How To Improve Your Credit Score After Bankruptcy-Part 10

Retained but Not Reaffirmed Mortgage Debt:

1. If you are trying to refinance your home mortgage but didn’t reaffirm this debt in your bankruptcy you could be facing a serious problem.  Without a reaffirmation some mortgage companies are refusing to report any payments received since the bankruptcy filing. This may severely hurt your credit score and jeopardize any change of refinancing.
2. Unfortunately, a reaffirmation can only be done while the bankruptcy case is open and before the discharge, so it is too late usually to do anything about it when the typical consumer discovers the problem.
3. Why not reaffirm? If you reaffirmed your bankruptcy attorney would have had to certify to the court that it wouldn’t be a hardship for you to make the mortgage payments. A lot of times debtors can’t really afford to keep their homes, so the attorney encourages them not to reaffirm just in case they have to eventually surrender it. That way the debt is discharged and the lender can’t come after them later.
4. Since the debt has been discharged the mortgage companies only have an obligation to report the discharge, a zero balance owed and report the status as “Discharged in Bankruptcy.” They usually won’t report continued payments because that would require showing a debt owed and would be a discharge violation. I have been able to get some mortgage companies to accept a waiver and consent from the debtor authorizing them to continue to report the mortgage debt despite the discharge, but you can’t force them to do it. Once the debt is discharged all they are legally required to do is report the discharge and a balance of zero.
5. Some creditors will not give credit to any person who has gone through a recent bankruptcy period, so don’t be discouraged if you get turned down. It is their choice whether to extend credit or not. But just because one turns you down it doesn’t mean others won’t extend you credit. There are other factors too like income, employment, marital status, and recent credit activity since the bankruptcy that they take into consideration.

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How to Improve Your Credit Score After Bankruptcy-Part 7

Handling Home Owner Associations After Bankruptcy

1. If you surrender real estate: Homeowner’s association debts are dischargeable in bankruptcy but only what was due on the date you filed. Homeowner Association dues that accrue after the bankruptcy and while you still own the property are current debt and you still owe it. That means if you don’t pay it you can be sued, the debt can be turned over to a collection agency or attorney for collection, and it can be reported as a delinquent debt to the credit bureaus.
2. Delays in Foreclosure: Mortgage companies don’t have any timetable they have to follow in foreclosing. They often will take months, if not years to foreclose. This puts the debtor is a bind because if he doesn’t pay the monthly dues he can be subjected to collection letters, phone calls, municipal fines, diminished credit, and even litigation and there is nothing he can do about other than pay the debt.
3. If you fee like gambling: You can ignore the homeowner's dues if you are willing to take the risk. Often times when the foreclosure finally happens the delinquent homeowner's dues are paid by the lender to clear the title to the real estate. This takes the debtor off the hook, but there is no guarantee this will happen and until the foreclosure actually takes place all the aforementioned collection horrors may still be inflicted on the debtor. 
4. If you stay in your homestead after bankruptcy: If you reaffirm the debt or just keep making payments each month to your mortgage company, don’t stop paying your homeowner’s dues. These dues are a lien on the homestead and eventually must be paid. The best practice is just keep them current. Even if you have the delinquent dues in your chapter 13 plan you should still make your current payments on time.
5. Dispute any erroneous credit reporting by homeowner associations: These associations are often run by individuals who don’t understand bankruptcy, so if they report to the bureaus make sure the reporting is correct and dispute it if it is not.

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How To Improve Your Credit Score After Bankrutcy-Part 5

Applying for New Credit to Improve Your Credit Score

a. If you have an auto or home loan that you have reaffirmed you won’t need to apply for a credit card to reestablish your credit. Just paying these bills on time is all you need to worry about.

b. If you are still paying on a car or home loan but didn’t reaffirm the debt the creditor may not be reporting to the credit bureaus so your credit won’t bounce back the way it should. Sometimes you can get these creditors to begin reporting again but you will have to contact their bankruptcy department and ask them to start reporting. They will probably need you to sign a waiver since reporting a discharge debt would be a discharge violation. Because of this some creditors will still refuse to report current house or car payments to the bureaus even if you offer to give them a waiver. But it won’t hurt to try. 

c. If you have no open credit accounts that are reporting to the bureaus after you get your discharge, you may want to apply for an auto loan or credit card so you can start building your credit again. If you do, follow these rules:

i. First you need to do a family budget to see if you can afford a credit card.

