How to Improve Your Credit Score After Bankruptcy-Part 4

Debts incurred after you file your case are not discharged. 

1. Debts incurred after your bankruptcy filing are not usually discharged so pay them timely.
2. Don't Ignore small debts. Even small unpaid balances that are in collection or charged off can drastically hurt your credit. Don’t ignore them or think they will go away. 
3. Pay off small balances in full that have accrued since your filing
4. Negotiate with creditors on debts too large to pay off. Try to get them to take 25%-50%. If they won’t agree to that, try to get an agreed payout of a flat amount per month like $50-$100. 
5. If you reach a negotiated settlement make sure it is put in writing and it is agreed that the creditor will delete the reporting once the agreed settlement is paid, or reported as “Paid As Agreed” or “Negotiated Settlement” with a balance of -0-.
6. Student loans and taxes often are not discharged and must be addressed. Consolidate student loans or get them deferred. Once you do that make sure the creditors involved remove and adverse reporting. If they won't, then dispute it.
7. Work out an installment agreement with IRS if you can’t pay the full amount immediately. That can usually be done with a telephone call or a meeting at your local IRS office. Don't let them file a federal tax lien. That will do great damage to your credit. If one is filed, get it released once the agreement is in effect.
8. If the amount of taxes is so high you could never pay it, try an offer in compromise. You’ll probably need a lawyer of accountant to help you with this, but if you qualify you could save a lot of money and avoid having a federal tax lien messing up your credit.
9. Child support won’t be discharged so keep it current and work out a payout on past due sums if they weren’t dealt with in your bankruptcy. Past due child support really looks bad on a credit report, so get it paid off as soon as possible.

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HOW TO IMPROVE YOUR CREDIT SCORE AFTER BANKRUPTCY

HOW TO IMPROVE YOUR CREDIT SCORE

1. Review Your Reports Annually: This may seem obvious but most consumers don’t look at their credit reports until they are declined for credit or are alerted by a third party of a problem. Be proactive. Go to http://annualcreditreport.com each year and get your FREE copy of your credit reports from Experian, Equifax and TransUnion. Be sure and download them in PDF format so you can save them on your computer and, if you live in Texas and want us to review them for you, forward them to us by email. Having them in electronic format is much easier than printing them out and mailing or faxing them to us. Once we get them we will store them on our server for later use if need be. If you lose your copies we will still have copies we can send you. And remember, your credit review is always free at Manchee & Manchee, P.C. For more information go to our website.

Common Mistakes Made by Bankruptcy Filers and Their Attorneys - #8

  8. Laziness can lead to disaster for bankruptcy filers.

We all have a lazy streak in us. It's just human nature. We want to get a job done with the least amount of effort. The attorney, who may have filed hundreds or even thousands of bankruptcies, begins to see them as routine or fitting into a common mold. So he begins to assume facts or take the word of the client rather than confirm them on his own. To do a bankruptcy correctly takes a lot of time and effort. Many times it may seem like a thorough review of every pay stub, bank statement, loan document or tax return is  a waste of time, but often this diligent scrutiny pays off and a serious problem can be dealt with rather than left to chance. 

Clients are lazy too. They hate to dig back through their records, if they even have any, to get the information needed to properly fill out the bankruptcy schedules. They often figure that if they don't have a record of it, nobody else will, so they can forget about it. Unfortunately, it doesn't work that way. The debtor has an obligation to fill out the schedules completely and the burden is on him to find the records if he doesn't have them himself. This means requesting records from the bank, credit card company or the IRS. 

I am amazed at the looks clients give me when I tell them I need a complete list of all their personal property along with a fair assessment of the market value of each. They often just stare at me like I have told them they have to travel to the moon for their 341 meeting. In actuality preparing a personal property inventory shouldn't take more than an hour or two and is a handy thing to have around anyway if you ever have a fire or other casualty loss. 

Another priceless look on a client's face is when you hand him his completed petition and schedules and ask him to review them carefully. Of course, the completed petition, schedules, statement of financial affairs, matrix, and means test can be several inches thick. The reality is most clients won't have the patience to read every question and then review his answer to for accuracy and completeness. This means the attorney must sit with the client and read every question out loud to make sure he understands them and has answered them correctly.

Clients may also be reluctant to ask questions because he really doesn't want to know the answer if it means he will have to do more work or disclose things he'd rather not deal with. He mistakenly believes his ignorance will be an excuse if the facts are later discovered. In this case the attorney must observe the client carefully so he can pick up on the signs of possible omissions that might come back to haunt both of them. 

Attorneys and clients are often tired and frustrated with the complexity of a bankruptcy filing and there is often a persistent urge to ignore possible irregularities or unwanted complexities. These urges must be resisted.

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Common Mistake Made by Bankruptcy Filers and Their Attorneys #7

7. Assuming property taxes and home owner association assessments will end when real property is surrendered and the debt discharged.

This is one of the most annoying discoveries after a person surrenders their home in bankruptcy. They assume their "Fresh Start" will include the property taxes and homeowners' association dues. The fact is it does up to the date of filing the bankruptcy, but the debtor is still liable for new assessments and taxes that accrue after the bankruptcy. This doesn't seem right to consumers who have lost their home. If they aren't in possession anymore why would they be liable for taxes and HOA assessments?

