We’ve written a series of blog posts answering questions regarding bankruptcy and the use of credit and its financial impact. Call (262) 827-0375

Bankruptcy and Credit Card Debt

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Bankruptcy has become an increasingly popular option for debtors in the past decade, with experts crediting this rise to the increasing instability of the economy and low-income families. While bankruptcy has traditionally been pursued by those who have lost their job and fallen into overwhelming debt, recent statistics show that it is now an option for those struggling with accumulated credit card debt. It’s important for you, as a consumer, on this issue to be informed before making any decisions that could have serious repercussions. This is why you should try to avoid accumulating too much debt in the first place by making conscious decisions about how you spend money.

What is Bankruptcy?

Bankruptcy is a legal process that allows debtors to withdraw from their debts by declaring bankruptcy. The filing typically occurs before the defendants’ assets are liquidated to pay the creditors. Borrowers retain property ownership and see their income, salary, or Social Security payments garnished. Jurisdictions of law broadly vary relative to the types of debts that can be included in bankruptcy. In the United States, each of the fifty states has laws regarding what debts can be discharged through this process. It allows individuals earning some income to create a repayment plan that gives them up to five years to repay their debts.

A chapter 7 bankruptcy case is a liquidation bankruptcy case that typically takes four to five months to complete. Chapter 7 bankruptcy petitions are filed under federal law and are governed by the federal Bankruptcy Code. The court in which you file your petition will determine whether you qualify for this type of bankruptcy and if it is approved, it is usually effective within four months. There are two types of chapter 7 bankruptcies, a straight chapter 7 bankruptcy and a chapter 13 reorganization. Those who qualify file under a straight chapter 7 bankruptcy in Wisconsin because it requires no repayment plan. To file for chapter 7 bankruptcy, the steps are as follows:

1. Credit Counseling

Complete pre-file bankruptcy counseling sessions before filing. This is a mandatory step that happens before filing for bankruptcy. It will help you to better decide on what type of bankruptcy you need, determine your liabilities, and understand how debt consolidation, debt settlement, and personal finance can work for you. The class is designed to provide an overview of various options and strategies and help you determine what type of bankruptcy would work best for you. Both federal and state law requires credit counseling as a means to educate individuals about their options before filing for bankruptcy and as a way to avoid defaulting on debts.

2. Find an Attorney

If you are a high-class professional, you must find an attorney specializing in bankruptcy who can help you navigate the process. A qualified bankruptcy attorney will use their knowledge and experience to guide the client through the process and ensure they can successfully file and be protected under the laws in place. An attorney can help you understand the process, help you make a plan, and negotiate with your creditors to file a bankruptcy petition on your behalf. Finding an attorney who can counsel you on all your options is important. If filing for chapter 7 bankruptcy, contact legal aid or pro-bono attorneys who can help with fees or payments.

3. File Paperwork

Once you have found an attorney and decided on what type of bankruptcy you will file, you can begin filling out paperwork. The paperwork needed varies by state, but the forms required to start the case usually include a petition, schedules, and the codebtor information. You will also need to complete credit counseling. The chapter 13 bankruptcy wisconsin petition is the most difficult to file, and certain steps must be followed to file a schedule of assets and liabilities. If you decide to file for chapter 13 bankruptcy wisconsin, it will stay in effect for three to five years and keep you from having your debts discharged.

4. Trustee Takes Over

Once forms have been submitted to start the case, the debtor will be assigned a bankruptcy trustee, who will act on behalf of the debtor. They are responsible for ensuring that creditors receive payments and that all court orders are followed. This means paying all debts and fulfilling any other official duties as they are required.

5. Meeting of Creditors

After completing the education course, a meeting of creditors must be conducted. The meeting is mandatory and will allow you to meet with your creditors before filing for bankruptcy to prepare for this next step. This is when all of the creditors are made aware of your intentions and will also be able to tell you about their rights and those of their respective attorneys. Your lawyer will represent them at the meeting and help make any questions or concerns known.

