Category Archives: Credit reports

Rebuilding Financial Strength: A Guide to Elevate Your Credit Score Post-Bankruptcy

Leave a reply

Introduction

Congratulations! You’ve successfully navigated the complex waters of Chapter 7 or Chapter 13 bankruptcy, and now it’s time to rebuild. Your credit score may have taken a hit, but with strategic and mindful steps, you can set the stage for a strong financial comeback. In this guide, we’ll explore effective strategies to elevate your credit score after emerging from bankruptcy, unlocking new opportunities for financial well-being.

Understanding the Post-Bankruptcy Landscape

Post-bankruptcy, your credit score may be lower, but it’s not a life sentence. It’s a starting point for a new financial chapter. Let’s dive into practical steps to rebuild and improve your creditworthiness.

Step 1: Assess Your Credit Report

Begin by obtaining copies of your credit reports from major bureaus – Equifax, Experian, and TransUnion. Scrutinize the reports for accuracy, ensuring that all discharged debts are appropriately marked as “included in bankruptcy.” Dispute any discrepancies you find.

Step 2: Craft a Comprehensive Budget

Develop a realistic budget that aligns with your financial goals. Prioritize debt repayment, allocate funds for living expenses, and set aside savings. Utilize budgeting tools to gain insights into your financial habits and make informed decisions.

Step 3: Establish an Emergency Fund

Build a financial safety net by establishing an emergency fund. Aim to save three to six months’ worth of living expenses. Having this reserve prevents the need for relying on credit in times of unexpected expenses.

Step 4: Secure a Secured Credit Card: Rebuilding credit often involves demonstrating responsible credit use. Obtain a secured credit card, make small, manageable purchases, and consistently pay off the balance. This showcases your ability to handle credit responsibly.

Step 5: Explore Credit-Builder Loans: Credit-builder loans provide an opportunity to rebuild credit while simultaneously saving money. Make regular payments into a savings account, and once the loan is repaid, receive the accumulated funds.

Step 6: Strategic Authorized User Status: Become an authorized user on a creditworthy friend or family member’s account. This allows positive aspects of their credit history to reflect on your report, aiding in the improvement of your credit score.

Step 7: Diversify Your Credit Portfolio: A well-rounded credit portfolio positively influences your credit score. Consider a mix of credit types, including credit cards, installment loans, and retail accounts. Manage these accounts responsibly to demonstrate financial stability.

Step 8: Monitor and Celebrate Progress: Regularly monitor your credit score using reputable credit monitoring services. Celebrate small victories and milestones along your journey to a better credit score. Adjust your strategy if needed and stay committed to long-term financial health.

Conclusion: Emerging from bankruptcy is not the end but the beginning of a financial rebirth. By implementing these steps, you lay the foundation for a healthier credit score and a more secure financial future. Remember, the path to credit recovery is a marathon, not a sprint. Stay committed, stay informed, and watch your credit score rise, opening doors to new opportunities. Your financial comeback story starts now!

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Are You Considering Debt Adjustment in NJ? Read This First!

Leave a reply

If you’re struggling with debt in New Jersey, you may have heard about debt adjustment as a way to get relief. Debt adjustment, also known as debt settlement, is a process where you negotiate with your creditors to settle your debts for less than you owe. However, it’s important to understand the laws around debt adjustment in New Jersey before deciding if it’s the right choice for you.

First, it’s important to know that debt adjustment companies are required to be licensed by the New Jersey Department of Banking and Insurance. These companies must follow specific regulations and guidelines to ensure that they’re acting in the best interest of their clients. It’s crucial to research and choose a licensed debt adjustment company to ensure that you’re working with a reputable organization.

Second, it’s important to understand the fees associated with debt adjustment. While debt adjustment companies can only legally collect their fees once they’ve successfully settled your debts, many of them charge high fees along the way that may not be adequately disclosed up front.

Third, it’s important to know that debt adjustment companies can’t guarantee that they’ll be able to settle your debts. It’s important to have realistic expectations and understand that settling your debts can take time and may not be possible in every case. These companies also cannot protect you from debt collection lawsuits.

