Tag Archives: personal finance

Using credit reports in bankruptcy

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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.

Debt settlement isn’t usually the best option

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Looking at debt settlement to help rid yourself of credit card debt?

Credit cards are a huge problem in the U.S. A May 21st New York Times article reported that the Standard & Poor’s/Experian Consumer Credit Default Indices shows that the default rate on credit card loans recently climbed to its highest point, 9.14 percent, since the index first began in 2004.

So more people are no longer paying their credit card bills. What are those people who’ve stopped paying on their credit cards doing about their credit card debt?

Hopefully, they’re not paying a debt settlement company to try and “get out of debt.” There are a few cases where using a debt settlement company may be appropriate, but not many. Many debt settlement companies take large fees and tell you to stop paying on your credit card bills. They take monthly payments from you for a long time. Then they make offers to your credit card companies to settle your debts.

Sound like something you can do by yourself without paying the high fees? Yeah, there’s a reason for that – it is.

But many people who are taking the debt settlement route should consider bankruptcy instead. If you’re thinking about pursuing the debt settlement route, ask yourself, “why did I decide that bankruptcy wasn’t for me?” Was it fear? A belief that bankruptcy is too difficult?

You owe it to yourself – and your financial health – to first take the time to do some research. Look around online. The bankruptcy courts have their own websites with plenty of information for potential filers. It can’t hurt you to take the time to educate yourself. You need to know what the potential benefits of bankruptcy are before you commit to the high fees charged by a debt settlement company.

Photo by Alan Cleaver.

Credit scores: Not all that and a bag of chips

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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.