Rebuilding Your Credit
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WhatsNew:
Dealing With This Economy
December 3, 2011
We have been busy at the firm helping our clients deal with this difficult economy. We have had some success recently filing Chapter 11's for a few individuals with multiple properties. A recent court ruling from the Middle District of Florida eliminated a major challenge to this type of bankruptcy. We have seen a drop in the number of Chapter 7 cases compared to last year but have been advised by the foreclosure attorneys that the next waive of foreclosures in coming soon. We expect to see a corresponding increase in Chapter 7 filings. Let us know if we can help you with your financial issues.
CurrentNews:
American Airlines Files Chapter 11
December 2, 2011
The parent company of American Airlines filed for bankruptcy protection in late November, seeking relief from crushing debt caused by high fuel prices and expensive labor contracts that its competitors shed years ago. For most travelers, though, flights will operate normally and the airline will honor tickets and take reservations. American said its frequent-flier program would be unaffected.
Recent Events:
The Local Bankruptcy Scene
November 28, 2011
In the Southern District of Florida, our firm has seen an increase in the unwillingness of Chapter 7 trustees to forgo the collection of potential funds. In Florida, an individual's exemptions in bankruptcy are guided by reference to state-not federal-law. An individual is entitled to certain exemptions of personal and real property. Generally, if an individual was over their exemption limit, i.e. having certain property not entitled to exemption, trustees would generally forfeit their right as administrator of the bankruptcy estate to sell the non-exempt asset if the asset was of little value or considered "unsellable." However, our firm has observed a recent uptick in the willingness of the trustee to sell non-exempt assets worth little, seemingly because trustees do not want to lose out on the potential collection of funds. Often, the sale generates funds in an amount that does little more than pay for trustee and professional fees. If you are considering filing for bankruptcy protection, it is imperative to consult with a bankruptcy attorney who can explain your options and offer pre-bankruptcy planning to avoid these common pitfalls.
Rebuilding Your Credit Through Bankruptcy
Most individuals with debt and credit problems think of bankruptcy as a last resort, and something that will irreparably destroy their credit. While that might have been a fair assessment some years ago, that is not the case today. Many individuals now see bankruptcy as the first step in rebuilding their credit. This article explains why.
Credit Reporting
The reporting of credit in the United States is governed by the Fair Credit Reporting Act. It limits the reporting of most adverse credit to a period of seven years from the time the debt is sent to collection or charged off. For people who are behind on their credit cards and other installment payments this usually means spending years to payoff credit card debts or bring the debts current followed by seven years of poor credit ratings. For many people in this situation credit problems can last a decade or more.
For those who are no longer able to even pay the minimum payment on their installment accounts, things can get worse. When credit card payments fall behind by three months or more, most credit card companies file suit. While many credit card suits result in compromises in which a portion of the balance is paid out over time, many also result in judgments. Judgments cause additional problems.
To order a copy of your credit report online visit Usefull Internet Links which contains direct links to Equifax and Experian credit reporting services.
Judgments
Judgments in Florida and many other states remain effective for a period of twenty years. Florida has a special recording statute requiring the judgment holder to re-record the judgment every seven years in order for it to remain a lien on real property, but the ability of a creditor to execute on personal property extends to twenty years regardless of re-recording. While judgments do not always show up on credit reports, particularly after the seven year mark, they will always show up on a search of the Public Records. A name search in the Public Records is a normal part of the process in obtaining a mortgage loan. Judgments give the judgment holder the ability to garnish wages, garnish bank accounts or send the Sheriff out to levy on personal property, automobiles, etc. Judgments also will impact on your ability to obtain new financing, since the item you are financing may be at risk of seizure by the judgment creditor. Lenders usually require that you obtain a Satisfaction of Judgment before they will give you new financing.
Bankruptcy and Future Credit
Filing for bankruptcy protection is considered adverse credit and will be picked up by the major credit reporting services. Unlike other adverse credit, a bankruptcy filing can be reported for ten years. This, initially, is very damaging to your credit. However, lenders now view bankruptcy for what it is, a fresh start for the debtor.
Federal lending guidelines followed by many mortgage lenders and banks permit the lenders to consider a loan applicant once two years has passed after a bankruptcy discharge. If you qualify for a Chapter 7 filing you can file a bankruptcy petition, obtain a discharge of your debts in about four months, and establish good credit about two years later. Some debts, including recent tax liabilities, alimony, child support and fraudulent debts may not be discharged. You must maintain some credit, such as a home loan, car loan or credit cards, to establish good credit after discharge. Many of my bankruptcy clients apply for secured credit cards for that purpose. Most have better credit ratings two years after discharge than they had when they first came to me. Bankruptcy can provide that opportunity.