Finally, it’s important to consider the potential impact on your credit score. Debt settlement can have a negative impact on your credit score, and it’s important to understand the consequences before deciding to pursue this option.

In conclusion, debt adjustment can be a viable option for debt relief in New Jersey, but it’s important to understand the laws and regulations surrounding this process. Working with a licensed debt adjustment company and having realistic expectations can help ensure a positive outcome. If you’re considering debt adjustment as a solution to your debt problems, consult with an experienced debt relief attorney to discuss your options and determine the best course of action for your specific situation.

Schedule a free telephone appointment to discuss your unique debt situation with attorney Jennifer Weil at my Setmore page.

Retirement Funds vs Bankruptcy: The Better Option for Paying Off Credit Card Debt

Leave a reply

If you’re struggling with credit card debt, you may be considering withdrawing funds from your 401(k) account to pay it off. However, this may not be the best decision for your long-term financial stability. Bankruptcy may be a better option. Here’s why:

  1. Early withdrawal penalties and taxes – If you withdraw funds from your 401(k) account before age 59 and a half, you’ll face a 10% early withdrawal penalty, as well as taxes on the amount you withdraw. This can significantly reduce the amount of money you’ll have available to pay off your debt.
  2. Loss of future savings – When you withdraw funds from your 401(k) account, you’re reducing the amount of money you’ll have available for retirement. This can have a significant impact on your future financial stability, especially if you’re still years away from retirement.
  3. Credit card debt may be dischargeable in bankruptcy – Credit card debt is often dischargeable in bankruptcy, which means that you won’t have to pay it back. This is a significant advantage over withdrawing funds from your 401(k) account, where you’ll still be responsible for paying back the debt.
  4. Bankruptcy can stop harassing debt collectors – If you’re being hounded by debt collectors, bankruptcy can stop the harassment. This can be a major relief and can give you peace of mind as you work to get your finances back on track.
  5. Bankruptcy can help improve your credit score – While a bankruptcy will stay on your credit report for 7-10 years, it can actually help improve your credit score over time. This is because bankruptcy eliminates most of your debt, allowing you to start making positive changes to your financial situation.

In conclusion, while withdrawing funds from your 401(k) account may seem like a quick solution to your credit card debt, it can have significant long-term consequences. Bankruptcy, on the other hand, can help eliminate your debt, stop debt collector harassment, and improve your credit score over time. If you’re struggling with credit card debt, it’s important to consider all of your options, including bankruptcy, before making a decision.

Click here to schedule your own free bankruptcy phone consultation.

How To Rebuild Your Credit After Bankruptcy

Leave a reply

What’s the best way to rebuild my credit after my bankruptcy case is over? Many people are afraid to file for bankruptcy due to the perceived impact on their credit. Truth be told, a lot of people who need bankruptcy already have bad credit and a bankruptcy isn’t going to worsen their credit that much more.

The real reason that people fear credit damage through bankruptcy is that they are afraid of permanent, or semi-permanent, credit damage because a bankruptcy stays on your credit report for ten (10) years. When someone hears that a bankruptcy filing stays on their credit reports for 10 years, they think that the record of their bankruptcy filing is somehow going to outweigh anything good that could happen to their credit after the bankruptcy.

In my experience and in my clients’ experience, bankruptcy does not permanently damage credit. The is an immediate impact to a credit score – a bottoming out, if you will – but if you play your (credit) cards right, there’s nowhere for your credit to go but up after a bankruptcy. There are effective steps that you should take to deliberately improve your credit after bankruptcy.

What You Shouldn’t Do After Bankruptcy

First, you should be aware of some things to avoid after bankruptcy:

  • Don’t overuse new credit cards;
  • Don’t take out business loans you can’t pay;
  • Don’t ignore new credit card offers; and
  • Don’t pay too much in credit card fees.

Believe it or not, there are things that you can do to your credit after bankruptcy that will only make your credit reports look worse, or that will inhibit your ability to rebuild good credit after bankruptcy.

