Credit and Credit Cards

Forgiven

in Bankruptcy, Credit and Credit Cards

Forgiven

There is a need to be forgiven in the world.  Forgiving others as well as yourself is so important to your mental health.  I discuss mental health a lot on this blog and I believe that it is one of the most important health topics in our country.  

The “forgiven” in bankruptcy goes beyond just the debts.  We need to forgive ourselves in the bankruptcy process.  

A bankruptcy attorney named Rachel Foley wrote about forgiveness in the context of bankruptcy.  

She wasn’t just talking about relieving yourself of debt but also relieving yourself of the negative emotions of the debt itself.  

She advises that we shed anger at the people who threatened the wellbeing of our family and she encourages us to look forward. 

Where she and I differ is on the point of forgiving not just your creditors, but forgiving yourself. 

It Starts at Home

Clients come to me in times of trouble.  They assure themselves that even the act of making an appointment makes them guilty of some unspeakable crime.  That they are guilty of some heinous act. 

But what are they guilty of?

Job loss?

Surviving a Pandemic?

Crashed investments?

Getting sick?

Going through a divorce?

Yes, hindsight is always 20/20 and sometimes there is a choice we make that maybe wasn’t the best decision.

But that doesn’t make us a bad person.  We ALL make bad choices sometimes in life. 

Even some of the biggest corporations in history have filed for bankruptcy and they’re all run by people who are supposedly the best and the brightest.  

If Presidents, businessmen and corporations file for bankruptcy, why do we make ourselves feel guilty?

Living in the Imagination

People believe that bankruptcy will end like the biblical day of judgement.  They stand in front of some Judge and confess their sins, hoping not to be cast into a lake of fire.  

Frankly, this isn’t how bankruptcy works at all.  For nearly all people who file bankruptcy, you’ll never even see the judge. The judge will likely never even give a moment’s thought to your situation.  There is absolutely NO subjectivity in an unchallenged bankruptcy…and most are unchallenged. 

My clients imagine bankruptcy like the Day of Judgment, lined up before the bench to be sorted into those who are worthy of forgiveness of debt and those who are not.

As the debtor, you are presumed to be entitled to discharge.  It is only rarely that someone is scrutinized and generally you must have filed the case in a deceptive or dishonest way in order to be put under the microscope. 

“Forgiven” starts with you

If you’re feeling guilty about filing bankruptcy, it’s all self inflicted. You must start with forgiving yourself and then let that feeling rush over you and extend to others.  

The past is in the past.  

You can’t change what happened now. 

You can only move forward.

When you’re ready to begin your journey towards forgiveness, call me. 

Straight to Jail

in Bankruptcy, Credit and Credit Cards

Jail

What would you do if you found out there was an arrest warrant out for you because you hadn’t paid your bills? Would you go around and borrow money from family and friends? Pack your bags and skip town? Change your name and head to France? Laugh?

If you said laugh, you’re correct.  In the United States we don’t arrest people for owing money you don’t have. 

There are scammers out there that are banking on the fact that you didn’t pay attention in Civics.  They’ll call you or email you, maybe even send something over in the mail.  

You’ve heard the calls and they all go something like this: “You have arrest warrant. Call this number now to avoid arrest by authorities. Court case filed in your name soon. Agent Bill William, Federal Department Revenue Service.”

As laughable as this is, it’s just another scam…and somehow it works.  

Preying on the vulnerable

If it didn’t work, they wouldn’t keep doing it.  This scam works because it preys on the emotions people have when they can’t pay their legitimate bills.  

These pieces of human garbage want to exploit you and your emotions to try to squeeze as much cash out of you as possible.  It’s a scare tactic and it works.  

That money isn’t going to your actual creditors, it’s going to end up in the pocket of some scammer in a rogue country. 

When can you go to jail?

There are some situations that can cause you to be arrested and go to jail for your debts.  Blatant refusals to pay child or spousal support ordered by a court can sometimes land you in jail.  Occasionally, a creditor can sue you and get a subpoena to make you show up in court.  If you defy that subpoena, you can sometimes be arrested, but not for failure to pay.  

Get “scam immunity”

If you’re in a bad enough place financially that the thought of getting arrested over your debts is keeping you up at night, you need to seek professional help.  That’s where we come in.  