6. Education Course

The second step is to take an education course. This will help prepare you for the next step, filing for bankruptcy. The course covers what to expect from a bankruptcy case and information about credit counseling and budgeting options. The education course is an important step in the pre-filing process. This is when you hear about opportunities and strategies to help you through your difficult financial situation. The class will also help you determine what will be best for you in the long term by explaining the basics of debt management and personal finance.

7. Your Eligibility is Determined

If you have completed the requirements for chapter 7 or chapter 13 bankruptcy, your petition will be filed by the bankruptcy trustee, and your eligibility will be determined. You may have to appear in court if your case needs to be reviewed. Your attorney will help you prepare the required documents and ensure everything is complete, correct, and up-to-date. This meeting aims to determine what type of bankruptcy you qualify for. This is how the court system becomes aware of your intention to file for bankruptcy, informing them of what kind of bankruptcy you will be filing. This also begins the necessary credit counseling sessions before you can start the case.

Chapter 7 bankruptcy in Wisconsin allows individuals to begin again after financial troubles have become too much to handle. The basic process starts with finding an honest and reputable attorney to help you work through the case. Once that is determined, the next step is completing the credit counseling class and filing paperwork with the court system. During this time, it’s important to learn as much as possible about your options and what type of bankruptcy would suit you.

Applying for Credit Cards After Bankruptcy

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You may feel awash in debt, but reluctant to declare bankruptcy because you fear losing all your credit cards. It is true that you will lose access to your credit cards, and will likely have them shut down. But does that mean it’s impossible for you to get new credit cards after bankruptcy? No. You can apply (and get) credit cards after bankruptcy, and rebuild your credit. This post lays out what you need to know to apply successfully for credit cards after bankruptcy

Discharged Bankruptcy

First of all, it’s important to know that your bankruptcy must be discharged before you can make an application for a credit card. If you are pursuing Chapter 7 bankruptcy, that discharge usually happens within 4 to 6 months. With Chapter 13 bankruptcy, though, you may think the bankruptcy is done when all the paperwork is complete and been approved, but it is not. You aren’t officially discharged until the 3 to 5 year plan is complete. If you would like to apply for a credit card before that time, you will need the court’s approval to do so.

New Credit Cards

Although your current credit cards will be unavailable to you once you declare bankruptcy, there are credit cards specifically designed for those working to re-establish creditworthiness. These credit cards fall into two categories: secured and unsecured credit cards. Once you demonstrate your ability to make monthly credit card payments, other institutions will begin to offer you credit cards as well.

Secured Credit Card

A secured card is one where you place a certain amount of money on deposit with the credit card company. This kind of credit card is usually successful even with a fresh bankruptcy. With a secured card, the credit limit you receive is typically equal to the amount of the security deposit you put down. You may think that a secured credit card is rather pointless; however, using it wisely re-establishes creditworthiness. Another benefit is that most secured credit cards shift to regular ones after you have demonstrated an ability to pay your monthly charges for a specified period of time.

Unsecured Credit Cards

A small number of unsecured card issuers will not check your credit score or may be willing to extend a line of credit to you after your bankruptcy is discharged. Such cards typically come laden with fees and sky-high interest rates, so be warned. These kinds of credit cards may cause you to end up in financial distress again.

Re-establishing Creditworthiness

Having a credit card gives you the opportunity to re-establish your creditworthiness. Once you do that, you will begin to receive other credit card offers. Here is the best way forward:
*Be sure to pay your credit card bills on time every month. Payment history is the single biggest factor affecting your credit, accounting for approximately 35% of your FICO credit score.
*Make a plan to pay off your credit card charges. The amount of total credit you use as a percentage of your credit limit also weighs in at 30% of your score.
*Sign up for programs that count alternative payment behavior. There are programs that report your payment of regular monthly bills like your cell phone, utilities, or streaming services from your checking account.

Pursuing bankruptcy will almost certainly mean that you lose access to your current credit cards; but it doesn’t mean that you’ll never have credit cards again. The experts at Burr Law can guide you through the whole bankruptcy process, including how to rebuild your credit afterwards.

