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Rebuilding Your Credit History After Bankruptcy

poster1 — Wed, 05 Jan 2011 15:34:28 +0000

Rebuilding Credit After Bankruptcy - Image via Wikipedia

Rebuilding your credit history after bankruptcy is an important step in reestablishing your financial health. Below are a few tips on how make the process easier:

After your bankruptcy is discharged check all three credit bureaus and make sure that the information on your credit report is accurate. All dischargeable accounts should read “discharged in bankruptcy” and no creditors should be reporting late payments if the account was discharged in bankruptcy. If you see any inaccurate information, including a wrong address, wrong accounts and incorrect account balances, contact the credit bureaus immediately to have the information corrected.
Do some research on which lenders extend credit to debtors after bankruptcy. Take the time to interview various lenders and ask them the following questions:
1. Do you approve debtors who have filed bankruptcy?
2. How long must a bankruptcy debtor wait before they can be approved?
3. What is the minimum credit score requirement for post-bankruptcy debtors?
4. Do you report to all three credit bureaus?
5. Do you know of any other reputable creditors that work with post-bankruptcy debtors?
If you are unable to get an unsecured credit card, then apply for a secured credit card after bankruptcy. Most secured credit card lenders will require you to deposit about $500 with their bank and will give you a matching credit line. But make sure that the credit card lender reports the credit card activity to all three credit bureaus so that it can help you improve your credit score after bankruptcy.

Are we there yet? Some economists suggest that recession has hit bottom

poster1 — Wed, 10 Feb 2010 13:02:35 +0000

The Wall Street Journal ran a commentary by Alan Blinder today entitled, “The Economy has Hit bottom.” He described the economic indicators which suggest once the recession does hit rock bottom, then, and only then, will it finally start climbing back. In the meantime, small and big businesses continue to struggle with the recession and the decision to file bankruptcy. CIT Group, one of the largest lenders for small and mid-sized businesses, has been struggling with the decision to file or not to file bankruptcy. After being rejected for additional bailout funds, they have sought to restructure their debt obligations in order to avoid bankruptcy. Even though they are struggling to avoid bankruptcy, many companies have emerged stronger and better from the bankruptcy process. Some small business franchises have actually benefited from their parent company filing for bankruptcy.

One example is Cork and Olive, a small wine retail franchise chain located in Florida. Owners of franchises had begun noticing issues with the parent company like not receiving requested inventory. Eventually the parent company filed for bankruptcy. At first the process was challenging because of public perceptions about bankruptcy and a slew of unanswered questions. CNNMoney.com recommends that if you perceive that your franchisor is going towards liquidation then attempt to acquire the rights to the mark. Richard Carlton, one of the owners of the Cork and Olive franchise, states that his store has actually become more profitable since the franchisor’s filing for bankruptcy. He is able to make more decisions and implement changes with less franchisor oversight. An added perk is that he no longer has to pay the monthly franchise fee.

Small businesses are feeling some of the tightest squeezing by this economy. Companies, like CIT Group, that have historically helped small businesses are being forced to pull in the reigns on credit they previously allotted to small businesses. When your franchisor files for bankruptcy, you don’t necessarily have to follow. Regardless, your franchisor’s filing will have some type of affect on how you continue to operate. Before you simply close up shop, get more information about your options and how restructuring debt can help you and your business. Your financial situation may be such that it is better in the long run for you to also consider bankruptcy and restructuring. More and more businesses, like Six Flags and Mrs. Fields, are using bankruptcy as a tool to emerge strong and more competitive to survive in this economy. Deciding whether to file, is an important decision. Contact a qualified bankruptcy attorney to explore all your options. Bankruptcy doesn’t have to be rock bottom. It can be a new beginning.

As unemployment rate continues to rise, many seek self-employment opportunities

poster1 — Tue, 09 Feb 2010 12:41:27 +0000

The unemployment rate is officially at 9.8%, just a couple points shy of the dreaded double digit unemployment. This represents the highest unemployment rate since 1983. With reports that the recession was ending soon, many had hoped to see better employment numbers. However, the latest announcement punctuates the warnings of conservative economists that job recovery will lag behind economic recovery. In the mean time, people have families to support and bills to pay. In the fashion of true American ingenuity, many consumers are rising to the employment challenge with a new juggling routine.

