Should I file for bankruptcy?

Your Credit Minute Show Notes:

00:00 What’s up, everybody? This is Nik Tsoukales with Key Credit Repair. Today, we’re gonna talk about a word that has a super negative association, a word that people don’t really want to talk about, and that’s gonna be ‘bankruptcy’. Okay, so we get the question all the time: should I file for bankruptcy? And obviously for the sake of fair disclosure, we have to tell you we are not attorneys, we are not bankruptcy attorneys. What we are is credit repair specialists, but there are some very simple things to consider when you’re, uh, thinking of doing a bankruptcy, okay?
00:29 First of all, let’s talk about what a bankruptcy is guys, okay? So sometimes, we just use this one word, ‘bankruptcy’, but there’s, there’s more that goes into this. Okay, if you actually look up ‘bankruptcy’ in the federal court system, you’re gonna see what a bankruptcy is, is a protection, okay? So, the full phrase is gonna be ‘bankruptcy protection’, and what it is, is you getting protection from creditors when your finances have gone a little out of whack, okay? Recently, you’ve probably seen 50 Cent, a guy who’s worth, uh … You know, he’s been on the Forbes list of over $100 million and he had to file for bankruptcy. How does this actually happen and why should this happen?
01:12 Well, there are a couple of different types of bankruptcies, okay, and I’ll give you the pros and cons of both, and a couple of different super simple ways of thinking about this and approaching them, okay? So personally, you have Chapter 7 as an option and Chapter 13 as an option, and these are probably the two most common bankruptcy. Chapter 7 is really a full discharge of all of your debt. So, you can’t afford your debt, you’re falling on hard times, and what happens is you go to a, um … You go to your local bankruptcy attorney, they’re gonna file a petition in bankruptcy court, they’re going to get you protection from those creditors, from those creditors harassing you, okay, and then the judge is going to approve wiping out all of those steps. Those creditors will charge off those debts. They won’t get any payment from you, okay, and you’re gonna get a clean slate financially.
02:03 Now, that doesn’t mean you’re necessarily gonna get a clean slate in terms of your credit. Keep in mind that a bankruptcy is a ten-year mark, okay? Ten years and any time you apply for something, they’re gonna ask you, “Have you, uh, filed for bankruptcy in the last ten years?” It’s quite common. I mean, even if it doesn’t come up on your credit report, most applications are gonna have a little checkbox. Keep in mind, even if it doesn’t come up on a credit report, it does come up on a public records search because a Chapter 7, a Chapter 13, any sort of bankruptcy is a public filing. That information is accessible by the public, okay? It doesn’t mean they’re putting that information on a billboard. No one’s to see it. (laughs) But, it is there in the court’s records, okay?
02:45 The second type of bankruptcy that is extremely common is Chapter 13, and one type of bankruptcy that I really think is almost silly for most people. A Chapter 13 is a reorganization of your finances. So, let’s say you have, you know, 15 credit cards, um, you’re a business owner, things falling apart, you’ve, you’ve put yourself on the line personally. Things, things are, are, are … The business didn’t go well and now you’re on the hook for all of these credit cards, okay? But, the business is still going pretty well, okay, or maybe not as well as you want, but it’s still there, it’s still viable. Okay, that’s usually when you file for Chapter 13, and the Chapter 13 works a little bit like … Kind of like a debt consolidation or almost like a debt relief plan, okay?
03:27 So, let’s say you have these multiple creditors here that you have to pay, okay? Well, instead of paying them, you’re gonna be paying the court. You’re gonna be paying through a trustee. Okay, this is you. You’re gonna be sending money every month. That money or that amount is gonna be determined by the bankruptcy courts. It’s gonna be an amount that you can afford, okay? And then, the court system is gonna be distributing to each of your creditors until each of those debts have been paid off. That’s usually done over the course of a five year period, sometimes faster. Okay, keep in mind, though … Okay, let’s say you owe $100,000 in debt, okay, and you’re paying off this Chapter 13. You’re gonna pay that, plus court fees, plus attorney’s fees, okay? So, this could quickly turn into $115,000 in debt. I’m not a huge fan of a Chapter 13.
04:28 Okay, the only time in Chapter 13 really works is if you’re self-employed, okay? Um, if you’re not self-employed, typically what I suggest is some sort of a debt relief program, and a debt relief program works very similar to this, and the only difference is you’re gonna send your money into a debt relief company. That company is actually gonna save up that money with you, okay, and then they’re gonna use that money to negotiate settlements with each of those creditors, so that $100,000 that you owe could quickly turn into $50k. So, debt relief companies do a great job of negotiating down settlements, and as long as those fees makes sense, um, and they’re affordable and the company’s performance based, meaning they’re only making a percentage of how much they can save you, it’s a grand slam, okay?
05:17 The cons of that are it doesn’t offer you protection against those creditors. They can still call you, they can still harass you, they can still chase you, they can still sue you, whereas a bankruptcy, again, it’s ‘bankruptcy protection’, okay? You have protection from the court system. Those creditors cannot contact you, they can’t reach out to you, they can’t harass you. That stops. The court tells them, “Cease and desist. We’re handling things from here on end.” Okay? So, keep that in mind. So again, guys, get Chapter 7 as the big one. Chapter 13 is the one I don’t really like too much, okay?
05:50 Um, also, another suggestion is, you know, if you’re a consumer debt or if you’re, if you’re just a consumer, you’re not self-employed, okay, you’re not on the hook for a bunch of business debts personally, then che- Then, bankruptcy is something you really want to think, uh, you really want to think about, okay? If you’re on the hook for $4,000 or $5,000 in, in, in debt, um, bankruptcy might not be the move for; debt relief might be the move for you, okay? Um, consumer credit counseling might be the move for you. Okay, so I’d probably want to explore those options before I even consider speaking to a bankruptcy attorney, okay? Um, and the big reason is, again, that, that bankruptcy’s gonna stay on your credit report for ten years. That’s a pretty big mark, um, and it’s gonna follow you around for a long, long time, okay? What’s interesting, by the way, is I’ve had some people approach me and ask me: should I file bankruptcy, um, even though a debt is six years old? Okay, so the debt is six years old, but it’s big. You know, it’s $30k and all of a sudden, they’re just now getting harassed for the debt. The debt was fairly dormant and they’re wondering, “What should I do?” Well, in a scenario like this, okay, bankruptcy’s not a good idea because six years, this debt is gonna border the statutes of limitations.
07:05 If you’ve seen from my previous videos, depending on the state that you live in, guys, you could have a six year statutes of limitations where the debit comes un-collectable. You get up a five year/four year, um, and their basic reporting is only seven years, seven years plus 180 days from the date of last delinquency, so basically seven and a half years, okay? So, don’t go ahead and start paying attorneys to file bankruptcy and do all this crazy stuff if they’re just calling you, okay? You might actually want to stall a little bit if that debt is going to expire in the next month or so, or if it’s, uh, if it’s already expired, based on your state’s statutes of limitations, that’s worth a dispute and a cease and desist to that creditor, telling them, “Hey, you know, beat it. This, this is, this is a dead issue. You’ve written this off many years ago.”
07:50 So, guys, this is Nik Tsoukales with Key Credit Repair. Any additional questions regarding how you should approach or finagle bankruptcy versus credit repair versus debt relief, that’s a question our consultants can, can help answer all day and we can steer you in the right direction. Have a great day.