Don’t overuse new credit cards: Most of my clients are pleasantly surprised that they can qualify for new credit card accounts after their bankruptcy case has ended, since they previously believed that they would never qualify for another credit card. But be aware that you don’t want to start charging up your new credit cards to their limit. Instead, only charge a monthly amount that you can easily afford to pay back.

Don’t take out business loans you can’t pay: This is a tough one, because most people want to get on with rebuilding their financial lives as soon as possible after bankruptcy, which includes building their business back to financial health. And it can be hard to know what you might be able to afford to repay. This is where good accounting help or financial advising is invaluable. Ask around for advise from people whose financial judgment you trust; is your business really pulling down the amounts of money that will enable you to repay a business loan? Be a penny-pincher for awhile. Build the business on a shoestring. It’ll give you the opportunity to test the waters and see if your business can stay afloat.

An interesting thing about business loans, or even business credit cards, is that they don’t always report to your personal credit reports. So you might consider business loans to be a net neutral when it comes to your credit. But remember, we are talking about your overall financial health, which your credit reports reflect – if you dig in too deep with business loans that you can’t afford, it’s likely to impact your personal financial health, which is likely to negatively impact your personal credit over time.

Don’t ignore new credit card offers: If you don’t care about rebuilding your credit and you’ve decided that you don’t like banks, then go ahead and ignore the new credit card offers that come your way after bankruptcy – your credit will stagnate. But if you want better credit, you have to work for it, and that means taking out new credit cards.

Don’t pay too much in credit card fees: If you don’t need to pay fees for something, don’t. For many people, annual fees just add on to credit-card debt, making it that much harder to pay.

What You Should Do After Bankruptcy

As you may have figured out by now, the best and fastest way to rebuild a good credit record after bankruptcy is to take out new credit-card accounts. Paying off the full credit-card balance on time each and every month is the safest and most effective way to accomplish improved credit. Only charge the amount that you can easily pay off in full at the end of every month.

After you’ve done this for a few months, pull your credit report from annualcreditreport.com and make sure that this new credit card account – and your monthly payments – are being reported. This is the goal of building new credit: To have positive, in-good-standing accounts consistently reported on your credit reports. If it’s not reporting to your credit, don’t continue to use it and try again with a new account.

Remember, debit card usage will not count as a credit account for credit reporting purposes. It needs to be a credit-card account. You can try a secured card, if that’s the best kind of card account for which you can qualify. Just make sure that you keep enough in the bank account to which the card is linked to pay off the card account in full without overdrawing your bank account.

If you are careful and you pay attention to what you are doing, your credit should improve over time. As you qualify for new and better credit offers, you should take the ones that look best to you (think no, or low, annual fees and higher credit limits). Switch your charging – and your paying off the full balance every month – over to the new account to continue rebuilding your credit. Higher limit cards tend to “look better” on your credit report.

Check Your Income

Obviously, before you take out new credit, you should make sure that you are in a position to be able to afford to pay off any credit card balance in full each and every month. That means you need a source of regular income that can first pay your regular monthly bills – rent, electric, food, etc. – and leave enough money left over to pay your credit card account in full.

Do not put the cart before the horse and get all worried about rebuilding your credit before you have enough income to do so! Worry first about employment and then about credit. Most job fields do not care that you have bad credit before they hire you. There are a few fields where employers do care about bad credit, and it’s highly likely that you’ll know for sure if you are in one of those fields.

If you need to discuss issues with a bankruptcy attorney, schedule a free bankruptcy phone consultation with attorney Jennifer N. Weil through her Setmore page.

How To Increase Your Credit Score After Bankruptcy

Leave a reply

So many people who are in debt are concerned about the impact of bankruptcy on their credit reports that they hesitate to file for bankruptcy. People are afraid that their credit will never recover from bankruptcy, especially since they know that a bankruptcy will be on their credit reports for ten years.

Does Bankruptcy Ruin Your Credit?

