Do What You Love: I Am a Bankruptcy Attorney and I Love It.

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How many times were you told when you were growing up that you should do what makes you happy? Dozens? Hundreds?  I was told that over and over, and I struggled with it through university.  After taking a 4 year break teaching English in Japan, I went to law school.  I then graduated at a terrible time for attorneys.  Large firms were not hiring, government was not hiring, so I put out nearly one hundred applications until I was picked up by a large consumer bankruptcy law firm in Ohio.  I had no idea how I was going to like practicing bankruptcy law.  None.  About a year into it, I realized I really liked what I did.  Now nearly 1000 cases in, I love it.  I lucked into a career that I love.

As a bankruptcy attorney, I can help turn peoples lives around and give them the fresh start that is provided for in the law.  I can stop foreclosures, wipe out second mortgages, save cars from being auctioned, stop garnishments, get people their driver’s licenses back, and generally give them a new lease on life.  It is awesome.

Find something you love and stick with it. You are going to spend somewhere around 90,000 hours of your life doing it.

Best of Luck,

Steven Palmer
Licensed in WA and OH
http://www.northwestbankruptcyattorneys.com
http://www.curtislaw-pllc.com

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Tax Refunds and Bankruptcy

Money

Tax refund season is typically the busiest time of year for bankruptcies to be filed.  The reason is pretty simple, people who have been slogging along trying to pay their bills have not had the extra money to use for a bankruptcy attorney.  Their tax refunds change that and finally make it possible for many people to get their cases filed.

If you are considering bankruptcy there are some things to keep in mind if you are expecting a big tax refund.

Filing a case before you receive the refund can lead to some or all of the refund having to be turned over to your bankruptcy trustee.  This all depends on your state’s exemptions. Some states, Ohio for example, will allow you to exempt all of your additional child tax credit and earned income credit.  Some states, Washington and New York for example,  allow you to use either state or federal exemptions.  If you have the option of using federal exemptions and you do not have a home with equity you can exempt a large amount which may protect your entire refund.  Still other states offer very anemic exemptions and make it very difficult to file before receiving a refund.

If you file a case after you receive the refund there are other considerations.  You can still use the exemptions mentioned above.  If, however, you are not able to protect the entire refund, you can spend it on items that are considered reasonable and necessary.  You just have to be aware that trustees will look to see if those were normal expenses that would usually be paid using your regular income.  Reasonable and necessary expenses are subjective but be aware that your attorneys fees and court costs are considered reasonable and necessary.

Many people rely on their refunds to get by.  If you are among them and are considering bankruptcy, make sure you speak to an attorney to protect as much of that refund as possible.

Best of Luck,

Steven Palmer
Licensed in WA and OH
http://www.northwestbankruptcyattorneys.com
http://www.curtislaw-pllc.com

 

Northwestbankruptcyattorneys Blog Year End Review

Fireworks

The year 2015 is almost ready for the history books.  Before we look ahead into what 2016 brings it makes sense to look back to get a greater sense of where we need to be headed.

This year I posted on a variety of bankruptcy issues, mostly general in nature to give my clients and anyone contemplating bankruptcy some issues to think about.

This year started out with looking at how loan modifications can still be pursued by debtors in chapter 13 bankruptcies. (They can be obtained and can be a great way to deal with a home that you had almost lost.)  I then looked at what happens to your car when you file a bankruptcy. (You have lots of options.)  Since so many of my clients are worried about how their credit scores will be impacted by the filing of a bankruptcy, we did a post on bankruptcy and your credit score. (The impact is not nearly as bad as people think.)  I then put together a post looking at some of the do’s and dont’s of filing a bankruptcy.  If you are contemplating a bankruptcy, please read or reread this post.  The award for the biggest northwestbankruptcyattorneys blog post goes to The History of Student Loans in Bankruptcy.  I did a ton of research for this post and am pretty happy with how it came out.  If you are at all interested in the topic, please give it a read.  The changes that have taken place over the course of 60 years are astonishing and terrible.  They remind me of the proverb, the road to hell is paved with good intentions.  From there, I tried to give potential filers some ideas of how they can find a good bankruptcy attorney in 5 Tips for Finding a Good Bankruptcy Attorney.  We then looked back at the topic of homes and bankruptcy in the Halloween Special Zombie Homes Attack.  (You do have options if you have a house that is stuck in your name after bankruptcy.)   The award for biggest rant post of the year goes to Credit Unions: The Devil is in the Details.  In that post we looked at the hidden dangers of using a credit union for a car loan and also having credit cards or bank accounts with those same credit unions.  Lastly, the Christmas Special this year was The Christmas before Bankruptcy.  In that post we looked at some of the hidden dangers of gift giving and receiving before filing a case.