Will This New Bill Help Your Credit Score?

There are three big complaints about the current credit scoring system in the United States – it’s confusing, it’s not always fair and it’s not always as accurate as it pretends to be. And considering that about one-third of all Americans have either poor or bad credit, it’s probably a good bet that a significant number of these individuals are “victims of the system” to some extent. In other words, their credit situation isn’t quite as dire as their FICO score indicates.

But soon this may be changing, thanks to a bill introduced in May by Rep. Maxine Waters dubbed the “Comprehensive Consumer Credit Reporting Reform Act of 2016.” The proposed bill could help a number of Americans improve their credit scores – and they wouldn’t even have to do anything:

What the Proposed Bill Includes

Bad credit information (i.e. foreclosures, Chapter 13 bankruptcy) would be removed from credit reports after 4 years (not 7 as it currently stands).
Debts that have been paid and settled would be removed 45 days after the date of finalization.
Employers would be forbidden to check a would-be employee’s credit report for employment consideration purposes.
Disputes wouldn’t be handled so much by the consumer, but by the credit bureaus.
Credit reports and credit checks would be able to be accessed complimentary more regularly so individuals could monitor improvements. Presently, consumers are allowed one free credit report check a year.
Credit relief would be provided to those that have been victimized by predatory lending.
The Consumer Financial Protection Bureau would be in charge of monitoring and developing scoring algorithms and models.