Because of the common view that bankruptcy ruins credit, I started paying attention to the post-bankruptcy credit reports of my clients, especially those clients who had gone through a Chapter 7. I started asking them to tell me about what credit offers they received, if any, right after their bankruptcy case ended. If they took those new credit offers, I wanted to hear what the freebie credit score estimators like Credit Karma (ad) said about their credit scores.

Surprisingly, these clients mostly received offers of new credit right after their Chapter 7 bankruptcy case was over. The offers were not great – often, they were for secured credit card accounts with low limits – but the point here is that my post-discharge Chapter 7 clients were receiving unsolicited offers of credit.

Not all of these post-bankruptcy clients accepted offers of new credit. When these clients checked their credit reports months after their bankruptcy cases were over, there was virtually no change. Their credit scores of those who had not accepted new credit offers had taken a hit from the bankruptcy itself, but then those scores hadn’t changed.

Steps To Improving Your Credit

However, there was significant improvement in the credit scores of post-bankruptcy clients who had accepted and used offers of new credit. The elements of building back up your credit score are key:

  • Clear out the bad debts from your credit reports (hint: debt settlement often doesn’t help);
  • Then accept offers of new credit – don’t go overboard here, because next…
  • You’ll need to use the new credit accounts, so don’t charge any more than you can easily pay off, in full and on time, each and every month. Even if you only charge $20 a month, that’s fine;
  • As your credit improves, accept the new, better credit offers that you receive;
  • Keep paying off your credit cards in full and on time every month.

After you’ve used bankruptcy to clear out your old, bad debts, you would use the above method to build your credit score back up.

How Debt Settlement Affects Your Credit

The above process is usually much faster than debt settlement, since debt settlement involves paying large amounts to creditors over time and then waiting 7 1/2 years for those bad debts to fall off your credit reports. The timeline may not matter for people whose bad debts have already fallen off their credit reports, but unless you fall into that category, you may want to speed things up.

Looking for bankruptcy help? Make a telephone appointment with attorney Jennifer Weil at (201) 676-0722. Or you can schedule your own phone appointment here.

The 2 Biggest Bankruptcy Myths, or: How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report?

Leave a reply

The question of how long a Chapter 7 bankruptcy stays on your credit report is one I get all the time. The short answer is 10 years. But the real reason that people ask me this question is because they’ve heard that a bankruptcy, especially a Chapter 7 bankruptcy, destroys the credit report for as long as it appears on their credit report, or even permanently. However, this reflects a couple of fundamental misunderstandings about the impact of bankruptcy on your credit report.

Myth #1: Chapter 7 Bankruptcy Destroys Your Credit

Simply put, it isn’t true that Chapter 7 bankruptcy, or any chapter of bankruptcy, destroys your credit. Your credit score takes an initial hit of several points as a result of the Chapter 7 being filed. But in saying that a Chapter 7 “destroys your credit,” you are giving too much power to bankruptcy – even more power than your bad debts have. It’s not possible for bankruptcy to “destroy” your credit report. What does it even mean for something to destroy your credit?

Let’s examine this belief: Does it mean that, when you apply for credit after bankruptcy, the decision maker will see that you filed for bankruptcy and automatically deny you? That’s just not true, but let’s assume for a moment that it is, and work through it logically.

Let’s start with basic facts: You have unmanageable credit card debt. Either all of that credit card debt shows up on your credit report, or it doesn’t because it’s business debt or because it’s pretty old. If it shows up, your credit report already looks bad because your debt-to-income ratio is bad and/or one or more accounts shows as being in default. But whether the debt appears on your credit report or not, you are living under the threat of debt collection, which includes debt-collection lawsuits. If you get sued for a debt and get a judgment against you, you could be subject to bank levy and/or wage garnishment. That’s even worse for your income and credit; it deprives you of full control over your income and your bank account.