Rebuilding Credit After Bankruptcy

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When you declare bankruptcy, you are able to eliminate or diminish your debt, but it does leave its mark. Any credit cards you have when you file for bankruptcy will be unavailable to you, and the bankruptcy stays on your credit report for 7 to 10 years. That doesn’t mean that you are doomed to live without any credit resources or loans for that entire time. Bankruptcy is often the wisest choice, and there are steps you can take in the short and longer term to rebuild your credit. In this blog, we’ll explore some practical ways to do that.

Adhere to Bankruptcy Agreements

Whether you declare Chapter 7 or Chapter 13 bankruptcy, you have entered into a legally binding agreement. In Chapter 13, that means that a court-appointed trustee takes control of all of your disposable income and pays your creditors with it. This situation usually lasts from three to five years. It is imperative that you inform the court of any changes to your disposable income during this period. If you have filed Chapter 7 bankruptcy, that eliminates all your unsecured debt. However, you may have entered into a Reaffirmation Agreement with your auto lender in order to keep your car. If so, you must prioritize making those monthly payments.

New Credit Cards

Although your current credit cards will be unavailable to you once you declare bankruptcy, there are credit cards specifically designed for those working to re-establish creditworthiness. These credit cards often have low credit limits and higher interest rates to begin with; those elements switch as time passes and you use the card wisely. Once you demonstrate your ability to make monthly credit card payments, other institutions will begin to offer you credit cards as well.

Understanding Your Credit Report

Bankruptcy will almost certainly lower your credit score, but it you have had delinquent accounts and history of late payments, you may be surprised to find that your credit score does not plummet. Rebuilding your credit score depends on understanding how your credit score is calculated. Not every action has the same impact. For instance, one of the most important factors is the amount owed. Declaring bankruptcy actually makes your amount owed negligible. The most important factor, though, is payment history. While you cannot change your past, you can certainly control what your payment history becomes.

Credit Report – Time Frame

Your credit report is not a static document. Your credit score changes all the time, and actions that have lowered your credit score do disappear from your credit report. The time frame varies from two to ten years. A Chapter 7 bankruptcy usually remains on your report for 10 years, while a Chapter 13 one stays on for 7. Crucially, the severity of the impact diminishes with time, too. So a bankruptcy five years ago will matter less than when freshly filed, especially if it appears with five years’ worth of on-time payments.

Credit Report – Repair

Declaring bankruptcy does not have to be devastating to your ability to get credit, and it can be mitigated. The experts at Burr Law can guide you in re-establishing your credit in ways that meet your particular situation. Remembering that payment history is crucial, and that many accounts do not typically report on-time payments, you can work to have your timely payments noted. While auto loans, mortgages, credit cards and some others are typically reported, other things like utilities, phone payments, and even streaming services can be reported. If you have a monthly expense that isn’t being reported and you want those timely payments to count, Burr Law can help.

Rebuilding credit after bankruptcy is certainly possible. The experts at Burr Law can advise you on that as part of your bankruptcy service.

Ways You May Be Hurting Your Credit Score

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Your credit score is important for all financial matters. When you want to get a credit card, finance a car, or take out a home equity loan, your lender will always consider your credit score before agreeing to a loan. And the terms of that loan will also depend on your credit score. If your credit score is near perfect, you may find that your lender will charge much less for closing costs, for instance. Finally, some employers are now checking prospective employees’ credit scores before finalizing job offers. Your credit score means a lot, so it’s crucial that you know how to maintain a positive one. In this post, we explore ways that you may be hurting your credit score.

Missing Payments

Late payments are the most common factor that hurts people’s scores. It’s so easy to miss a payment if your life is busy, and paying a little late may seem harmless. However, it has a disproportionate impact on your credit score. Your credit report indicates any payments that are late, and the length of time. Even one 30-day late payment can have a substantial negative effect. If at all possible, set up direct payments for your credit card payments and other monthly obligations. That way, you won’t unintentionally miss a payment due.