Will it Pass?

While the proposed Comprehensive Consumer Credit Reporting Reform Act of 2016 appears favorable (and practical?), it’s also another pitch in a line of credit reform proposals that have been introduced over the years. And these proposals have done little in the way of moving the legislative needle when it comes to credit scoring.

In fact, this is the second recent credit reform pitch from Waters herself, as her first attempt came in 2014. Last year, Sen. Elizabeth Warren and Rep. Steve Cohen introduced a proposal that would prohibit employers from checking credit scores and reports on job applicants. Both proposals didn’t pass. In fact, the last real notable change in credit reporting may have been way back in 2003 when an amendment to the Fair Credit Reporting Act permitted consumers to receive complimentary annual credit reports. Based on this unfavorable track record, the Waters’ latest proposal may appear to be a long shot, but the Senator is still working to help raise support for it.

Stay tuned to see where – if anywhere – this bill goes, as it could spell some welcome relief for millions of Americans with less than favorable credit scores.

Can I Start A New Credit Report? – Key Tips

If you hit a bad shot in the game of golf, you have one of two options moving forward: you can either deal with the poor shot and strive to make a better shot on your next stroke or you can drop a new ball and essentially hit a do-over, or a mulligan. In many cases, the mulligan trumps the former option.

But unlike golf, there are no mulligans when it comes many things in life – like your credit history. Yes, those with poor credit history – and thereby a poor credit score – often wonder if there’s a way for them to hit the reset switch and essentially start over. Essentially, the closest thing to accomplishing this is bankruptcy, but this method of “starting over” can actually do more harm than good over the short term, as bankruptcy can stay on your credit report for up to 10 years. Can I Start A New Credit Report?

Here’s a look at some common misconceptions that people have when it comes to their credit history and starting over:

Name Changes

One common misconception is that you’ll get a new credit report if you were to change your name. That’s false – in this case, one’s existing credit history is simply transferred and carried over to the person’s new name. A person’s credit report is matched to a specific individual, so any data would simply be carried over in the case of a name change.

Social Security Number Change

It’s very rare that someone is issued a new social security number, legally at least. But just like as in the case with a name change, your credit history would simply be carried over to that new number, should you qualify to receive a new social security number. Unlike what many people may hypothesize, a new SSN doesn’t mean a fresh start on your credit.

Can I Start A New Credit Report?

The best option to improving your credit score, and the closest thing to hitting the reset button on your credit report, is simply to take it more seriously. Come up with a credit repair plan that will pay down high-interest debt, aim to reduce your credit card and debt to under 30 percent of your total credit allotment and always be sure to pay your bills on time. Credit repair takes patience and commitment, but it’s certainly not impossible.

On a side note, be wary of quick fix credit repair scams, which create a new credit report by altering your identity. This is illegal – an example of fraud – and can result in much more bad than good.

As you can see, there are no mulligans when it comes to your credit report. The best way to start fresh is to commit to taking the matter more seriously and work to increase your score to make you a more attractive consumer. There’s no such thing as a credit report do-over, so aim to correct your financial mistakes with smart decisions moving forward.

For additional information, feel free to Sign Up for $0 .

Establishing Credit – When Should You Start ?

Length of credit history accounts for 15 percent of the overall credit score. It’s certainly not the single most important category when it comes to calculating your FICO score, but generally speaking, the longer your credit history, the better reflection it will have on your score.

Length of Credit History Basics

So just what does the credit score take into account when it comes to credit history? Here’s a look:

Age of the oldest account established, as well as the age of your newest established account. An average age of all accounts is also calculated.
The amount of time that specific credit cards have been established.
Amount of time since certain accounts were used.

When to Start Building Credit?

Most credit repair experts agree that people should begin to establish credit as soon as they’re able to handle the financial responsibility and the consequences that they may be subject to. This generally falls into the late high school and early college years.