Let’s say that instead of keeping these unmanageable debts on your credit report, instead of subjecting yourself to debt-collection lawsuits, you qualify and file for a Chapter 7 bankruptcy and you get all those credit-card debts discharged. How does your credit report look then? Yes, the bankruptcy shows up. Yes, all your credit-card accounts show up…but NOT as owing any balances. Instead, they show up as “$0 owed, discharged in bankruptcy” or something similar.

How does the sudden lack of debt affect your credit report? Positively, to be sure. Your debt-to-income ratio, which looked pretty bad just a few months before, looks a lot better after all that debt is wiped out in bankruptcy. Any creditor, such as a mortgage company, who is interested in how much debt you’re carrying, will see that you have several $0 balances, instead of credit-card balances totaling $20,000, $30,000 or more. Owing $0 gives you more money to put toward other things, such as a new mortgage, than owing $30,000 or more on credit cards. Mortgage companies know this.

Yes, there’s a waiting period of a couple years after bankruptcy before you can qualify for a mortgage, but that waiting period is shorter than the amount of time that bad (defaulted) credit-card debt stays on your credit report. Bad debt generally stays on your credit for 7 1/2 years. Which one do you think looks “better”? Seven and a half years of owing a ton of unmanageable credit card debt, or a Chapter 7 bankruptcy notation with no credit card debt at all? If you said the former, then you really need to put yourself in the shoes of creditors and re-examine your financial belief system.

Myth #2: Chapter 7 Bankruptcy Looks Worse on Your Credit Than Chapter 13 Bankruptcy

The basis of the myth that Chapter 13 bankruptcy looks better on your credit report than Chapter 7 bankruptcy comes from the idea that it is better to repay your debts, even partially, and Chapter 13 allows you to do that.

While it’s true that any individual creditor could choose to look more favorably on Chapter 13 for this reason, it’s a myth to believe that a Chapter 13 is always better for your credit. In fact, a Chapter 7 bankruptcy can be better for your credit in that it ends more quickly. To be successful, a Chapter 13 bankruptcy must last either 3 years or 5 years, which is the length of your plan. For each month of your Chapter 13 plan, you pay 100% of your disposable monthly income into the plan.

Either chapter of bankruptcy may be used as a method of solving your debt problems. It’s helpful to keep that in mind: Bankruptcy is a solution, not a way of making your debt problems worse. Don’t let the myths override your ability to rationally think about your financial situation.

For help rationally thinking about solutions to your debt problems, call (201) 676-0722 to schedule a specific day and time to have a discussion with attorney Jennifer Weil, or email weilattorney@gmail.com.

In debt? You’re not alone

Leave a reply

A new study shows that a whopping 77 million Americans has debt that’s listed on their credit report as being “in collections.”  That’s 35% of adults who have credit files.  And this debt is spread around all over the country, even though a higher percentage of it is in the South. The student was released by the nonprofit Urban Institute.

So if you have bad debt on your credit report, you’re not alone.  Millions of Americans have the same problem.  The difference boils down to, can you do anything about it? Is bankruptcy or debt settlement right for you?

Whether you can (or should) start the ball rolling toward a clean bill of health for your credit depends on your particular situation. You can keep on spinning your wheels, wondering what to do about your debt, or you can call a competent consumer debt attorney and find out exactly where you stand.

Call consumer debt attorney Jennifer N. Weil, Esq. at (201) 676-0722.

Film Review of Spent: Looking For Change

Leave a reply

A recent documentary available on YouTube highlights the high cost of being poor.  Spent: Looking For Change, a film sponsored by American Express, explores the financial lives of people who lack access to banks or who have bad credit or no credit.  Here is a basic summary of the important topics covered:

According to the film, approximately 70 million Americans lack access to the traditional financial system.

Why don’t these people have access to banks or to credit?  For a variety of reasons – medical problems resulted in lost income, bad financial decisions were made, etc.  Then bank accounts were overdrawn and eventually closed.  Once debts have gone unpaid, credit gets ruined and it’s hard to fix, even where there is currently a good income and all monthly bills are being paid.  Where a person has large student loans relative to their income, their credit is weakened.  Or those who have never had a credit card or taken out a loan are invisible to the credit reporting agencies and have no available credit.