The problem is that until they mortgage lender forecloses they are still technically the owner of the property. It used to be that foreclosures took place fairly quickly after a property was surrendered, but after the 2008 real estate crash quick foreclosures became the exception rather than the norm. Now foreclosures often drag on for months and even years. So, the homeowner who surrenders his property in bankruptcy now must endure endless harassment from homeowner associations, taxing authorities and municipal code enforcement agencies until the property is finally foreclosed and their liability stops.

There ought to be a law requiring mortgage companies to quickly foreclose, but there is no such law and one is not likely to be ever enacted.  But on the bright side I have seen several times where the mortgage lender completely abandons its security interest in the property leaving the debtor with a free home or a windfall of whatever price he can get for the house. Don't do what one of client's did, however. When he got a notice from his lender that they were releasing the lien on the house and all he had to do was agree to accept it, he was so suspicions he rejected the offer. Needless to say he was very upset when he found out he had thrown away over $50,000!

So, when a consumer decides to surrender his homestead in bankruptcy he should factor in the likelihood that he will have to keep paying the HOA dues after bankruptcy until the property is sold, that he will have to maintain the exterior landscaping to meet local code requirements if the lender doesn't do it, and pay the property taxes until the property is foreclosed. If he is lucky the lender will pay the property taxes and keep up the exterior maintained until foreclosure, but he needs to monitor the situation and make the sure the lender does so.

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Common Mistakes Made By Bankruptcy Filers and Their Attorneys - #6

6. Assuming all of a consumer’s debts are on their credit report.
  

Many consumers have no idea who they owe money to. Debtors and their attorney’s routinely rely on credit reports to provide the information for Schedules D, E & F. A lot of time this is okay but not always. Some medical providers, friends, relatives, ex-spouses, business associates, landlords, and many others don’t always report to the credit bureaus. In a no asset chapter 7 the debt may still be discharged but if one of these unlisted creditors years later suddenly sues on the debt it may be difficult to stop them. Few attorneys will take such a case on a contingency so debtors facing this situation may have to spend thousands of dollars defending themselves.
  
So, it is important for consumers filing bankruptcy to think back to anyone in the past who wasn’t paid or anyone who had a claim, whether the claim had merit or not. And they can't assume if a debt was written-off that they don’t have to worry about it. Writing off a debt is only an accounting entry and doesn’t prevent the creditor from trying to collect the debt. Nor does the statute of limitations make it unnecessary to list an old debt. Statute of limitations statutes are complicated. They can be tolled during bankruptcy or extended by the discovery rule or other statue. It doesn’t cost anything to list another debt, so it's not smart to hold back.

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Common Mistakes Made by Bankruptcy Filers and Their Attorneys - #5

5. Ignoring Creditor Collection Attempts after Filing and Discharge.

There are a number of mistakes that debtors and their bankruptcy attorneys make that often cause  problems after discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge or the automatic stay and can cause the debtor to suffer a serious financial loss.

It’s human nature to avoid embarrassment and conflict, if at all possible. So, it is not understandable that Debtors would ignore calls and letters from creditors after filing bankruptcy. They know the debt is no longer collectible, so they throw away the collection and letters and ignore the calls that keep on coming after filing and even, sometimes, after a discharge is received. This, however, is a mistake.

Some creditors intentionally ignore a bankruptcy notice hoping that the debtor can still be coerced to pay. Whether it is to buy peace, ease feelings of guilt, or believing it will help improve their credit, debtors will often pay discharged debt even though they have no obligation to do so. The problem with ignoring these illegal contacts after bankruptcy is that the creditors will just continue to harass the debtor with calls, letters, by illegally pulling their credit reports, and they may even report the debt as active and collectible to the credit bureaus.

These acts may prevent a debtor’s credit score from properly rebounding after filing bankruptcy and threaten the fresh start they were expecting. What all debtors should do is keep every letter or email received from creditors, document each phone call carefully and report these contacts to their attorneys.

There are various laws that protect bankruptcy filers from these types of illegal contacts, but they can only be successfully prosecuted if there is evidence to show the court and jury. The actual letters, telephone records and documentation of damages are all needed to prevail in bankruptcy court, in state courts, or the federal district courts.  But nothing will happen unless an attorney who handles these type claims is retained and he has the proof necessary to prevail.

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Common Mistakes by Debtors and Their Attorneys

There are a number of mistakes that debtors and their bankruptcy attorneys make that often cause  problems after discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge or the automatic stay and can cause the debtor to suffer a serious financial loss.

4. Failing to Surrender Real Property for Value in Chapter 13.

So many times clients have come to us complaining that their mortgage lenders or servicers are still trying to collect the debt discharged in their Chapter 13. But was the mortgage claim discharged? This very complex issue commonly occurs when a debtor files chapter 13, includes the arrearage in his Chapter 13 Plan but then changes his mind or can’t keep up with the payments and the stay is lifted. The attorney will, of course, modify the plan to allow for the surrender but often forget to state that the property is being surrendered for value. In other words it must be clear in the modification order that the deficiency claim will be discharged along with all of the other unpaid debts when the plan is completed. Although few lenders would try to collect this deficiency debt after the discharge, they often will continue to report the debt to the credit bureaus and pull the debtor’s credit reports. Since it is unclear if the debt is discharged there is not much that can be done to stop this collection effort and this clear invasion of privacy. The bottom line is debtor’s credit score may suffer and their personal financial information will be exposed. Since mortgage lenders often share information with other lenders there is no telling who will end up seeing it.

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