Posts Tagged ‘bankruptcy’

Why I Should Have Avoided Bankruptcy

May 5th, 2010

I am writing here about bad credit, because I have been through the process and through the system, including bankruptcy, and I have bad credit now, but my credit was worse.  I've done everything I can to bring up credit scores, and for me, this happened before the bulk of Americans today fell short on their mortgages or lost their jobs. So, I figure I'm about three years ahead of the curve and I hope people can learn something here.

Also, I'm a lawyer. I'm not a bankruptcy lawyer or credit lawyer, but I understand the law, and still I made mistakes I can't believe I mad.  I can swim through rules and regulations and legalese, but still I messed up – so I can't help but assume there are many many people out there who are completely confused about what they should do, and don't know where to go for help. If a lawyer can't figure it all out perfectly, probably no one can.

It started when I declared bankruptcy; this was a mistake.  I had a lot of debt,but student loans I couldn't discharge, and I wanted to keep my house. (which in the end was unsuccessful).  I filed for bankruptcy before the laws changed so I could discharge everything – but I'm sorry I did.  A year later I lost my job and my house; I could have tried to be on a payment plan, or something besides having the bankruptcy on my credit report.  

My feeling about it is, even if I had been seriously delinquent, I did have some alternatives to  bankruptcy.  I could have made some kind of small payments until I got another job (which too my 9 months). But having that bankruptcy is a HUGE red flag – even though my credit score is creeping back up, slowly, lenders see that bankruptcy and today they just say no.

Right now, I could have gotten my past due debts paid up, and had a shot at borrowing for big things like a car or house. Today, I can't, not for a few more years.  And paying cash is tough, but I did learn my lesson. I keep no credit cards now, am paying off my existing car loan and student loans, and swearing I will from now on deal in cash, even if it means driving a crappy car or not taking the vacations I dream of.  At least I owe no one, and can even save a little today.

The point is, before I declared personal bankruptcy, I didn't really understand what it would mean afterward. My bankruptcy lawyer did not explain enough about the ramifications of having this on my credit report; he did say that about half my debt I'd still have afterward, but I didn't listen. So, if you are thinking about bankruptcy, think twice.  Figure out if there is any real reason to file, because you can just be late on payments and catch up when you can, you don't have to ruin your credit for ten years, and it will be easier to get back on track if you avoid bankruptcy altogether.


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Debt Reduction – Taking a Closer Look at Your Debt to Income Ratio

January 4th, 2010

One of the main reasons why many Americans look to bankruptcy and other measures of debt reduction to clear their name from this debt is because statistically as a country we have a very high debt to income ratio; sometimes way over 50% per household. This ratio can prevent people from obtaining financing, establishing credit, and can also get you in a major bind with many of your own creditors. You can calculate this by taking the percentage of the debt you have versus how much income you bring home.

So how can we as whole get better with debt reduction? Having a high DTI can be a deterrent for many creditors and finance companies to want to give us any kind of chance of having credit or financing. Taking a look at your DTI involves you taking the percentage of debt versus your income.

Getting a loan approved involves having the lender calculate your debt to income ratio to show how much risk you are as a consumer. If you DTI is higher than the norm, this shows the company that you are high risk and may run into the problem of not being able to pay the creditors back in time.

Next, you will have to calculate all your debt; this includes the payments you make monthly on all outstanding balances. Do not include your utility bills, just your credit cards, car payment, mortgage, child support, personal loans, and any business loans. If you know that any of these balances will be paid off within 3 months, do not include it. Lastly, divide your monthly expenses by the monthly income and you will calculate your debt to income ratio.

Your monthly income is the first thing that needs to be determined to start this equation. Your monthly income can include child support, alimony, benefits, annuities, and your monthly wages; this will include all income that comes into the household on a monthly basis. If your income is different on a monthly basis then the lender will calculate the last six months of standard and averaged income.

The next thing to be calculated is the debt you have incurred. Debt does not include any utility bills, but it will include credit card balances, mortgage, child support, business loans, personal loans, the car payment, etc. Do not include it if it will be paid off within three months.

Finally, go ahead and divide your monthly expenses by the your monthly income. This will give you the debt to income ratio.

Example:

Monthly Income = $3500

Fixed Monthly Expenses = $1700

DTI = 58%

This debt to income ratio is very poor and shows that expenses are so high that it would be very difficult to gain any additional credit or financing.

The first step of debt reduction is always taking a look at where you currently stand, and that is through obtaining your debt to income ratio.

Looking to find the best advice on Smart Debt Repair, then visit www.smartdebtrepair.com to find the best advice on debt consolidation scams and various debt repair tips.


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Bankruptcy Credit Repair Steps, What Are They?

November 17th, 2009

After you’ve declared bankruptcy, and you now have been discharged, you might be wondering what are bankruptcy credit repair actions you can take now? It’s going to be a long hard road, that’s one thing you can be sure of, to repair your credit again. If you haven’t filed bankruptcy yet, but are thinking about it, read this post before you file, you may change your mind. Bankruptcy credit repair is not impossible, but it will be tough. Here is what you can expect.

First off, it’s odd but if you’ve used a credit repair attorney they may not be the same person you’d hire as a bankruptcy attorney. A bankruptcy attorney probably has nothing for you at all after bankrutpcy to help you repair credit afterward. They got their fee, and did their job, now you’re back on your own.

Next, remember that a bankruptcy stays on your credit report for ten years. Some creditors will automatically turn you down just because they see the bankruptcy, even if it was eight years ago and you’ve paid all on time since then. That’s pretty hard to overcome. This means you just have to sit there and keep current on everything for ten long years.