(1) write down your family net income (after taxes and deductions)

(2) make a list of all your expenses each month including the cash you spend. Be realistic. Then add it up and subtract it from your income.

(3) If you have a surplus, then you can apply for a credit card or auto loan as long as the minimum payments are less than the surplus amount.

(4) If you have more expenses than income, don’t get any new credit or auto loan. You can’t afford it.

ii. Only get a new credit card or auto loan if you can easily make the minimum payments each month. If you miss payments your credit score will go down instead of up.

iii. Put the card on automatic pay from your checking account for the minimum payment due each month.

iv. When the paper credit card bill comes in, pay as much more as you can by check.

v. Don’t ever max out your credit card.

vi. Borrow less than one half of your credit limit, if possible.

vii. Try to pay the full balance when the bill comes at least once or twice a year.

viii. Only use the credit card for emergencies or to cover short term shortfalls.

ix. Don’t ever apply for a new credit card so you can use it to make payments on another credit card. 

x. Avoid adding family members as authorized users of a credit card as that makes it much more difficult to manage properly.

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How To Improve Your Credit Score After Bankruptcy-Part 1

Review Your Reports Annually

This may seem obvious but most consumers don’t look at their credit reports until they are declined for credit or are alerted by a third party of a problem. Be proactive. Go to http://annualcreditreport.com each year and get your FREE copy of your credit reports from Experian, Equifax and TransUnion. Be sure and download them in PDF format so you can save them on your computer and, if you live in Texas and want us to review them for you, forward them to us by email. Having them in electronic format is much easier than printing them out and mailing or faxing them to us. Once we get them we will store them on our server for later use if need be. If you lose your copies we will still have copies we can send you. And remember, your credit review is always free at Manchee & Manchee, P.C.

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How to Improve Your Credit Score After Bankruptcy-Part 3

Dispute All Reporting Errors Discovered

 It does no good to review your credit reports if you don’t dispute the errors you find.

1. Unsecured debts that were included in your bankruptcy should be reported as “included in bankruptcy,” “Chapter 7 or 13 Bankruptcy” or “Wage Earner Plan.” If the bankruptcy isn’t mentioned you should dispute the account.
2. Debts included in your bankruptcy that were discharged should have a -0- balance. If they show a balance owing then the account should be disputed.
3. Debts included and discharged in your bankruptcy should have no other derogatory statements in the “Status” line other than the bankruptcy notation. If the status line includes things like “collection account,” “past due,” or “Charge off” it should be disputed. You should argue that it can't be a collection account because the creditor can't try to collect it, it can't be past due because nothing is owed, and it can't be a charge off unless it was was reported as a charge off before the bankruptcy was filed. If it is reported as a charge off after the bankruptcy is filed, it would be a stay violation.
4. If you have forgotten to list a creditor in your bankruptcy you should immediately send them a copy of your discharge by certified mail. There is case law in some jurisdictions that says in a Chapter 7 no asset case the unlisted unsecured debt is still discharged. So, give the creditor 60 days after you send it a copy of the discharge and if the reporting is not corrected, dispute it. If the creditor doesn’t respond within 30 days the reporting will be removed. If the creditor responds and confirms the reporting then you should consult a consumer attorney to help you get it removed.
5. Debts you have incurred since the bankruptcy was filed won’t be discharged, but you can still dispute them if they are reported incorrectly. If you don’t recognize the account as your account, the amount is incorrect, or there is something else wrong with the way it is being reported you should dispute it.
6. If you are in Chapter 13 each credit line included in the bankruptcy should show a status of “Chapter 13" or “Wage Earner Plan” with the current balance due on the debt after any payments made by the Chapter 13 Trustee. When you file chapter 13 and a plan is confirmed all defaults on your debts are cured so there should be no other negative remarks in the status line such as “Collection Account,” Past Due” or “Charge off.” If there are dispute them.
7. In Chapter 13 cases review your credit reports again 3-6 months after your discharge to make sure the discharge is reported correctly