Balance to Credit Ratio

Your balance-to-limit ratio is also called your credit utilization. Here is a simple way to calculate it: add up separately all of your credit card balances and then all of the limits on your credit cards. Then divide the total balances by the total limits. This is your balance-to-limit ratio. As a general rule, a lower ratio means a better credit score. As a rule, you should try to keep your credit card utilization rate below 30%. However, it is also a bad idea to completely pay off your credit cards every month. You could be hurting your credit score without realizing it, even if you never make any late payments on those accounts. It’s a bit of a tightrope to walk; doing the calculation twice a year should keep you in the golden zone.

Hard Inquiries

Each time a lender requests your credit reports, a hard inquiry is recorded in your credit file. These inquiries stay in your file for up to two years. A hard credit pull can cause your score to go down slightly for a short period. Lenders look at the number of hard pulls to gauge how much new credit you are requesting. Too many inquiries in a short period of time can signal that you are potentially slipping toward financial problems by suddenly taking on a lot of new debt. Be aware when applying for new loans, and do not crowd applications together.

Timing of Closing Credit Card Accounts

Closing a credit card account can cause your overall balance to credit ratio to increase, which is a sign of risk. As a result, your credit scores may drop. Generally, a brief dip in your credit score won’t matter one way or the other, but If you are planning to make a major purchase (like a house or a car) in the next three to six months, it’s better to forego closing any open credit card accounts.

Beware of Cosigning Loans

You probably know that when you cosign for a loan, you are promising that if the person you are cosigning for doesn’t pay the debt, you will. What you may not know is that the loan will appear on both of your credit reports along with the payment history. If the primary debtor doesn’t pay their loan on time, that late payment will hurt your credit too.

These are some of the ways that you may be hurting your credit scores without really knowing it. Keeping in mind the tips above and maintaining an awareness of your financial situation should help you attain and keep a good credit score. Of course if you default on your financial obligations that will damage your credit score as well. For more advice particular to your personal situation, contact the professionals at Burr Law.

Understanding Your Credit Report

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Finances are complicated, and they are further complicated by your credit report. Your credit score fluctuates constantly, and knowing how various things will affect your credit report is important to your overall financial planning. Here, we’ll explore the various factors that cause your credit score to go up or down, and how long those factors will continue to affect your credit score.

Fair Credit Reporting Act

The Fair Credit Reporting Act–also known as the Consumer Credit Protection Act–was enacted on October 26, 1970. It is designed to protect the integrity and privacy of a person’s credit information. It requires credit reporting agencies, and those that report credit information to those agencies (like credit card companies), to make sure all information is fair, accurate and confidential. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.

Components Of Your Credit Report

Before exploring how various actions affect your credit report, it’s important to know how your credit score is calculated. Not every action has the same impact. Here is how your credit score is determined:
Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
Credit mix – 10%
New credit – 10%
This makes up your FICO credit score, the most common method used. Obviously, payment history is crucial and it’s important to remember that even if a company does not report your usual on-time payments, they will certainly report a missed or late one.

Time Frame

Your credit report is not a static document. Your credit score changes all the time, and actions that have lowered your credit score do disappear from your credit report. The time frame varies from two to ten years. Generally, those negative actions will fall off your report after seven years. Another thing to understand is that the severity of the impact diminishes with time, too. So a bankruptcy five year ago will matter less than when freshly filed.

Credit Inquiries

One of the most insidious ways that your credit score can be lowered comes from credit inquiries. Also called “hard inquiries” or “hard pulls,” a credit inquiry of this type happens when you apply for another credit card. It’s important to know that even department store credit cards can cause a hard pull. Credit inquiries remain on your credit report for two years, and can have a negative impact on your credit score—from 5 to 20 points per pull.

Seven-Year Itch

Most negative actions will remain on your credit report for 7 years. These include debts that have gone into collection, charge-offs (where the business is no longer actively trying to collect the debt), and late payments that are over 30 days past due. The later the payment, the worse it is for your credit score. It also includes Chapter 13 bankruptcy, starting from the date of filing. Chapter 7 bankruptcy stays on your credit report for 10 years.