In the coming year, look out for more posts on student loans and ways to deal with your small part of this national crisis.  Another post on zombie homes and getting rid of them through the bankruptcy process.  A more detailed look at what you can do to rebuild your credit.  A post on attempting to avoid bankruptcy.  There will be others as well as the inspiration strikes.  We are also open to writing on topics that people request, so if you have a topic you would like to see an article written on, please suggest it below.

Happy New Year from all of us at northwestbankruptcyattorneys.com and the Curtis and Casteel Law Group.

Steven M. Palmer, Esq.
Licensed in WA and OH
http://www.curtislaw-pllc.com
http://www.northwestbankruptcyattorneys.com

The Christmas before Bankruptcy

Depending on your family, Christmas gift giving may be huge or it may be minor.  If you fall in the former category and you are considering a bankruptcy you need to be aware of some bankruptcy rules which could impact your bankruptcy filing.

Gift giving and bankruptcy:

If you are a big giver and routinely rack up credit card debt ensuring that everyone gets just what they want, you will want to go easy the Christmas before bankruptcy.  In the forms that are required by the bankruptcy code, there is a requirement that you list any gifts made to a family member of more than $200.00 or more than $100.00 to a charitable organization.  Giving cash or items to a charity is generally not a problem so long as you don’t go over 15% of your gross income during the year in which the contributions were made.  The reason behind the restrictions is that congress did not want potential debtors to squander their assets in an attempt to hide them from their creditors before filing a bankruptcy.  If you did give a bunch of gifts to family members this Christmas, it may be best to wait until next year to file.  Your best bet if this situation applies to you is to contact a local bankruptcy attorney and ask their advice.

Gift receiving and bankruptcy:

What really matters here is what was given and is it an exempt asset.  If you received cash for Christmas, that cash gift could push you over the income threshold between a chapter 7 bankruptcy and a chapter 13 bankruptcy if you were already close.  If instead you received a car or a new mac book, those are items which would need to be listed.  What happens next depends on the value of the assets and the exemptions available.  If you have enough exemptions available, you will not have anything to worry about.  If on the other hand there are not enough exemptions to protect the new assets, a chapter 7 trustee may take them, or you may be pushed into a chapter 13 bankruptcy.  Again, you would want to talk to a local bankruptcy attorney to make sure that this will not be an issue in your case.

Best of Luck,

Steven M. Palmer, Esq.
Licensed in WA and OH
http://www.curtislaw-pllc.com
http://www.northwestbankruptcyattorneys.com

Halloween Special: Zombie Homes Attack!

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https://pixabay.com/en/zombies-undead-monster-horror-598393/

With the housing bubble bursting a few years ago, many homeowners were left underwater on their homes.  Some people were so far under that they strategically defaulted on their mortgages and walked away from their homes.  Some filed bankruptcy and “surrendered” their homes only to find out that did not mean they were off the hook.  For others still, their lenders or servicers had commenced foreclosure, obtained a judgment and never executed on that judgment.  Meaning they never sold the homes at Sheriff’s sale or trustee sale.  Whatever happened, thousands of people are stuck with homes that no one wants.  When this happens they find that they are still responsible for housing code violations, condo or homeowners association fees, property taxes until the house transfers, and are liable if anyone gets injured on their unwanted properties.