So how can someone begin to build credit during these late teenage years, especially when they might not have a large income to rely on? Here’s a look at some credit tips for establishing a history:

Credit card: Parents will need to co-sign on any credit card opened for their child if they’re under 21 years of age and don’t have a consistent, reliable source of income. Many credit card companies offer student credit cards, with low credit ceilings to help teens start establishing credit.
Authorized user: An alternative to co-signing on a credit card is adding a teen as an authorized credit user on an existing account. This is a preferred route by many experts, as the child can simply be dropped as an authorized user if things go awry – something that’s much easier to do than get out of co-signing.
Secured credit card: A “secured” credit card is similar to a regular card, except that users are required to put down a deposit as assurance to the creditor that payment can be met. Usually, the amount you’re able to charge with a secured card is limited to the deposit you put down.

Responsibly managing that first credit card that is opened (or amended) with your name on it is the key to building a positive credit history and credit score, which will open more doors down the road in terms of home loans, auto loans and more. However, failing to enact proper debt management during these crucial early years while you’re establishing credit history may not just force you into a lengthy repair credit program, but it can also impact the credit score if you have a co-signer on your account.

Public Records – How do they affect my credit score?

How Do Public Records Affect Your Credit Score?

According to BSC Alliance, it’s estimated that anywhere from 1.3 to 1.5 million Americans file for bankruptcy protection each year. In 2013, Fox Business News reported that the IRS filed over 300,000 tax liens, or unpaid assessed money against your property or salary. Hundreds of thousands more Americans have court judgments filed against them.

So just what do bankruptcy, tax liens and court judgments have in common? They’re all types of public records – or public legal documents – that can appear, linger and negatively impact your credit score. In fact it’s estimated that bankruptcy alone can dock an otherwise good credit score of up to 200 points. But that might not be the worst part about this public record. Arguably the worst part about bankruptcy is that it can stay on your credit report for up to 10 years, if credit repair or debt management strategies are not applied.

Yes, for bankruptcy – as well as many other types of public records – one way to repair credit is to wait out the years until it expires from your credit history. It goes without saying that a key credit tip to maintaining a favorable score is to avoid these public record pitfalls. Here’s some additional information on public records and how it can impact you:

Bankruptcy: We already covered a bit about how filing for bankruptcy impacts your credit score and how it can stay on your credit history for 7 to 10 years, depending on which Chapter you file for. Having a bankruptcy removed from your credit report is challenging and will require several disputes, but it is possible, as long as it has been discharged.
Tax Lien: Tax liens are filed either against your money or your property, indicating that you owe money to the IRS. But tax liens work a bit differently than bankruptcy and other public records. That’s because after you pay a tax lien, it is “released.” And although even tax liens that have been released can stay on a credit report for up to 7 years, you can contact the IRS and request that the released lien by withdrawn. If your request is granted, the lien is removed from your credit report immediately.
Court judgment: Judgments are filed after you lose a trial or ignore a lawsuit and a court grants the opposing party the right to claim money, property, etc. from you. After they’re filed, they’ll stay on your credit report for up to 7 years. Additionally, judgments can be re-filed within that 7-year span and tack an additional 7 years onto the time it will impact you. Needless to say, it’s wise to avoid judgements, whether it be with a creditor, landlord, etc. So if you believe a court date is imminent, do what it takes to explore settling outside of the courthouse. Your credit score will thank you for the next seven years.
Other public records: Other types of public records your credit score could be burned on include foreclosure, wage garnishment and past due child support payments.

Public records can be a burden to your personal finances as well as your credit score. So try to avoid them, if at all possible. But if you can’t, it’s important to know what to expect. For additional information feel free to Sign Up for $0 below.

Debt Settlement Vs. Bankruptcy

Think of it as a debt management conundrum – should you file for bankruptcy or try to strike a settlement agreement with your creditors? Depending on your situation, either one can be a viable route if you can no longer make payments on a loan or credit card. But it’s important to carefully analyze both courses of action, not only in terms of cost, but impact on your credit score. Here’s a closer look at both debt settlement and bankruptcy:

Bankruptcy

Generally speaking, filing for bankruptcy – whether it’s Chapter 7, 11 or 13 – negatively impacts your credit score for longer than a settlement would. A Chapter 7 bankruptcy, for instance, would remain on your credit report and be reflected in your credit score for up to 10 years. A Chapter 13 bankruptcy, for seven years. But the big thing about bankruptcy is that there’s really nothing you can do to repair credit after you’ve filed – you just have to endure until the bankruptcy is removed from your credit report after seven to 10 years.