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Proving Mental Anguish Damages

If a bankruptcy filer prevails in a claim under the Fair Credit Reporting Act or in an adversary proceeding for a violation of the automatic stay or discharge injunction the most likely damages sought will be for mental anguish. After all a debtor expects to get a fresh start from their bankruptcy and when creditors continue to harass them after they have been granted a discharge, it is quite traumatic. So, it is important for bankruptcy filers, who are victims of abusive creditors, to keep a diary of the mental anguish they suffer on account of the unlawful actions of these creditors. This will allow the victim to testify in deposition or at trial fully and completely as to the suffering they have endured. And simply being upset or angry won’t cut it. To prove serious mental anguish damages a plaintiff must show physical symptoms like headache, insomnia, depression, nervousness, marital strife, or lack of concentration that effects their job or enjoyment of life. It isn’t necessary to have expert medical testimony to prove mental anguish but to convince a judge or jury that they have suffered serious mental anguish will require convincing testimony, so the more details, including dates, times and circumstances that can be provided the better.

 

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FCRA Not Always Consumer Friendly

Although you would think the Fair Credit Reporting Act was written to protect consumers, it also has provisions that protect creditors. One specific requirement that insulates creditors, at least under federal law, from liability exposure, is the requirement that consumers dispute erroneous items on their credit reports and give the offending creditor 30 days to confirm or correct the reporting. This may seem fair at first glance, but what if the erroneous reporting was intentional or resulted from gross negligence, which is often the case. Why should creditors be insulated from liability when they cause a consumer to lose an opportunity to buy a house or a car? Why should consumers have to endure the humiliation of a credit denial without recourse when a creditor makes an obvious mistake? Why should creditors get a free pass when they injure a consumer? It doesn’t make sense. There is no doubt the credit industry lobbied long and hard for this provision in the FCRA. Luckily there are state laws that don’t recognize this requirement to dispute erroneous credit before action can be taken against the offending creditor.

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Creditors Confused by Chapter 13 and Consumers Suffer

Creditors have a difficult time properly reporting a chapter 7 bankruptcy to the credit bureaus. Whether it’s anger or resentment over having to write off the debt, ignorance or incompetence is anybody’s guess. The proper reporting of a discharged debt is to report the account as “closed,” the balance at “zero” and some mention of the bankruptcy. Sometimes it is shown as “included in bankruptcy” or “chapter 7 bankruptcy.” Rarely do creditors state that the debt has been “discharged in bankruptcy” even though that would be the most accurate way to report it. The fact is creditors are vindictive and if there is anyway to legally hurt a consumer coming out of bankruptcy, they’ll do it. So, it is important for consumers to review their credit reports three or four months after discharge to be sure the chapter 7 debt has been properly reported.

It is even worse with a Chapter 13. A lot of creditors don’t understand how a chapter 13 works and they tend to either treat it like a Chapter 7 or they just freeze the account and quit reporting it because they know they will eventually be paid all or a portion of their debt. The proper way to report the debt is to show the account as “Open,”state that it is included in a “Chapter 13 bankruptcy and report any changes that occur if payments are made by the Chapter 13 Trustee. But, rarely do creditors properly report a chapter 13 bankruptcy to a credit bureau and when the discharge order is finally signed three to five years later, its often ignored.

There is a lot of chapter 13 debt that is sold to debt buyers and by the time the debt is discharged it may have changed hands several times and the odds of the holder of the debt getting notice of the discharge is slim. So, long after the bankruptcy was filed it is common for consumers to suddenly get phone calls and letters trying to collect a discharged debt. Or, the consumer will have credit denied and discover it was because debts that were discharged in bankruptcy have suddenly appeared on his credit report.

Our firm offers a free discharge compliance review including an examination of your credit reports. For more information check out our website at http://mancheelawfirm.com/. You have nothing to lose but your bad credit.