What to do?  These unsuspecting homeowners have some options.  The first step may be to attempt to get homeowners insurance to protect yourself from liability. You should then contact that mortgage company that doesn’t seem at all interested in the property.  You want to ask them for an application to do a deed-in-lieu of foreclosure.  This would basically allow you to transfer the property over to the mortgage company.  You may also be able to short sell the home.  To do this you use the same application with the bank.  Yet another option is to ask the mortgage company if a short payoff is an option.  With a short payoff, you offer the mortgage company a fraction of what is owed on the home and they release their lien meaning that you would own it free an clear.  I have seen short payoffs for 4% of the amount owed on the loan.  If the mortgage company isn’t interested in any of these options, they may be interested in you transferring the property over to a land bank if there is one active in your county.

What if the mortgage company isn’t interested in any of these seemingly rational options?  An option that has recently come to light is attempting to vest the property in the mortgage company’s name through a bankruptcy.  This option is pretty new and will not work in all jurisdictions.  Look around for an attorney who is willing to attempt this.  They are out there.  You can also contact the CFPB and file a complaint.  http://www.consumerfinance.gov/complaint/ If the lender is headquartered in your state, you can also contact an analogous state agency and file a complaint there, or with the state attorney general.  Of course all of this can be daunting.  If you want help, there are attorneys who specialize in this sort of thing.  They will usually help you out upon payment of a retainer fee with an hourly fee agreement.

Now, what do you do in the meantime?  If you moved out of your house and it is unoccupied, you may want to consider moving back into it until it is actually sold.  Before you do this, contact an attorney to make sure you are following all applicable laws.

Best of Luck and Happy Halloween!

Steven M. Palmer
Licensed in WA and OH
http://www.curtislaw-pllc.com
http://www.northwestbankruptcyattorneys.com

5 Tips for Choosing the Right Bankruptcy Attorney

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Filing a bankruptcy is a big life choice.  As I have written in previous posts it is not nearly as scary as people assume it to be.  That said, it is important to choose an attorney who knows what they are doing and who has a reputation for good client advocacy.  You don’t want to get stuck with someone who won’t return your phone calls, is rude, or who gets disbarred after they start taking your money.  What follows are some tips for choosing a good bankruptcy attorney.

  1. You can find attorneys with bankruptcy expertise by using the attorney finder function of www.nacba.org.  NACBA is the National Association of Consumer Bankruptcy Attorneys.  Attorneys that you find on this site have paid dues to the organization which I believe shows that they are committed to the bankruptcy field.  You want an attorney who files bankruptcies regularly, not once or twice a year.
  2. Another good source is your local bar association.  Contact your local bar association and see if they have a referral service.  Referral services generally require attorneys to have 5 years of experience in the field you are looking into.  They also often require that their attorneys they refer clients to have completed continuing education courses in the field you are looking for.
  3. Ask around about the attorneys reputation.  If you do not know anyone who has used them, look online.  Attorneys are rated by www.avvo.com.  While their methodology may not be perfect, (for example, you might have a great attorney with 20 years experience who has a rating of 7.0, on the other hand you might have one with 2 years experience with a 10.0.)  I am not sure how accurate the ratings are, but you can at least see if they have any reports of misconduct.
  4. Go to a free consultation.  Most bankruptcy attorneys will offer you 30-60 minutes of their time to figure out if you are a good candidate for bankruptcy and to determine how complex your case is.  This really serves an additional purpose of helping you to determine if it is someone you would be comfortable working with.  Some attorneys do charge a consultation fee.  If this is the case with the attorney you want to meet ask them if they apply that fee to the overall attorney’s fee.  Even if they do charge an additional fee for the consult, it may be worth it if their reputation is sterling.
  5. Ultimately, make the decision using all the information at your disposal.  If they were referred by a reputable source, if they have a good reputation, and if the fee is something you are comfortable paying, be confident in your choice to go forward and provide your attorney all of the information that ask for.  If you have done this, chances are your case will go smooth.