Settlement

Debt settlements typically require you to work with the creditor to see what they’d be willing to accept to settle an outstanding balance. While in many cases, they’ll accept less than what you actually owe, there are a few things to consider when it comes to settlement:

You’ll likely have to make a lump sum payment.
Your credit may still be damaged if you’ve failed to make on-time payments. Therefore, you’ll still have to enact a credit repair strategy to raise your score following settlement. (Credit tip: If a payment goes to collections, it isn’t removed from your credit history until it’s reached seven years from the time of last delinquency. So if you just now settle a debt you stopped making payments on 4 years ago, you’ll only have 3 more years before it’s wiped off your report.)
The IRS considers forgiven debt as taxable income, which means that federal debt collectors might be coming after you for more money if you don’t file your income taxes properly.

So if you’re caught in a financial pickle, be sure to do your homework before you settle or file for bankruptcy and what it may mean for your credit future.

For any additional information on how to repair your credit after a bankruptcy or settlement, please Sign Up for $0 below.

Bankruptcy – Can I Ever Buy A Home Again?

Check out our recent interview with Boston.com and real estate radio network host, Chris Devin. Nik Tsoukalis, President of Key Credit Repair discusses how someone may finance a home post personal bankruptcy. This is a MUST READ & WATCH!

Credit After Insolvency– Obtaining Authorized For A Home mortgage

After a past or current insolvency, many people want to hop on the road towards developing good credit report. To achieve this objective, some opt to buy a house. While a brand-new couch acquisition is an excellent way to restore credit and improve your credit history, acquiring a house after a recent bankruptcy could lead to greater rate of interest and fees.

Setting up Credit after Bankruptcy

An insolvency will remain on your credit rating record for 7 to ten years. During this moment, acquiring a brand-new house, automobile, or getting a charge card with a prime passion price will be complicated. You need to set up or rebuild your credit rating. When lenders evaluate your credit report application, your rating is a crucial identifying consider whether you are approved. If you have closed new charge account given that your insolvency, lending institutions can not precisely evaluate your creditworthiness.

There are several means to re-establish credit rating after a personal bankruptcy. If you can not get authorized for an unsecured credit report card, think about applying for a safeguarded card.

When Should You Obtain a Home Home mortgage Finance?

If possible, delay making an application for a new mortgage for anyway two years following your insolvency. This will certainly enable you sufficient time to rebuild your credit rating as well as increase your credit score. By doing this, you could qualify for much better or similar rates of interest.

Numerous lending institutions will approve a mortgage loan application eventually following a personal bankruptcy discharge. Sadly, the rate of interest on these finances are numerous points higher than present market rates. This rate increase will considerably increase your monthly mortgage settlement.

Ways to Get Approved for a Home Loan after Bankruptcy?

The good news is, it is feasible to obtain a home mortgage complying with a previous or recent bankruptcy. If you are obtaining a funding before re-establishing credit, call at least four sub prime lenders and get on-line quotes. While the prices you obtain will be high, you could consistently re-finance in 2 years for a much better price.

If you have developed brand-new credit accounts, regularly examine your credit rating record. Your credit report ranking will enhance substantially if you pay your creditors on time and stay away from late settlements. After two years, start getting in touch with home loan loan providers. Likewise, you must likewise get a number of quotes. To accelerate the procedure, apply through a home loan brokerage firm website. A single on-line application will generate a number of quotes from numerous various lending institutions.

After a current or past personal bankruptcy, many folks really want to obtain on the course towards establishing great credit rating. While a brand-new residence investment is a good means to restore credit and also enhance your credit score, purchasing a house after a recent bankruptcy might result in greater interest prices as well as charges.

Bankruptcy – Can I Ever Buy A Home Again?

An insolvency will remain on your credit guide for 7 to ten years. If you have not opened brand-new credit accounts given that your insolvency, loan providers could not precisely evaluate your creditworthiness.