Bankruptcy was a system created to eliminate debts, legally.  We have filed thousands of cases and eliminated nearly hundreds of millions of dollars in debt for our clients.  

Our website has countless articles about collection rights and we offer free consultations to discuss how bankruptcy can help you become free of the burden of debt.  We’re here to help when you need it most.  

But, just in case we need to say it again, don’t send your money to Agent Bill William.  The Federal Department Revenue Service isn’t coming to put your in jail. 

What’s on your credit report after bankruptcy?

in Bankruptcy, Credit and Credit Cards

Your credit report is just what it says.  It’s basically a report card for your finances that lenders use to make decisions regarding your credit worthiness and ability to repay. 

Bankruptcy makes many of these debts go away all together and forbids collection efforts on any debt that isn’t included in the bankruptcy.  We often get the question, “what will my credit report look like after bankruptcy?”  While we can’t answer all your questions, especially about your credit score, what we can say is that your score is likely to go up, starting the very month you file and it should clean up a number of issues on your report. 

Every listed debt on your credit report has something called a trade line.  The trade line notates the following things:

  1. When your account was opened
  2. The balance on the account
  3. The type of loan (ie. mortgage, auto, revolving, etc.)
  4. The payment history on the loan
  5. It’s current status

 

WHAT SHOULD MY CREDIT REPORTS SAY AFTER I RECEIVE MY DISCHARGE?

  • First and foremost you will see the bankruptcy.  It will likely appear in a section called public records.  It may list who your attorney was and whether you completed your bankruptcy (ie. got a discharge or successfully completed your case) or whether it was dismissed for some reason (this means your debts have all come back).  
  • The trade lines for all revolving (credit cards) and other unsecured loans should have the payment history stopped and the balance should read $0.  If your completed your case, it will also say, “discharged in bankruptcy.”  It will likely remain like that for 6 years following the date it was discharged.  It signals that this debt used to exist but doesn’t anymore.  There should be no more mention of late payments or non payments.
  • If you have student loans,  you’ll see a line on the report for that as well.  Because student loans are not frequently discharged in bankruptcy your credit report will continue to show their status.  If you were current, it will show current and if you were not current, it will reflect that as well.  While many people find that student loan debt causes them many problems, one bright side is, if you start making your payments again after your bankruptcy discharge, you can use that payment history to rebuild your credit moving forward. 
  • The final list you often find are secure loans.  Secured loans are loans that involve collateral like an auto loan or mortgage.  These loans will often only show on your credit report if you sign what’s known as a reaffirmation agreement with the lender and the lender files it with the court.  While reaffirmation agreements are not required in most cases and are sometimes discouraged, they can help rebuild your credit if they are filed with the court and the creditor updates your credit report.  If you do not sign a reaffirmation agreement with the lender and you wish to retain the secured property you’re often allowed to just continue payments to the lender, but be aware.  Lenders often put up roadblocks to monitoring your payment progress by denying you access to your online account access.  You’ll need to contact your lender and see how they wish to proceed with your payments going forward.  You’ll also need to keep meticulous records of your payments to the lender.  

 

If all of this seems complicated, well, it is.  The attorneys at Harmon and Gorove are here to help you through all of this and we work tirelessly to get your finances back on track.  If you’re in need of bankruptcy assistance, contact us today for a free consultation to see how bankruptcy can help you achieve your financial goals. 

Escrow: The Forbearance Gotcha

in Bankruptcy, Credit and Credit Cards

Millions of people have applied for and received mortgage forbearances during the pandemic. It’s been a huge lifeline that has saved hundreds of thousands of homes from foreclosure.  There’s only one problem.  Once you stop making your mortgage payment, money stops going into your escrow account.  That leaves deficiencies in the account that pays your property taxes and your homeowners insurance.  

What’s an escrow

Most mortgage lenders require that you pay a portion of your monthly payment into what’s known as an escrow account.  Escrow accounts usually pay out for things like homeowners insurance premiums and property taxes.  Because those are things that have to be paid, the lender takes the money and sets it aside to make sure that it actually gets paid each year.  