Best of Luck,

Steven M. Palmer, Esq.
Licensed in WA and OH
http://www.curtislaw-pllc.com

The History of Student Loans and Bankruptcy

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Student loans are basically non-dischargeable, almost everyone knows this.  There are some very specific circumstances where even today you can have your student loan debt discharged, but that is a narrow exception that often requires a fight and money to fight.  We will discuss the current state of dischargeability in a future post.

The landscape around student loans and bankruptcy has not always been so desolate.  Not so long ago student loans were dischargeable.  Back when they were dischargeable, the cost of an education was much lower and the total student loan debt was a fraction of what it is now.   With student loans currently being a 1,200,000,000,000.00 (One Trillion Two Hundred Billion) dollar problem holding people back from purchasing homes or taking part in the broader economy, with a little help they may become dischargeable yet again.

A Brief History.

Student loans really did not pop into existence in America until 1958 under the National Defense Education Act. 2.  These loans were offered as a way to encourage students to pursue math and science degrees to keep us competitive with the Soviet Union. 3.  In 1965, the Guaranteed Student Loan or Stafford Loan program was initiated under the Johnson Administration.  Over time, additional loan programs have come into existence.  The necessity of student loans has become greater as the subsidies universities receive have fallen over time.  Take Ohio State for example.  In 1990, they received 25% of their budget from the state, as of 2012 that percentage had fallen to 7%. In the absence of state money, universities and colleges have increased tuition to cover the reduction in state money. 4.

The Rising Cost of Education.

The cost of higher education adjusted for inflation over time goes something like this, in 1980 the average cost for tuition room and board at a public institution was $7,587.00 in 2014 dollars and by 2015 it had gone up to $18,943.00 in 2014 dollars.  The cost of a higher education in 35 years with inflation accounted for has gone up by 2.5 times.  Compare this to inflation adjusted housing costs which have remained nearly unchanged, increasing just 19% from 1980 to 2015 when the bubble and housing crisis is removed. 5.   Or  compare to wages which, except for the top 25%, have not increased over that same time period.6.    Looking at affordability in terms of minimum wage it is clear that loans are more and more necessary for anyone who wants to attend university or college.  In 1981, a minimum wage earner could work full time in the summer and make almost enough to cover their annual college costs, leaving a small amount that they could cobble together from grants, loans, or work during the school year. 7.    In 2005, a student earning minimum wage would have to work the entire year and devote all of that money to the cost of their education to afford 1 year of a public college or university. 8.   Now think about this, there are approximately 40 million people with student loan debt somewhere over the 1.2 trillion dollar mark.  According to studentaid.gov, seven million of those borrowers are in default, that is roughly 18%.  Default is defined as being 270 days delinquent on your student loan payments.  Once in default, the loan balances increase by 25% and are sent to collections.  The collections agencies get a commission on collected debt and are often owned by the very entity that originated the loans, i.e. Sallie Mae.  See, http://www.studentloanborrowerassistance.org/collections/collection-agencies/fees/

The Building of the Student Debt Prison.

Prior to 1976 student loans were dischargeable in bankruptcy without any constraints.  Of course, if you look back at statistics from that time, there wasn’t much student loan debt to speak of.  When the US Bankruptcy Code was enacted in 1978, the ability to discharge student loans was narrowed.  Back then, in order to have your student loans discharged, you had to be in repayment for 5 years or prove that such a repayment would constitute an undue hardship.   The rationale for narrowing the discharge was that it would damage the student loan system as student loan debtors flocked to bankruptcy to have their debt discharged.  The facts, however, did not support this attack.  By 1977 only .3% of student loans had been discharged in bankruptcy.9.    Still, the walls continued to close on student loan debtors.  Up until 1984, only private student loans made by a nonprofit institution of higher education were excepted from discharge.10.  Next with the enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984, private loans from all nonprofit lenders were excepted from discharge.  In 1990, the period of repayment before a discharge could be received was lengthened to 7 years.11.    In 1991, the Emergency Unemployment Compensation Act of 1991 allowed the federal government to garnish up to 10% of disposable pay of defaulted borrowers.12.    In 1993, the Higher Education Amendments of 1992 added income contingent repayment which required payments of 20% of discretionary income to be paid towards Direct Loans.13.  After 25 years of repayment the remaining balance was forgiven.  In 1996 the Debt Collection Improvement Act of 1996 allowed Social Security benefit payments to be offset to repay defaulted federal education loans.14. In 1998, the Higher Education Amendments of 1998 struck the provision allowing education loans to be discharged after 7 years in repayment.15.  In 2001, the US Department of Education began offsetting up to 15% of social security disability and retirement benefits to repay defaulted federal education loans.  In 2005, “the law change” as we call it in the Bankruptcy field further narrowed the exception to discharge to include most private student loans.  Since private student loans were given protection from discharge in bankruptcy there has been no reduction in the cost of those loans.16.   If the rational for excepting student loans from discharge is that the cost to students to obtain loans would soar, this fact would seem to lay waste to that argument.