Credit Repair

When you have financial difficulties, your credit score will be impacted, whether or not you declare bankruptcy. This impact does not have to be devastating, and it can be mitigated. The experts at Burr Law can guide you in re-establishing your credit in ways that meet your particular situation. Remembering that payment history is crucial, and that many accounts do not typically report on-time payments, you can work to have your timely payments noted. While auto loans, mortgages, credit cards and some others are typically reported, other things like utilities, phone payments, and even streaming services can be reported. If you have a monthly expense that isn’t being reported and you want those timely payments to count toward your credit score, Burr Law can help.

Understanding your credit report can lessen your anxiety around declaring bankruptcy. When your credit score is suffering from late payments and debts in collection, bankruptcy isn’t going to make things worse. It can make things a lot better, and the professionals at Burr Law can guide you in repairing your credit too.

Consumer Credit Bankruptcy

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What Is Consumer Credit?

Although any type of personal loan could be labeled consumer credit, the term is usually used to describe unsecured debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–are all examples of revolving credit. Installment loans are another kind of consumer credit, and the most common installment credit example is an auto loan. Consumer credit is not usually used to describe the purchase of a house; that’s considered a long-term investment and is usually purchased with a secured mortgage loan.

Consumer Credit Causing Financial Distress

If you find yourself struggling every month to pay each of your credit cards as well as your department store cards, your gas cards, and make your car payments (not to mention continuing to live), your situation is not unusual. The average American had a credit card balance of $6,200 in 2019, according to Experian. And revolving credit with its high interest means disaster for those who can’t pay the balance in full every month. That means you continue to accrue additional interest charges from month to month. The average annual percentage rate on all credit cards was 20.21% as of August 2020. Department store credit cards averaged 24.22%. A single late payment can boost your interest rate even higher.

Bankruptcy Can Offer Relief

If your consumer credit obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, consumer credit debt can be entirely eliminated. You also have the option of filing for Chapter 13 bankruptcy where you enter into an agreement with your creditors to repay a portion of your debt over 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can derive the benefit of eliminating consumer credit debt while retaining your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. With this type of bankruptcy you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Consumer credit obligations can be crushing, but they don’t have to be. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your consumer credit debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

Does Divorce Hurt Your Credit?

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Divorce, like marriage, doesn’t directly affect your credit. You and your ex-spouse will still have separate credit reports. That said, divorce is usually a time of considerable stress, and legal and other expenses, loss of income due to interruption of routine, and inability to keep on top of expenses or disagreements about untangling finances can have significant consequences for your credit score.

Such concerns are often compounded when the divorce is not amicable, and property and debt division are contested. It is generally advisable to suspend joint accounts if divorce seems imminent and to try to establish individual accounts, and to keep good records of what debts have been incurred by which party, since any debts involving joint credit or joint property will be liabilities on both parties.

Remember, too, that apart from legal fees and whatever losses might result from a reduction in joint income, the sum of individual expenditures will often rise when former partners begin to support separate residences, perhaps acquire another vehicle and replace other shared items and expenses that no longer can be shared. It is best to budget strictly in anticipation, because any interruption in payments for joint debts may adversely affect individual credit ratings. Interruption in court-ordered spousal support payments and child support often accompany such upheavals, whether due to inability or unwillingness of a former partner to pay.

If you are able, try to untangle whatever debts you may have from those belonging to your spouse. Request in writing that any joint accounts be suspended and not reopened. Remove his or her authorized user status from any credit accounts. Once again, it is best to do this in writing. Also, if possible, get your spouse to have transferred to them any debts belonging solely to them, so that responsibilities will be as clear-cut as possible. Look to transfer balances and renegotiate debt to your favor wherever possible.

And even though the transition time is liable to be tempestuous, don’t blow off your debts. Stay in touch with your creditors, and let them know that you mean to meet your obligations, even though it may be hard to muster the focus during a difficult time.