As for your credit score, a personal bankruptcy will affect your credit score for sure, but by the time you get to file bankruptcy, your score has already been so damaged by late payments, the bankruptcy itself isn’t going to lower your score a whole lot more. Still, going forward, it won’t be easy to get your score up due to the bankruptcy, which shows up as a public record on your credit report.

You will also see than next to every single debt you discharge in bankruptcy, there will be an entry on your credit report that says “Discharged in Bankruptcy”. Guess what? For a lender, that’s like waving a red flag in front of a bull. All they can see is that long list of lenders and creditors who got “discharged in bankruptcy” and lost all the money that they lent to you. So going after bankruptcy credit repair may be futile ins some degree as long as that mark appears.

However, some lender and other creditors will cut you a break after a couple of years. While many banks won’t take the same risks today that they took just a few years ago, with people with bad credit on their records, after two years of paying everything you have left on time, you can possibly see some improvement in your credit score. You may have some debts, like a student loan, that you didn’t discharge, that you are still paying. Or you “reaffirmed” a car loan ( meaning you didn’t default and lose the car but continue to make payments) then be sure you keep paying those on time no matter what, so you can rebuild your credit in some fashion.

If you have any debts at all you are still paying, one method for bankruptcy credit repair you must follow is to pay those on time every single month. If after your bankruptcy there is even a hint that you are falling behind again, you will be in big trouble. You can’t just refile bankruptcy either, you have to wait a period of time before you can do another filing. So don’t stock up on a lot of new debt just because your credit record has been wiped clean. (Not that banks will be beating down your door to lend you money anyway!)

Finally, this might be a good time to stay out of debt once and for all. When economic trouble hits, its people who are in debt who have the most trouble from possible job losses, or higher living costs, because those monthly payments are still hanging over their heads. In addition, it becomes nearly impossible to build real family wealth while a chunk of your paycheck goes to pay debts every month, instead of into the bank where it can earn interest or grow in the stock market or other investments. When you are paying off debt, you are making someone ELSE rich! Why not stay out of debt, now that you have cleared the slate, and start making yourself rich instead?

These basic bankruptcy credit repair efforts, while they will take some time, will eventually get your credit back on track – but you might find you don’t really need to get in debt again after all.


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The Secrets of Bankruptcy Recovery!

August 8th, 2009
by Wendy Polisi

More and more American families are being devastated by bankruptcy. Here are easy steps that anyone can follow to bounce back quickly! There is life after bankruptcy!

You cant watch the news without realizing that millions of Americans are struggling to pay their bills. Delinquencies and foreclosures are on the rise and many have no where to turn to for help.

For some, the only option is bankruptcy.

Bankruptcy leaves both financial and emotional scars that few can understand without having witnessed it themselves. Still, it isnt the end of the road but rather a new beginning.

You can get your life back faster than you ever dreamed! Here is how!

The most important thing to keep in mind is that you can not let the bankruptcy define who you are!

This was one period of your life and does not represent who you are! It is important that you take the steps to make sure nothing like this ever happens again, but do not beat your self up. Any time you waste feeling bad is time you could be spending on building a better life.

A great way to move on is to take the time to generate income from multiple streams.

You family is going to be more secure if you have income coming from several sources, even if your job is very stable. This is a great time to invest in you and learn a new skill! Why not start a website based on a hobby or a home-based business?

Starting your financial life over is also very important. The first step should be opening a bank account if you lost your account during the bankruptcy. This could take some time. A credit union or grocery store bank may be a good place to start. Do not underestimate the value of establishing a relationship. Even though the branch employees may not be able to change the rule for you, they can help by explaining what you will need to do to get an account and going to bat for you to help it happen.

Next, you will want to reestablish your credit. This step might seem counterintuitive. After all, wasnt it too much credit that got you into this mess in the first place?

The only way to improve your credit score is to use credit. You have probably already learned that having a low or no credit score is very expensive.

Just after a bankruptcy you may think that no one will grant you credit. Luckily, there are several options.

A Certificate of Deposit loan from your bank is one of the best things you can do to restart your credit file. What you will need to do is go to your bank and see if they will allow you to open a CD and take a loan out against it. Although you will end up paying interest on your own money, in the long run it is a sound strategy because you will reestablish credit quicker than you would be able to otherwise.

The second way to reestablish credit is through secured credit cards. You will likely begin getting offers for these shortly after your bankruptcy has been discharged! A secured credit card works much the same way as the CD loan does. You will give the lender a set amount upfront and they will issue you a credit line of that amount or perhaps slightly more.

Be smart when you choose your credit card company! You are looking for a low annual fee. Avoid paying an application fee if at all possible. The ability for the card to convert to unsecured at some point in the future is another great feature to look for

Now that youve reestablished your credit, make sure you manage it wisely! Make all of your payments on time as lenders are likely to be less forgiving of minor slips ups than they would have been before the bankruptcy.

Monitoring your credit regularly is very important.

Make sure that lenders arent reporting accounts that were included in your bankruptcy as open and past due. This happens more often than it should, especially when lenders have sold your account to collection agencies.

One of the easiest solutions it to keep a letter on hand to send to any lender that contacts you. Include your personal information, the bankruptcy case number and your attorneys contact number. If you have this on hand, it will be easy to respond to any lenders who are still trying to collect from you.

By following these simple steps, you will be back on your feet quicker than you ever thought possible.

About the Author:
Wendy Polisi is founder of Finance the Dream, the nations premier Lease Option and Rent to Own Program. To learn more about life after bankruptcy, please visit them at liferebooted.org ” the blog that tells you everything you need to know about rebuilding your life after financial setback.

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