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.

Mortgage Servicing Rights: A Cash-Cow for Servicers But A Nightmare for Consumers.

 



A recent trend in the mortgage lending industry is the sale by banks and mortgage companies of the lucrative servicing rights on the loans in their portfolios. Special servicers like Nationstar and Ocwen are taking over the collection of mortgage payments, processing of modifications and the foreclosure and collection of delinquent accounts. This is probably a positive development  as  the banks and mortgage companies have been doing a horrible job at it.

 

Unfortunately, the assignment of servicing rights on a mortgage loan can cause the consumer much grief. I can't count the number of times that a client has complained that they were current on their mortgage until the servicing rights were transferred and they suddenly had to make payments to another company. Invariably in the transition a payment would get lost or delayed and then the collection letters would start, late charges applied and suddenly a perfectly good loan was in default.

 

A Chapter 13 bankruptcy is often the only way to cure a loan that is in default. Those who do not qualify for Chapter 13 must file Chapter 7 and reaffirm the debt or surrender their homes and get a discharge of the mortgage debt. These filers who surrender their homes, however, should carefully monitor their credit after their discharge as the original lender, the original servicer and the successor servicers quite often will continue to report the account to the credit bureaus. And successor servicers will often act like the loan is still collectable. With all these assignments it is not unusual to find  the original lender or servicer and the successor servicer reporting to the credit bureaus on the same loan and pulling credit reports when there is no longer any account relationship. This inaccurate reporting can significantly delay the recovery of a filer's credit score.

 

So, if you get a notice in the mail that the servicing rights on your home mortgage are being assigned to a new company be wary, monitor your credit reports carefully and if you find something that doesn't look right, seek professional help..

 

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Creditors Can’t Seem To Stop Illegally Accessing Credit Reports

It is a perplexing phenomenon but some creditors can’t stop illegally pulling consumers’ credit reports even after they are caught doing it. On numerous occasions we have sued a creditor for illegally accessing our client’s credit reports after their debt was discharged in bankruptcy. Once the debt is discharged they have no legitimate reason to be pulling them, yet sometimes before the ink on the settlement agreement is dry, they start pulling the credit reports again. In a few cases we have had to sue them three times before they finally stop. And it’s not because the penalties are small. Damages can run $500 to $1500 per illegal pull, plus actual damages, costs and attorney’s fees. If anybody has an explanation, let me know.

 

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How Creditors Collect Discharged Debt

We all know that when a debt is discharged in bankruptcy that’s the end of it, right? Think again. Creditors have a sack full of tricks to get consumers to pay debts that they don’t have any legal obligation to pay. In fact, there is an entire industry of debt buyers out there that most people don’t even know about. I’m not talking about the collection agencies, but companies and trusts that do nothing but buy and sell debt—some of it discharged. Obviously if they are buying the debt they intend to collect it. Below are a few of the ways it’s done.

1) Closing on a house or car. When your bankruptcy is over you will eventually need to finance a new car or buy a home. When you go to apply for a loan your loan officer will pull your credit and may tell you that you don’t qualify—unless you can pull up your credit score a few points. They suggest you contact some of your creditors that are negatively reporting on your credit report and settle the debt. You protest that the debt has been discharged but they just shrug. So, you take their advice, contact the creditors and pay off some of your discharged debt. What you were not told was the negative reporting should not have been on your credit report in the first place.

2) Several months after you bankruptcy discharge comes through you start receiving telephone calls or letters from a company you don’t recognize. You think perhaps you didn’t list them on your bankruptcy and are still liable for the debt or the collector says this debt isn’t discharged by the bankruptcy. It gets ugly from there on and you end up settling with them. What they don’t tell you is that they bought the debt from a creditor who was listed in the bankruptcy or that, in a no asset case which is the norm, an unlisted debt is still usually discharged.

3) After your bankruptcy is over you continue to pay an auto loan or home mortgage, although you don’t formally reaffirm that debt. Later on you get behind on the payments and the car is repossessed or the house foreclosed. Months later a collection agency comes along and tries to collect the deficiency. They tell you or you assume that you still owe the debt since you continued to pay on it after the bankruptcy is over. What they don’t tell you is that the debt is still discharged and usually not collectible. The creditors sole remedy, in most cases, is to take back their collateral and that’s it.

4) After your bankruptcy is filed some of your creditors will quit updating your credit report so they don’t have to report that their debt has been discharged. They hope you will voluntarily pay them later to improve your credit score. What you should know is that this trick called “parking an account” and you can dispute the account and make them update it without paying them a nickel.

 

These are just a few of the ways creditors will try to collect a debt that legally isn't collectible. They are very resourceful and will do just about anything if they think they can get away with it. That's why we decided to practice in this area. We believe everyone who filed bankruptcy to get a fresh start should get what was promised them.

 

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Millions of Americans Will Seek A Fresh Start, But Will They Get It?

With lingering unemployment and the inevitable casualties of our credit driven economy, millions of Americans will be forced into bankruptcy over the next few years. They will be looking for a discharge of their credit card debts, medical bills, and mortgage deficiencies and the fresh start the bankruptcy code promises.

 

Unfortunately, even if they successfully complete their bankruptcy filing and their debts have been discharged doesn't mean the fight against predatory lenders is over. Many creditors intentionally misreport people's credit after filing bankruptcy and some will even continue trying to collect the discharged debt. You would think there would be someone in the government making sure creditors obeyed the bankruptcy discharge and the Fair Credit Reporting Act, but that's not generally the case. That task is largely left to the debtors themselves, which means most often nothing is done and the predatory creditor is allowed to continue to ruin the lives of innocent Americans.

