Tag: #creditreport

Credit will Heal

in Bankruptcy

heal

I try really hard to give good news on this blog.  Bankruptcy isn’t nearly as scary as people make it out to be.  Unfortunately, everything can’t be rainbows and unicorns.

Bankruptcy will most likely hurt your credit. It’s a fact.  In the days immediately following your bankruptcy, your credit score will take a hit. 

So…knowing that, does that mean I shouldn’t file bankruptcy?

ABSOLUTELY NOT

I frequently meet with clients who are literally drowning in debt but are worried about their credit report.  They put a miserable little report ahead of their own financial and likely personal health. 

They have a misguided belief that once they have damaged their credit, it will never heal or be the same again.  

That’s simply not true. 

A credit report is a snapshot of a period in time.  

It WILL recover, probably quickly. 

A credit hit is like a scratch, it will heal

No matter your choice, whether it be debt settlement, debt management or bankruptcy, your credit report will get dinged in the short term. 

Instead of worrying that it will be a death knell, think of it more as a scratch. 

It bleeds, you clean it and bandage it (think of bankruptcy as this part), it scabs over and eventually heals . 

Once it heals, there may be a scar…but that fades over time, just like the damage to your credit report.  

Debt is like a disease

When you can’t actually pay your debts off, it’s like a chronic disease.  

There are symptoms that just don’t go away, sometimes getting worse and worse. 

Debt causes stress, which causes a whole array of problems that the medical community still doesn’t quite fully understand.  

But know this, debt will drain your energy, consume your thoughts, limit your opportunities and make you mentally unhealthy. 

Additionally, if you’re already in this much debt, chances are, your credit report already tells a much different story than you like to think. 

In fact, it may not be doing you any good at all. 

The balance sheet matters most

Like I said before, your credit report is a snapshot of a period in your life.  It is, by its very nature, limited. 

As time goes by, things fall off, never to be heard from again. 

If you use the bankruptcy code, you will change the balance in your favor. The balance sheet that is. 

Bankruptcy has the ability to wipe out your debts, on the spot. 

It stops collections, eliminates unsecured debts and clears your balance sheet in one fell swoop. Immediately.

Yes, the bankruptcy filing will show on your credit report, but the further down the road you get, the less it matters to lenders. Also, with your old debts gone for good, you’ll look like a much more creditworthy individual. 

When you take the steps to get financially, emotionally and physically healthy, the credit health will come and your credit report will heal.  

When you’re ready to take that step, call me.

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.