For personalized guidance on how best to protect your assets and your credit during a divorce, contact the experts at Burr Law. They will offer intelligent, compassionate support to help you when you need it most.

Who Pays for Bankruptcies? How Bankruptcies Work

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When you’re in desperate financial distress, bankruptcy can be a lifeline. When you declare personal bankruptcy using Chapter 7 under the Bankruptcy Code, you can eliminate all of your unsecured debt (credit card debt, medical debt, etc.). If it’s not possible for you to file under Chapter 7, you can file under Chapter 13. Your unsecured debt will not be eliminated, but it will be greatly reduced and you will have three to five years to pay back that lower amount.

Declaring bankruptcy, however, means instigating a court procedure, and there are certain costs associated with that.

Court Costs

There is an entirely separate court system for bankruptcy and these courts need to be maintained, and the personnel paid. Part of that cost comes from the filing fee that the person filing for bankruptcy (the petitioner) pays. Currently, the national bankruptcy fee is $335 to file for a Chapter 7 bankruptcy. If you are unable to pay that amount in full at the time of filing, you can pay in four installments within 120 days of the date of filing. In other words, you can pay approximately $84 a month for four months. There are provisions to waive the fee entirely if your family income is below 150% of the federal poverty guidelines. As of January 17, 2020, the federal poverty guideline for a family of four in Wisconsin is $39,300. There is also a small fee for the bankruptcy trustee. The filing fee for Chapter 13 is $310.

Credit Counseling Course Costs

When you file for bankruptcy, you must agree to participate in a credit counseling course at the beginning of the procedure, and a debtor education course at its conclusion. The cost of these courses varies widely. Some can be as inexpensive as $10, while some can cost about $60. You must attend a court-approved course. So you can expect to spend an additional $20 to $120. If you have been granted a filing fee waiver due to your low income, course costs are often waived as well.

Attorney Costs

You are not required to use an attorney when you file for bankruptcy, but it would be foolish not to do so. Bankruptcy is extremely complicated and any mistakes can have long-term, serious consequences for you and your family. Having an attorney responsible for the paperwork necessary helps assure mistakes are not made. There are ways to mitigate attorney fees, and certainly, consulting with a firm that specializes in bankruptcy law, like Burr Law, is a sensible course of action. We would be able to assess the nature of your situation, and anticipate the complexity of your case. So we would be able to give you a clear idea of what your attorney costs might be. While only 5% of Chapter 7 bankruptcy proceedings were challenged by a creditor in 2019, if that happens, litigation would obviously increase attorney costs as well.

Cost/Benefit Analysis

It is important to keep the costs associated with bankruptcy in the proper perspective. When you are being buried under a mountain of debt, the logic of incurring a small additional obligation should be apparent. Here at Burr Law we will work with you to make sure that you derive all possible benefits from filing for bankruptcy and still retain the financial means to restart your life.

How Does Debt Relief Affect Your Credit?

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The unrelenting pressure of overwhelming debt can cause all kinds of problems outside of the financial realm. It can affect your love relationship, your familial interactions, and your physical and mental health. You know you need debt relief, but worry that pursuing it may further deteriorate your credit score. In this blog post, we will examine the different kinds of debt relief and their implications for your credit.

 

Debt Management – What Is It

With debt management, the entirety of your financial situation is reviewed by a credit counselor, who then creates a debt management plan for you to follow. Generally these are for terms of three to five years, and often you must agree not to seek any additional credit during the time that the debt management plan is in place. Some organizations may take control of your monthly payments, making them on your behalf. You will pay a monthly fee for the service.

 

Debt Management – Credit Implications

The fact that you’re engaged in a debt management plan will be noted on your credit report. If you adhere to the regime for the entire time, your credit score should not be affected. However, at least half of clients do not successfully complete the plan. Obviously, failing to complete a debt management plan would have negative implications for your credit score.