According the Wall Street Journal, more people are taking on multiple part-time jobs and gigs to make up their lost wages. Ken Hall, for example, took on several part-time positions and bartending on the side. Handling one job can be stressful, but some are actually enjoying a new lifestyle that is absent the usual office politics. Regardless, makings ends meat on your own is stressful and scary. Despite their best efforts, some are still having difficulty making the mortgage and paying all the credit cards on time. To cope, many are tapping every possible cash asset and savings source to make the minimum payments. When you’re financially stressed and you feel you’re down to your last options, it is extremely tempting to take a slash and burn approach to debt resolution: sell everything of value and deplete every other source of cash. Essentially, do anything but file bankruptcy.

One of the worst pre-filing mistakes is not talking to a bankruptcy attorney. If you have a large debt burden, talk to a qualified bankruptcy attorney who can explain the advantages and disadvantages of different debt management techniques. They can help you head off problems before they backfire. Another major pre-filing mistake is liquidating the tools of your trade, especially in this economy. Liquidation might make sense at first blush—pay everything off and then starting over. But the question then becomes, what do you start over with. With the slow rebound in the job market, you may be your best opportunity for employment. If you liquidate your tools, you won’t have the items you need to make money. Also, make sure that your bankruptcy attorney knows your profession and the tools that you need for that profession. Your bankruptcy attorney can then work with you through the bankruptcy process to resolve your debt issues, improve your cash flow, and help you keep your trade tools. Tools of the trade are protected during the bankruptcy process. What is considered a “tool of the trade” depends on your occupation. For example, a transcriptionist needs word processing equipment. Mechanics need shop tools. A promoter might need power point equipment. Don’t be stuck in the mind set that “tools of the trade” only apply to certain occupations. Protecting one of your last avenues of livelihood is an extremely important goal during the bankruptcy process, so don’t neglect identifying what items you need towards your occupation.

This is a rough economy. Some analysts are dreading and predicting double digit unemployment by next year. Fortunately, there are still options and opportunities available for you get back on your feet. Contact a bankruptcy attorney in your area today to learn which type of bankruptcy is best for your financial situation.

FTC attempting to tighten rules on debt relief organizations

poster1 — Mon, 01 Feb 2010 10:57:01 +0000

The Dallas Morning News reported that the FTC is attempting to promulgate new legislation in response to the unscrupulous practices of some debt relief or credit counseling organizations. The number of complaints regarding companies that provide debt relief services has steadily increased. According to the article, some of the reform measures would include: prohibiting an agency from charging fees before the organization provided any services and from masking themselves as a non-profit organization when they are actually a for profit organization. The recession and decade high job losses have created an environment where many people are simply desperate for help. Almost proportional to double digit unemployment rates, the rates of cons and scam artists have increased. There are some agencies out there which are truly focused on providing quality credit counseling. Before you sign up for a credit counseling service, review the FTC’s web site and advice on how to spot scam credit counseling services. For example, a tactic recommended by some services is to create a new identity for yourself by applying for an Employer Identification Number when you are not an employer and then using that identify to generate a new credit history. The FTC warns that using a fraudulently obtained employer identification number to subsequently obtain a loan on a credit application can be considered fraud. This is particularly good advice if you are in a situation where you may eventually have to file bankruptcy, since a bankruptcy judge will consider fraudulent activity when deciding to approve, or not to approve, your bankruptcy petition.

Whether you are seeking credit counseling or debt relief assistance, the best advice is to use the smell test… if something doesn’t smell quite right, get more information. Getting an instant and new credit history might appear to be a good idea in the short run when you feel like your finances are crumbling around you. However, fraud, even when done through your credit counselor, can still get you into hot water. Depending on the amount of the loan, it is considered a felony offense in some states. If you are not sure about how to proceed when you receive questionable advice about your debt situation, contact a qualified bankruptcy attorney in your area. Many will offer free or nominal fee consultations. They can tell you exactly what the law is and how it will affect other potential decisions. Don’t gamble your financial future with a scam artist.