In the wake of the slow march towards saddling our students with unshakable debt, the government created a couple of ways to deal with government backed student loans outside of bankruptcy.  In 2007 the College Cost Reduction and Access Act of 2007 added income based repayment which allows for a smaller repayment than income contingent repayment, 15% of discretionary income and debt forgiveness after 25 years.17.  In 2010, the Health Care and Education Reconciliation Act of 2010 created a new version of income-based repayment cutting the monthly payment to 10% of discretionary income with debt forgiveness after 20 years.18.  This new improved income based repayment plan is only for borrowers who have no loans from before 2008.  Further, those with loans in default, will not qualify for income based repayment unless they first rehabilitate those loans.  If you are interested in seeing if your loans qualify for income based repayment or income contingent repayment please visit https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven.    Unfortunately, none of these programs do anything to deal with private student loans, a growing problem currently at around $200,000,000,000.00 (Two Hundred Billion) or around 16% of the total student loan debt.19.

What Can We Do?

The cost of education is relentlessly marching upward, the need for a higher education to earn a living wage is only becoming greater, and the ability of our graduates to repay these loans is diminishing. Why is the cost of education outpacing inflation by so much?  Why are state and local governments reducing funds they used to devote to college students?  These are questions that need to be addressed as well.  My focus is on the unavailability of a real discharge option is weighing down the rest of the economy.  This is a problem.  On September 8, 2015, Michigan Congressman Dan Kildee introduced a bill in Congress intended to reduce the burden on students and their families caused by the increasing costs of education and the financial stress of student loans.20.  The proposed legislation would do away with the exception to discharge listed in 11 U.S.C. § 523 (a)(8).  If you want to have your say on this issue, call your congress person today and let them know that where you stand on H.R. 3451.

I welcome a friendly discussion on these issues.  Comment away.

All the Best,

Steven Palmer, Esq.
Licensed in WA and OH
http://www.curtislaw-pllc.com

  1. http://www.eoionline.org/blog/the-great-cost-shift-college-was-once-a-ticket-to-opportunity-now-its-a-roadblock/
  2. P.L. 85-864; 72 Stat. 1580
  3. http://www.studentdebtrelief.us/news/rising-tuition-costs-and-the-history-of-student-loans/
  4. http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?pagewanted=all&_r=0
  5. http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/
  6. http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php
  7. Student Debt: Bigger and Bigger, Center for Economic and Policy Research by Heather Boushey (Sept. 2005).
  8. Boushey (Sept. 2005)
  9. http://harvardlawreview.org/wp-content/uploads/pdfs/vol126_student_loan_exceptionalism.pdf
  10. www.finaid.org/questions/bankruptcyexception.phtml
  11. Crime Control Act of 1990, P.L. 101-674, 11/29/1990
  12. P.L. 102-164, 11/15/1991
  13. P.L. 102-325, 7/23/1992
  14. Debt Collection Improvement Act of 1996, P.L. 104-134, 4/26/1996
  15. P.L. 105-244, 10/7/1998
  16. http://harvardlawreview.org/wp-content/uploads/pdfs/vol126_student_loan_exceptionalism.pdf
  17. P.L. 110-84, 9/27/2007
  18. P.L. 111-152, 3/30/2010
  19. http://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-parents-and-the-economy/
  20. http://www.ncbrc.org/blog/2015/09/15/proposed-bill-eliminates-student-loan-discharge-exception/