 

Debt Settlement – What Is It

Debt settlement differs from debt management in that the organization you work with negotiates with your creditors on your behalf to decrease the amount you owe. Sometimes, they offer a lower lump sum payment to the creditor; sometimes, they seek debt forgiveness or lower interest. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also any forgiven debt is reported to the IRS who treats that as income.

 

Debt Settlement – Credit Implications

Debt settlement companies are not concerned with your credit report. Their job is to get the current debt lowered or forgiven. Most debt settlement companies ask you to suspend payments to your creditors while they negotiate on your behalf. This strategy has a tremendously negative impact on your credit report since the most significant factor is payment history.

 

Debt Consolidation – What Is It

In its most basic form, debt consolidation combines multiple debt payments into one monthly payment through obtaining either a secured or unsecured loan. That monthly payment is sometimes lower than the individual payments combined, and the interest you pay is sometimes lower as well. Sometimes you may risk losing collateral that you aren’t aware you have placed in jeopardy. That can happen when your debt consolidation loan has a cross-collateralization clause that lets the lender take other property it has financed if you default on the debt consolidation loan.

 

Debt Consolidation – Credit Implications

Because you are taking out an additional loan, your credit report will reflect a “hard inquiry” and that will lower your credit score. Often, your credit score decreases by a relatively small amount, and that decrease is temporary.

 

The ultimate debt relief, of course, is filing for bankruptcy. The general fear that filing for bankruptcy means the end of ever acquiring new credit or home ownership is unfounded. The experts at Burr Law can talk you through the different options and the various implications for your credit.

When Does Bankruptcy Clear From Your Credit Report?

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If you’re considering filing for bankruptcy in Wisconsin, you probably have a lot of bankruptcy questions. It’s important for you to have all the information you need in order to make a truly sound decision, and in this post, we will look at one of the most commonly asked bankruptcy questions: When does bankruptcy clear from your credit report?

Credit reports are simply a fact of contemporary existence, and they are consulted every time you apply for a new credit card, or an automobile loan, or any type of financial undertaking. You may not be aware that in Wisconsin credit reports are also considered by landlords, and by some employers. So concern about your credit report is absolutely reasonable when making the decision to file for bankruptcy.

Filing for bankruptcy becomes part of the public record, so if anyone is truly interested in the bankruptcy filing itself, they can access that information.

Generally speaking, bankruptcy stays on your credit report in Wisconsin for about 10 years. Remember, though, that even if you don’t file bankruptcy, your creditors can obtain a judgment against you for your debt, and that judgment would appear on your credit report. A judgment can remain on your credit report for seven years or until the statute of limitations expires, whichever is longer. In Wisconsin, the statute of limitations on a judgment can be up to 20 years! So a bankruptcy may well fall off of your credit report before a particular judgment.

Bankruptcy will mean a drop in your credit score immediately after filing, but about 12 to 18 months after you receive your bankruptcy discharge your credit score should go up because your debtor to income ratio becomes much better than when you filed the bankruptcy. However, you may already have a poor credit score due to your debt-to-asset ratio (your debt is high compared to your available credit) and delinquent accounts; in that case, the decrease in your credit score may be less than you suppose. If your credit score was good before filing bankruptcy, the drop may be more pronounced.

The type of bankruptcy that you file may also affect how its presence on your credit report is viewed by prospective lenders. Chapter 7 Bankruptcy completely wipes out your debt by selling whatever eligible assets you have; Chapter 13 Bankruptcy sets up a three to five year plan to repay a portion of your debt. Obviously, prospective lenders would consider a Chapter 13 Bankruptcy in a more favorable light than a Chapter 7 Bankruptcy. When applying for credit after bankruptcy, you should be straightforward about the bankruptcy and your reasons for choosing that option.

Attorney Michael Burr and the Burr Law Offices can answer all of your bankruptcy questions. You concern about your credit report is certainly warranted, and we can help you understand all the implications of a decision to file bankruptcy. Consult the experts in Wisconsin bankruptcy law at the Burr Law Offices, and bring all your bankruptcy questions with you.