When people lack access to the traditional financial system, they often turn to check cashing businesses, payday loans, and title loans in order to make ends meet.  These types of financial products cost more in fees and interest than traditional products.  The film tells us that Americans spend about $89 billion a year on fees and interest.

When people don’t have a bank account or a debit card, they must physically go around and pay monthly bills, which costs a lot in terms of gas and time.  Even prepaid debit cards that are funded with cash carry large costs in fees charged for buying and using the card.

People turn to payday loans, which are designed to be paid back on the next paycheck; and title loans, which are loans that use your car for collateral.  If you don’t pay the loan, they take your car.  Many will pay the fee over time instead of paying the original loan off because they can’t afford it.  The original loan is never paid off.

My take on the film is that it is a good overview of how financial products that are designed to take advantage of poor people actually set them farther and farther back.  It’s worth watching because it’s an unbiased presentation of a lot of information in only about 40 minutes.

 

Using credit reports in bankruptcy

Leave a reply

If you are considering a bankruptcy filing but you are concerned because you don’t remember which credit card companies you owe and/or exactly how much you owe them all, what do you do?

First, don’t worry. Remember – most, if not all, of your debts are on file somewhere – in your consumer credit reports. It is possible to pull your credit report from each of the three main consumer credit reporting agencies and find out what your creditors have reported with regard to what, and whom, you owe. These three agencies are Experian, Trans Union, and Equifax.

But what if you think you already know exactly who you owe and how much you owe them, prior to filing for bankruptcy? It is still a good practice to pull your credit reports before you file, anyway.

You should pull your credit reports because you may have forgotten a debt, a creditor may be reporting that you owe more than you think you do, and/or one or more of your debts may have been sold to a debt buyer without your knowledge. This is just a good due diligence practice.

The official site for free credit reports from all three credit reporting agencies is annualcreditreport.com. You don’t need to use the ones you see advertised on TV – they will cost you some money, possibly every month. So watch out what services you might be signing up for when you are surfing the net looking for credit report sources.

If you are going to hire an attorney to help with the bankruptcy, speak to that attorney first before you go to the trouble of pulling the reports, unless you just want to see them anyway. The attorney may already have a credit reporting service they want to use. Tell the attorney that you want a copy of the credit report they pull for you. Or, they may want you to pull your own reports first, before starting on your bankruptcy case. Different lawyers go about the preparation of a bankruptcy case in different ways.

Photo by Adam Baker.

Credit scores: Not all that and a bag of chips

Leave a reply

Without a doubt, one of the most frequent questions I get is about credit scores. The question is always some version of: Will a bankruptcy ruin my credit score forever?

Americans have an unhealthy obsession with bad credit, as though a credit score were an indicator of self worth. This obsession is unnecessary. You don’t need a good credit score to live a fulfilling and happy life. Even if you have bad credit, the sun will still come out tomorrow.

Do you want to work for a bank? Do you want to buy real estate someday? If so, you probably have legitimate reasons to be concerned with how your credit report looks to others. If not, stop worrying about your credit. It is not worth the energy you spend on thinking about it, believe me. But if it is a priority, there are ways you can rebuild credit.

And you’d think people who are on the verge of filing for bankruptcy must be starting out with good credit, considering all the energy they expend worrying about how it might ruin their credit scores. But you’d be wrong, for the most part. Sure, some people who file for bankruptcy early enough might still have a decent score, but honestly, most people who are serious about it already have bad credit.

If you are legitimately concerned with your credit, consider this: Those starting out with bad credit should look at how a bankruptcy can help begin to rebuild credit by providing a fresh start. Those starting out with good credit, but who have dischargeable debts they can’t pay, should be looking at how far down their credit score can go if they let their untenable debt situation continue its downward spiral.

Thinking about a bankruptcy in New Jersey? Call Jennifer Weil at 201-676-0722 for a free telephone consultation or email me at jweil@jenlawyer.com.

Photo by Pretty Poo Eater.