The Dos and Don’ts of Filing a Bankruptcy

Alright, you have it in mind that filing bankruptcy is going to help you to reach your goal of a fresh start.  Now what?  Well, you need to find a good bankruptcy attorney to help you file, but besides that, there are some dos and don’ts of filing that we will take a look at in this post.  The last thing that you want to have happen is to have your discharge denied or revoked because you did something that you shouldn’t have done.

What to do before you file:

  1. Do find a good, experienced bankruptcy attorney.  You can do this by looking around on the internet and going to a free consultation to see what the attorney has to say.  I recommend that you visit the attorney finder page of the National Association of Consumer Bankruptcy attorneys.  That link is http://www.nacba.org/find-an-attorney/ You can also find bankruptcy attorneys at http://www.avvo.com and then search for a bankruptcy attorney in your area.
  2. Do get all of your documentation in order.  It will be very valuable to your attorney and will save you time at his or her office if you have the following documents before you go in:  Paystubs for the last 7 months, bank statements for the last 2 months, tax returns for the last 2 years, copies of the most recent retirement account statements, most recent statements for car or home loans, credit reports, divorce decree or separation agreement and a list of everything that you own.  Also if you have any pending lawsuits, or if you could sue someone be ready to let your attorney know about those suits.  Your attorney may require more or less documentation, but if you have all of this, you are well on your way to getting filed.
    1. You can get your credit reports for free by going to www.annualcreditreports.com
    2. If you cannot find your taxes for the last two years you can request them at www.irs.gov.
  3. Do be honest and forthcoming with all of the questions that your attorney asks you.

What NOT to do before you file.

  1. Do not pay back friends or family members.  Everyone you owe must be listed in the bankruptcy schedules.  The debt would get discharged.  If you wanted to voluntarily pay them back, do it after the bankruptcy.
  2. Do not transfer any items out of your name prior to filing without consulting with an attorney.  The trustee could view this as a fraudulent transfer and look to undo it in the bankruptcy.
  3. Do not buy anything worth more than $500.00 in credit in the 3 months leading up to the bankruptcy.
  4. Do not pay any one creditor more than $600.00 in the 3 months leading up to the bankruptcy.
  5. Do not take out payday loans of more than $750.00 in the 70 days leading up to the filing of the bankruptcy.
  6. Do not go on an expensive vacation prior to the filing.
  7. Do not spend your money on items that are not reasonable or necessary before filing bankruptcy.
  8. Do not freak out.  Bankruptcy is really not that bad.

If you have done anything on the DO NOT list, contact an attorney and see what you need to do before you file.

Best of Luck,

Steven M. Palmer
Licensed in WA and OH
http://www.curtislaw-pllc.com

Bankruptcy and Your Credit Score

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One of the biggest concerns for my clients is how their credit will be affected by filing for bankruptcy.  Everyone knows there is some impact.  Most disagree as to the size or the duration of the impact. That, and how to rebuild are two things I hope to shed some light on in this post.

What if I just grin and bear it?

A question you should ask your self is, “What is going to happen to my credit score if I don’t file bankruptcy?”  For many people contemplating bankruptcy, they are already at the point where they are not able to pay their ongoing debt obligations.  If this is you, your credit score is taking a hit every month that goes by where you aren’t making your monthly payments.  To give you an idea, once you go 30 or 60 days late, your credit score starts to take a hit.  If you let a payment get to the point where it is 90 days late, it will stay on your credit report for up to 7 years and will have a significant impact on your score.  Having just a couple of these occurrences could be as damaging or more damaging than filing a bankruptcy in the first place.   Because of this, once you recognize that you aren’t going to be able to find a quick way out of the situation, it is probably best to get the bankruptcy wheels moving.  The higher your score is before the filing of the case, the higher it is going to be after you file the case and get your discharge.

