November 21, 2017

Disecting a Credit Report for Bankruptcy

I have previously written an article on obtaining free credit reports each year from Annual Credit Report.  This present post goes into detail on how to read a credit report once it is obtained, and how the credit report is used for constructing a chapter 7 bankruptcy or a chapter 13 bankruptcy.

Under Federal Law, the three main credit bureaus must provide a free credit report every year to consumers.  The three major credit reports are: Exquifax, Transunion, and Experian. But once you pull your reports, how do you read the reports in the context of preparing a bankruptcy petition?  What information is contained in these reports?

The information contained in the reports are fairly uniform throughout each of the three reports.  For each account that is reported to the credit bureaus, certain information is provided by the creditor.  First, the kind of credit a particular account is will be reported.  Generally, credit falls into two categories, installment or revolving.  Installment credit is credit based on installment payments, such as a car loan or a mortgage loan.  Revolving credit represents credit cards, and other forms of credit, that you can build up the balance and pay down the balance over time.  Second, the credit report will indicate if the account is owned by you alone (individual), or jointly owned (co-signer) or if you are an authorized user.  Third, the credit report will indicate information regarding the account in terms of total amount of credit allowable and the highest balance you may have maintained, and so forth.  Fourth, the credit report will indicate how much you actually still owe on the account (credit reports are updated monthly). Fifth, the credit report will also indicate if there is a fixed or minimum payment amount that is contractually required. Sixth, the credit report will indicate the status of the account.

Status of the account is a factor I pay extremely close attention to when constructing a bankruptcy.  An account can be open, closed, inactive, paid, charged-off, or transferred.  If an account has a balance, or has been charged off, or transferred, these are the accounts we must include in the bankruptcy filing, even if such account shows a zero balance (we list it as precautionary, then, in the bankruptcy).  Accounts that have a zero balance and that are closed and paid off, we do not list in the bankruptcy.  There is, however, a certain level of errors contained in credit reports.  I will review the credit reports with clients to ensure we have all the creditors listed.  (I also have clients bring in any bills they may have, and write down any creditors they can recall for which they may not have a bill for or that may not be included on the credit report.)

We always list charged-off accounts in a bankruptcy filing.  What are charged-off accounts?  This is a statement from the creditor that this account is probably not collectable.  This does not mean the debt is no longer valid.  Therefore, we always list charged-off accounts when constructing a bankruptcy.  A creditor can, theoretically, pull the account back and pursue the debt, sell the debt to a third party (such as a junk debt buyer), or cancel the debt and issue a 1099c income statement to the borrower (to be discussed in more depth in a future post).

In conclusion, credit reports, and what is reported by creditors, form part of the basis of what we use in constructing a bankruptcy.  As part of my document production, I always have clients pull credit reports as the reports provide quite a bit of useful information when constructing a bankruptcy petition.

If you are interested in bankruptcy or learning more about bankruptcy, please call for a free in-office bankruptcy consultation today

 

 

Certain level of errors

If I am Married, Can I File Bankruptcy by Myself?

If you are married, one spouse can file bankruptcy individually.  This will leave the other spouse out of the bankruptcy, entirely.  This post details this option, and when this option may prove more appropriate than filing bankruptcy jointly, as a married couple.

Oregon is a separate property state (with a few exceptions) when it comes to a person’s debt.  If a husband incurs credit card debt in his name only, his wife will not be liable for this debt.  Therefore, sometimes it makes sense to file bankruptcy for only one person in the marriage instead of both people.  This is particularly true if the husband or wife came into the marriage with substantial debt and needs to file bankruptcy, but does not want to pull the other spouse into his or her bankruptcy; or, if one spouse incurs substantial debt during the marriage (such as a failed business, etc.), while the other spouse is relatively debt free, and so on.

Married couples can file a joint bankruptcy together, two individual bankruptcies separately, or one spouse can file bankruptcy and the other spouse does not file bankruptcy.

I generally charge the same amount for individual bankruptcy as I do for a joint bankruptcy (which includes both husband and wife).  I even had one case where a couple who were engaged to get married, moved their marriage date up so that they could file bankruptcy and only pay for one bankruptcy (as a joint married couple) rather than paying for two separate bankruptcies.

Now, there are also some credit reporting concerns clients raise regarding only one spouse filing bankruptcy: How will if affect the non-filing spouse?  Usually the bankruptcy filing of one spouse does not affect the non-bankruptcy filing spouse’s credit, except if there is joint debt involved.  For example, if a husband and a wife are jointly liable for a debt and the husband files bankruptcy, the non-bankruptcy filing wife will still be liable for this debt, and her credit report may even show that the co-borrower (husband) filed for bankruptcy on this debt.

Despite only one spouse filing bankruptcy, the other spouse’s income must be calculated in the bankruptcy’s “means test.”  This simply means that wage information will have to be provided from the non-filing spouse to determine if the spouse filing bankruptcy is eligible for a chapter 7 bankruptcy.  The non-filing spouse’s name will not appear in any of the documents, only a number representing his or her income.

If you have concerns about filing bankruptcy and how it may affect a spouse who does not want to (or does not need to) file bankruptcy, please call today to schedule a free bankruptcy consultation.

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

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