Escrowed taxes after forbearance

At the end of your forbearance, whenever that may be, you will still be responsible for the payments you missed.  Some lenders are asking that the payments be made up in a lump sum while others are allowing the amount to be divided up over a period of months.  There’s simply no single way that says how something has to be handled.  There is no firm and solid rule yet. 

While the principal may not be due in one lump sum and could ultimately be spread out over years, one thing is certain. Skipped escrow payments will be due long before anything else is.  This could potentially add hundreds of dollars to payments each month when they do resume because lenders are allowed to recoup the escrow shortage over 12 months.  

Example: Your escrow is short $4,500 for the year.  If you make that up over the course of a year, that’s an extra $375 a month on top of your normal payment, not including any principal payments that must be added in.

Keep escrow in mind

The Covid emergency, coupled with numerous different terms laid out in mortgages, make the answer about what’s going to happen very complicated.  What makes it even worse is that the goal posts keep moving.  We don’t know what kind of legislative remedies are going to pop up in the future.  

The long and short of it is, be mindful of what’s happening to the escrow balance of your mortgage and ask questions now so you aren’t blindsided later.  

Finally, if uncertainty still exists and you’re financially able, set aside the escrow portion of your mortgage just in case you need to make up the balance quickly and if for some reason you don’t, at least you have a little bit of savings on hand for another emergency.  If you’re in trouble with your mortgage and need help, contact the attorneys at Harmon and Gorove.

8 Things Finance “Experts” get Wrong

in Bankruptcy, Credit and Credit Cards

Personal finance “experts” love to run around spouting off about bankruptcy and other issues they don’t know much about.  While many of them do promote best practices when it comes to finance, many of them share blatant falsities about bankruptcy like this guy does.  

Number one, they often don’t even know basic facts about bankruptcy.  It’s complicated, so many people just spew what they think they know about bankruptcy and pass it off as legitimate advice.  

Number two, these so called “experts” make bankruptcy sound like it should be your last choice.  We have written about why bankruptcy should never be treated as a last resort. Instead, bankruptcy should be considered alongside a number of tools to help you improve your financial position.  Instead, they just continue to spread misconceptions and myths.   

So, considering I’ve been practicing bankruptcy for 11 years and I’ve handled more than 2,000 cases, I’ve got a few things to discuss that these finance “experts” should know.  

1. In 97% of bankruptcy cases the debtor loses nothing. 

Chapter 7s are considered a liquidation bankruptcy.  In theory, if you have a valuable asset that is unencumbered by liens, the trustee can sell that asset to recover money for your creditors.  The problem is, most Chapter 7 clients, don’t have enough assets to sell for two reasons.  First, most assets either have liens on them or aren’t really worth much and second, you have generous exemptions here in Georgia.  

2. If you have any assets, you can just file a Chapter 13 and keep them. 

If you do have assets and they could potentially be at risk in a Chapter 7, you can just file a Chapter 13 and then they’re protected.  You simply repay the value of the items you wish to keep at an extremely low interest rate and then you emergen from your bankruptcy with a discharge.

3. The means test just determines which chapter you are eligible for.

The means test doesn’t keep you from filing bankruptcy. Period. It’s just there to make sure that wealthy or high income people don’t abuse Chapter 7s. Even if the means test determines you don’t qualify for a 7, you can still do a 13 and pay back only a fraction of your debt. 

4. Credit scores improve immediately. 

We have written about this and we want to state it again.  Studies by the Consumer Financial Protection Bureau have shown that your credit score starts going up the month you file bankruptcy.  Yes, a bankruptcy can stay on your credit report for up to 10 years, but as we say so often, time heals all wounds and your bankruptcy will matter less and less as time goes on. 

5. You can get a loan, even in if you’re still in your bankruptcy

Filing bankruptcy changes how much you’ll pay for credit.  It doesn’t mean you can’t get credit at all.  People in Chapter 13s routinely take out (court approved) debt to buy cars in the event of an accident.  Just because you’ve filed bankruptcy doesn’t mean you’re not able to get credit at all. 

6. Stress is a health risk

We have only recently begun taking mental health seriously in our country. Stress, particularly stress related to money, can take a substantial toll on our mental and PHYSICAL health.  Stress leads to bad choices, mental health problems and unhealthy habits like drinking or drug use to cope.  Bankruptcy can help you get your financial house in order and lowers stress, immediately. 