Debt Consolidation Companies and Your Credit.

Many people try to do whatever they can to avoid bankruptcy, for some people this includes entering into agreements with debt consolidation companies.  These companies come in a variety of flavors.  That is a topic for another time though.  What many of them will do is enter into an arrangement with you where you make a monthly payment to them, then they either hold the money until they have enough to make an offer on any one particular debt, or they make small monthly payments to all of the creditors at once.  The problem is, this doesn’t stop those creditors from negatively reporting to the credit bureaus.  It also doesn’t necessarily stop the creditors from suing you in state court, obtaining a judgment, and garnishing your wages.  Another problem is that if they do settle, it will show up as settled for less than full amount which hurts your score.  On top of that, if you settle, you will likely get a 1099 from the company and likely will have to claim the forgiven amount as income on your taxes.  That will either mean you will have a smaller refund or will owe.

How long does it stay on your report and what does that mean to you?

First of all, if you are in a tough financial spot and are having trouble paying your rent or making your house payment, this should not be a factor in your decision to file.  That said, how long it stays on your report and how long the bankruptcy notation negatively affect you are two very different things.  If you file a Chapter 7 bankruptcy, it is generally going to stay on your report for 10 years.  If you file a Chapter 13 bankruptcy, that will stay on your report for 7 years after the case is discharged.  Seven to ten years seems like a long time.  It is a long time, but within that seven to ten year period you can still buy cars, houses, and get credit.  The general rule is about two years after a chapter 7 you can get a home loan (sometimes only one year), almost immediately after the case you can get car loan and credit cards. Not too bad right? You should tread lightly here.  Look at the offers you are receiving and only accept the best, it isn’t going to help you if you start applying for many cards at once, limit it to one or two at the most.  When you can get credit is going to be dependent on your income, and on your credit score. I have seen clients with scores in the 500s prior to filing a Chapter 7 have scores in the 700s one year after the case discharged.  On the other hand, I have seen other clients with low scores come back a few years later and they still had low scores.  So what is going on there?

How to improve your score after bankruptcy.

If you do as you did and nothing else has changed, your credit score is probably not going to change much.  The lowest that your score could possibly be is between 300 and 403 depending on the type of FICO score. The highest that it can be is about 850 but that too depends on the type of score. If you use no credit your score isn’t going anywhere.  So what can you do?  The first thing that I recommend is going to www.annualcreditreport.com and getting all three reports for free.  This is something you are able to do once a year.  Once you have these, you will want to review them, possibly with the help of your attorney to determine if the credit reporting agencies are properly reporting your debts as discharged in bankruptcy.  If they aren’t accurate and they refuse to fix the errors, you may have remedies either through your old bankruptcy case, or a cause of action under the Fair Credit Reporting Act (FCRA).  Once your report is in order, you can start rebuilding.  A good idea is to start with a secured credit card or with a store brand card.  With a secured card, the creditor generally has you put down $300.00 to $500.00 and that becomes your credit limit.  There is very little risk to the card holder because they have the security of your deposit, but the benefit to you is that they will report to the credit bureaus.  If you are in need of a car, a car loan with a reasonable payment is another great way to improve your credit score so long as you are able to and actually do make your payments on time.  My secret credit score repair weapon is IBR.  If you have federal student loans and you are low income or living paycheck to paycheck, you should at least look into this program.  IBR stands for Income Based Repayment, you can apply for it at the following site.  https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven.  The great benefit of this plan is that many people who had filed bankruptcy may be eligible for $0.00 payments.  If you are eligible and you sign up for, and are approved for a $0.00 or whatever payment, each month that passes where you make that payment (yes, even the zero dollar payment, if you are eligible) is a month that your lender reflects as an on time payment to the credit bureaus.  The more on time payments you have, the better your credit score will become.

Best of Luck,

Steven Palmer, Esq.

Licensed in Ohio and Washington