Archive for February, 2010
Bankruptcy – A Rough Road Ahead
Posted by: | CommentsThe Difference Between Default and Bankruptcy:
Rarely does a person file for bankruptcy without already having defaulted on at least one credit account. So, if a person defaults on an account, meaning they have failed to repay it as agreed, they have taken the first slippery step toward bankruptcy. That doesn’t mean the person will declare bankruptcy, but they are a step closer to it. A default occurs with only one account. The problem is that when a person has serious difficulty with one debt, they often are struggling with their other debts, as well.
Bankruptcy is among the worst things that can appear in your credit report. When you file for bankruptcy, you are telling all of your lenders that you will not be able to pay them in full, or at all. As a result, it will be very difficult, if not impossible to qualify for new credit while the bankruptcy appears on your credit report.
Considering Bankruptcy:
A bankruptcy showing up on your credit is considered a very negative occurrence in regards to your credit scores and one thing is for certain; you can expect a rather large drop in your current scores. Typically, someone with a score in the mid 700s might see their score fall by 100 points or more. Listed below are a few things to consider before filing for bankruptcy.
- Do your homework. There are several things to think about when considering bankruptcy, such as choosing the type of bankruptcy (Chapter 7 or 13) that’s right for you based on your ability to repay your debts, the type of debts you have, and the impact that bankruptcy will have on your future financial picture.
- Consult with a bankruptcy attorney or a reputable debt counseling service. Because bankruptcy is an important decision that will affect many aspects of your life for years to come, it is highly recommended that you consult with a bankruptcy attorney. You may also want to consult a “legitimate” non-profit debt counseling service as an alternative to bankruptcy, as they may be able to arrange a special debt repayment plan with your creditors. Be careful, however, as there are many dishonest debt management companies that charge high fees and provide very little, if any, value toward resolving your credit problems.
Bankruptcy and How It Affects Your Credit:
One of the great myths about bankruptcy is that it erases bad credit history. It doesn’t.
A bankruptcy will always be considered a very negative event by your credit scores. How much of an impact it will have on your scores will depend on your entire credit profile. For example, someone that had spotless credit and very high credit scores could expect a huge drop in their scores. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their scores.
Another thing to note is that the more accounts included in the bankruptcy filing, the more of an impact on your score.
While there are many things to consider when considering filing for bankruptcy, you can expect it to impact your score for as long as the bankruptcy is listed on your credit report.
How to Stop A Collection Agency
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Here we will show you how to accomplish more than simply stopping a bill collector’s calls. In many instances, mistakes made by bill collectors can not only make them stop calling, but even cause your account to be cleared and closed out.
The Consumer Protection Act governs the activities of collection agencies and in-house collection departments. If you can gain a working knowledge of this act, you can use its provisions to turn the tables on bill collectors and beat them at their own game!
Rules Collection Agencies Have To Play By
Bill collectors will almost always violate some part of the Consumer Protection Act while handling your case. This is why it is imperative for you to keep good documentation of their contact with you. Often, it takes several steps for them to hang themselves. You must have every inch of the way well documented.
In general, a bill collector may contact you by mail, telephone, telegram or in person. Also, unless otherwise advised, a bill collector can call you seven days a week, between 8 AM and 9 PM local time where you live or work. When calling, a creditor cannot in any way discuss your matters with persons other than you. A bill collector MAY ask about your whereabouts or how to reach you, but, they cannot give information about the reason for their call.
The Consumer Protection Act prohibits bill collectors or creditors from using harassing or abusive practices. Creditors or bill collectors cannot: threaten to use violence or other criminal means to cause you physical harm or harm to your reputation or property, use obscene or profane language, publish your name on a “list of debtors” if you allegedly refuse to pay debts except to a consumer reporting agency such as EXPERIAN, Equifax, or TransUnion, engage you in telephone conversation repeatedly or continuously with the intent to annoy, abuse, or harass you or any other person at the called number, or place a telephone call to you without meaningfully disclosing their identity.
How Much Is A Short Sale or Foreclosure Going To Drop My Credit Score?
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Believe it or not, a Short Sale does not have to be a negative occurrence on your credit report. On the other hand, a foreclosure ranks up there just under a Bankruptcy, which is an extremely negative occurrence on your credit. Let’s talk about how these two affect your credit.
How Many Points Will My Credit Score Drop With A Short Sale?
The mortgage that is affected by the short sale should reflect the short sale verbiage within 60 to 90 days. This short sale verbiage is made in the form of a notation made under the account which says “Agreed Settlement Short of Full Payment”, or words to that effect. I’ve got some good news for you though; these types of notations mean nothing as they don’t affect your credit scores in any way.
If you were late on your payments prior to the completion of the short sale, you can expect your credit scores to drop about 120 points on the average. The amount your score actually drops depends on the amount of trade-lines you have, the length of history on your credit, and whether or not you’re late on anything else, among other things.
It will take about 2 years to recover from a Short Sale on your credit if you had late payments associated with it. Of course this is assuming you have good credit in other areas and continue to keep it that way.
How Many Points Will My Credit Score Drop With A Foreclosure?
A foreclosure on your credit can drop your credit score up to about 250 points on the average.
It takes about 3-4 years for your credit to recover after a foreclosure.