7. Bankruptcy frees up cash to pay debts that can’t be discharged

Some debts can’t be discharged.  It’s just the way the bankruptcy code is written.  The bright side of this is, you’re freeing up cash you can use to pay off those debts by filing bankruptcy.  

Bankruptcy isn’t the last resort. ever.

Bankruptcy offers a quick, legal and certain fix for debts that have swamped you.  Every day we see people who have spent their retirement savings or strung along debts that have kept them from being able to start over.  Bankruptcy should always be in the discussion when it comes to eliminating overwhelming debt.  After all, cutting $5 lattes is a good practice to keep yourself on a budget but it isn’t going to fix a mountain of uncontrolled debt, no matter how many “experts” try to claim it will.

The Cure

in Bankruptcy, Credit and Credit Cards

We hear them every day and we have written extensively about get out of debt schemes and what an absolute scam most of them are.  People sit there and pitch the most unimaginable garbage to people who are struggling with debt.  They’re just like the snake oil salesmen of the wild west with all of their ridiculous cure all solutions.  “Buy my book and learn how to get out of debt fast” barks the salesman from his multimillion dollar radio perch or the best one is, “we’ll get your credit card company to settle for pennies on the dollar.” They’re selling you snake oil and without a proper diagnosis, you’ll get exactly…nothing. Except for a lighter wallet. 

You don’t treat a medical problem without a proper diagnosis.  Is it gas pains or colon cancer, a headache or an aneurysm?  You wouldn’t let someone start cutting or taking a dangerous therapy if you only needed to take a tylenol or quit eating so many beans. 

Much like medical problems, for a proper cure, your finances need a proper diagnosis too.  Do you have a temporary problem that will work itself out with a little discipline or are you throwing your hard earned money into a bottomless money pit. The answer is a big step in diagnosing and treating your debt problems. 

Rx for Debt

Any good physician needs to know things about you.  Your age, your medical history, family history, etc. 

An attorney assessing your financial situation will have similar questions.  We need to know your age, whether you have dependents, what your assets are, who and how much you owe as well as what your income is.  All those are questions we have to have answers to in order to recommend a good plan to get you out of debt.  

If you’re about to retire, you don’t have the luxury of time to get out of debt by just cutting a few frills but if you’re young and single with a good job, maybe selling that expensive car for a more frugal model and cutting back on the dinners out will help you get your financial house in order.  

The old, “cut out the lattes” line doesn’t exactly work if you’re staring retirement squarely in the face like it would for a 22 year old. Sometimes “buckling down” is:

Too little, too late

Most of the better known and more respectable “debt gurus” have advice that is better suited for how to live AFTER you cure your debt issues or if you have plenty of time and discipline and not much debt.  You have to start by comparing your income to your debt load.  Otherwise known as a Debt to income ratio.  If you’re using all your income just to service the bare minimums of your debt, you need a lot more help that someone who just spent a little too much this month.  

You have to assess your situation.  If you’re hunting squirrels, you don’t need a howitzer, but if you’re taking on a grizzly bear, you better come with some powerful options. 

How risky is the cure

The last question we need answered to give you a proper diagnosis is, how risky is the treatment.  In medicine, you don’t want to have brain surgery for a headache.  Think about the side effects of the medicine you take.  Every medicine has them and you don’t want to take something dangerous unless you have to.

When you are talking about curing debt though, you risk having to live with no safety net, especially if you’re doing it the “radio show” way. We have talked about how nearly half the country can’t cover a $1,000 emergency without having to borrow money from somewhere.  $1,000 isn’t much in this economy and don’t fool yourself into thinking that you can put your hands on a grand in a matter of minutes or that you’re not one of those people.  

One thousand dollars isn’t much in this economy.  Yet a $1,000 expense would imperil a huge swath of our citizens.  This list details more than 30 different everyday situations that could require you to spend at least $500.  None of those reasons are all that crazy or out there.  It could happen to any of us at any time.  Not long ago, we wrote about what to do when you’re in serious debt and I’ll link to that here.  It goes into greater detail and will help you understand more of your options.