If you have set up new credit report accounts, frequently inspect your credit guide.

Types of Bankruptcy Protection

Many people working on credit repair have a bankruptcy in their past. Over 1.2 million bankruptcies were filed in 2012 alone. But, even many of those who have filed do not know very much about the process, the long term consequences, or what each type of bankruptcy entails. Read on to learn a bit more about the most common types.

To undergo either type of bankruptcy, you will have to go through credit counseling. There are agencies in each state approved by the United States Trustee’s office. You will also need cash for filing and administration fees.

Chapter 7 – Liquidation Bankruptcy

Chapter 7 is the most common type of bankruptcy, accounting for three quarters of filings last year. Under this type of bankruptcy, all qualified debts are discharged. One of the benefits of a Chapter 7 bankruptcy is the “automatic stay.” Once you’ve filed, creditors cannot garnish your wages, go after your bank account, repossess your car or foreclose on your house until the process is finished. So, it can give you time to make new plans while everything is being resolved.

Not everyone qualifies for Chapter 7. You cannot use Chapter 7 bankruptcy if you’ve already had another bankruptcy discharge within the past 6 to 8 years. And, after undergoing a means test, your income, debt burden and expenses show that you could manage a the repayment plan that comes with a Chapter 13 bankruptcy, you may be required to file that form instead.

A Chapter 7 bankruptcy stays on your credit record for 10 years. However, the full impact will not stay on your credit that long. Older discharged debts will fall off sooner (usually after 7 years) meaning that your credit rating will start to rise even before the bankruptcy disappears from your credit history.

Chapter 13 – Reorganization Bankruptcy

In Chapter 13 bankruptcy, you are able to keep many assets but have to repay your debts back over a three to five year span of time. The advantage is that you can usually keep your home and car, even if you have fallen behind on payments. Typically, you will only have to partially repay debts that are included in a Chapter 13 bankruptcy.

Another advantage of a Chapter 13 bankruptcy is that it drops off your credit record in 7 years instead of 10. This can be a boon to those who want to proceed with home purchase plans sooner.

No matter which form you consider, bankruptcy has a profound affect on your credit rating for a number of years. It takes time and work to rehabilitate your credit so that you can move on with new credit and bigger plans like home ownership. By carefully managing your finances, you can get relief from debt and get back to financial health.

Bankruptcy Foreclosure – How long do I wait to purchase a home?

One of the most popular questions we get here at Key Credit Repair is “How long after a bankruptcy can I purchase a home?”.

The events leading up to a bankruptcy can be absolutely traumatizing but bankruptcy can provide an immediate sense of relief. Having a “clean slate” financially is a pretty wonderful thing. One of our top ranked mortgage partners, Savvas Fetfatsidis has forwarded us some pretty amazing information in regards to bankruptcy, foreclosures, short sales, etc.

So, here it goes…….

FHA Loans:

Chapter 7 Bankruptcy-2 years after discharged.

Foreclosure-3 years after completion.

Short sale-3 years after completion. P.S. If you are wondering the difference between doing a short sale and just letting your home go into foreclosure is in regards to purchasing a home might be? Well, there isn’t any for FHA financing. Only with conventional financing will you find a difference.

This is pretty amazing information. Millions of consumers assume that you need to stay on the sidelines for the next 10 years because of bankruptcy. It’s just not true! Give us a call today. Our Post Bankruptcy program is the most aggressive and inexpensive option to ensure that you will be bankable in the shortest period of time after your bankruptcy is discharged. The moment you have the discharge letter from the court you can reach out to us for a Sign Up for $0. Also, I would like to thank Savvas Fetfatsidis for this wonderful information. Savvas is the Vice President of Lending at Guaranteed Rate Mortgage. His contact information can be found below.

Savvas Fetfatsidis Assistant Branch Manager/VP of Mortgage Lending
P: 617.532.2005 C: 781.366.4849 F: 617.830.0466	savvas.fetfatsidis@guaranteedrate.com http://guaranteedrate.com/Savvas NMLS: 35213
27-43 Wormwood St Suite 310 • Boston, MA • 02210NMLS ID 2611 \| NMLS Consumer Access Licensing Information: https://guaranteedrate.com/licensing