 

We have all witnessed lender greed and corporate excess during the current economic meltdown and it's time we put an end to them. Fortunately there are a myriad of laws available to stop this type of abuse by the credit industry. The first is a contempt action in the bankruptcy court, the second are federal actions under Fair Credit Reporting Act (FCRA) and/or the Fair Debt Collection Practices Act (FDCPA), and the third are state court actions for defamation, unreasonable collection or violation of local fair collection laws.

 

Unfortunately, these laws are not utilized often enough to stop this type of abuse. Two of the reasons for this are ignorance on the part of consumers and residual guilt from the bankruptcy filing. They don't know what their rights are after bankruptcy and because they feel a little guilty over not paying their debts, they are not inclined to take action against the lender whose debt has just been discharged. What they don't know is that their creditors haven't necessarily given up getting paid and sometimes won't quit until forced to do so.

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Mortgage Lenders and Servicers Out of Control?

Mortgage Contracts Allow Creditors to Monitor Credit

Today I reviewed a husband and wife’s credit reports and was shocked to see what their mortgage servicer was doing to them. Over five years ago disaster struck this middle-aged couple, an illness and loss of employment forced them to file bankruptcy. They couldn’t afford their house payments so they surrendered their home in the bankruptcy, moved out, the debt was discharged, so they waited patiently for the lender to foreclose. The property was soon posted for foreclosure but for some unknown reason the foreclosure didn’t go through and hasn’t to this day.

     

Once the debt was discharged the lender no longer had a right to monitor or review the consumer's credit reports since there was no longer a debtor-creditor relationship. About a year later the mortgage servicer contacted the couple several times trying to get them to apply for a modification, do a short sale or give them a deed in lieu of foreclosure. The couple cooperated at first but when a short sale was offered to them it was rejected. The lender knew the couple was not qualified for a modification since they had vacated the property and the debt had been discharged. After the rejection the couple notified the lender in writing that they were fed up and would no longer participate in a short sale or deed in lieu of foreclosure and told them not to contact them in any manner in the future. The letter worked for a couple years and then suddenly the letters, statements, and phone calls began again.

  

When the couple came to us to see what could be done to stop the harassment we pulled their credit reports and were aghast to find out that in 2012 and 2013 the mortgage servicer had pulled their credit reports over 39 times without their consent and without a permissible purpose! It’s hard to believe that some of our leading financial institutions would be a party to such blatant invasions of privacy, but we see it far too often, not only with this servicer but with many others as well. Since the debt had been discharged and was uncollectible, the only conclusions we can draw are that the mortgage servicer doesn’t have the ability to control its automatic collection programs, it has no respect for their customer’s right to privacy, or both. Fortunately, there is a remedy for this flagrant violation of the law, the Fair Credit Reporting Act (FCRA).

 

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Fair Credit Reporting Act Protects Creditors As Much As Consumers

Although you would think the Fair Credit Reporting Act was written to protect consumers, it also has provisions that protect creditors. One specific requirement that insulates creditors, at least under federal law, from liability exposure, is the requirement that consumers dispute erroneous items on their credit reports and give the offending creditor 30 days to confirm or correct the reporting. This may seem fair at first glance, but what if the erroneous reporting was intentional or resulted from gross negligence, which is often the case. Why should creditors be insulated from liability when they cause a consumer to lose an opportunity to buy a house or a car? Why should consumers have to endure the humiliation of a credit denial without recourse when a creditor makes an obvious mistake? Why should creditors get a free pass when they injure a consumer? It doesn’t make sense. There is no doubt the credit industry lobbied long and hard for this provision in the FCRA. Luckily there are state laws that don’t recognize this requirement to dispute erroneous credit before action can be taken against the offending creditor.
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Reporting to the Credit Bureaus Is Debt Collection Activity

The courts have held that credit reporting is debt collection activity and this makes sense as the credit bureaus were established for one simply reason, creditors wanted to make sure that the money then lent would be repaid. The credit bureaus have two functions. First to make sure the money their members lend goes to people who are likely to pay it back. Secondly, if the debt isn’t repaid there is an effective way to force the debtor to pay it back. Since having good credit is critical today for home ownership, to rent an apartment, to get a car or finance large consumer items, most people will do just about anything to keep their credit clean. The reality is depriving someone of good credit is a more effective collection technique that dunning letters, harassing phone calls, or even threat of litigation. This is particularly true in Texas where the generous exempt property laws make collecting from the average citizen a hopeless endeavor. So, when creditor report on their customers after they file bankruptcy they must comply with the Fair Credit Reporting Act and it is imperative for consumers who file bankruptcy to make sure their creditors follow the dictates of the FCRA so their credit will come back as quickly as possible

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Don't Let Finances Destroy Your Marriage.

One of the most common refrains I hear from my bankruptcy clients is: "Why did I wait so long to file?" The problem is most people are optimistic and believe they will be able to turn things around. They hate to admit failure and don’t want to be saddled with the stigma of bankruptcy. So, they suffer unbearable stress and pain, year after year, struggling to make ends meet until their situation becomes unbearable. Few marriages can survive this trauma and as a result families are split apart.

 

The fact is, in our credit driven economy, bankruptcy is inevitable for a lot of consumers. A lost job, illness, business failure, or weakness for all the alluring products and services that are dangled out in front of us each day, can leave a consumer deeply in debt with no way out. In this situation, absent a rich uncle or a lottery win, these consumers will eventually have to face bankruptcy. I’m not saying consumers should take filing bankruptcy lightly, but if there is no realistic way to avoid it then sooner is better than later.

 

This was brought home to me early on in my career when I got a call from a widow of a man who had committed suicide because of his business failure. We put the business in chapter 11 and the man's brother turned it around in six months. The man had taken his life needlessly. So, it's always better to face the inevitable and file bankruptcy before the marriage is destroyed and family relationships irrevocably injured.

 

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