Solutions for Wayne County Delinquent Property Taxes

Many individuals, mostly in the city of Detroit, have found themselves behind on property taxes owed to the  Wayne County Treasurer and face the risk of losing their home.treasurerlogo

 Timeline

-A city tax bill is sent out to the homeowner in both July and December for both Summer and Winter taxes. Property taxes are assessed based on the property’s State Equalized Value on their tax bill.

-In March of the following year, the taxes are moved to the County Treasurer. An administration fee of 4% is assessed along with an additional 1% per month interest as long as the taxes are unpaid.

– In October a $15 fee is applied to the parcel.

– In March of the second year, the property is deemed forfeited. Fees of $201 are assessed and intereste jumps from 1% to 1.5% per month.

– In November of the second year, the properties are listed as subject to foreclosure the following March.

– In March of the third year, the court enters a judgment of foreclosure. Property owners have  one month to redeem.

– In April of the third year, the property is foreclosed and title is passed to the Treasurer and sold in the fall at auction.

Solutions

The Treasurer is always willing to enter into a payment plan with owners. The plan usually requires a certain amount down along with a monthly payment obligation. The standard payment arrangement is providing a lump sum of 60% for all foreclosed taxes (currently 2013 and earlier) and a monthly payment agreement to pay off the remainder in a reasonable period of time.  The Treasurer provides a form for the stipulated payment agreement. We highly encourage our clients to explore this avenue first. Call (313) 224-5990 or visit 400 Monroe, 5th FloorDetroit, MI 48226. Although very busy, the staff is friendly and accommodating.

The Treasurer also provides a hardship option for those going through financial distress allowing for an extension.

If the Treasurer’s payment plan is too steep, a home owner can file a Chapter 13 Bankruptcy to pay off the taxes over the course of a 5 year plan. They may be able to reduce the amount of taxes if the value of the home is less than the taxes owe.

Appealing the property tax bill is also a consideration. Wayne County Treasurer assesses taxes based on the State Equalized Value that was issued years ago when the values of properties were much higher. As a result, the homes are worth much less than what they are being taxed on. The ACLU and NAACP have filed a lawsuit against Wayne County Treasurer asserting that the Treasurer has violated federal law with inflated tax assessments.

Step Forward Michigan has offered programs to help pay down delinquent taxes if certain qualifications are met.

 

Our office deals with property tax issues daily. If you need advice on how to handle past due property taxes or are at risk of foreclosure, contact an experienced debt professional at 248-237-7979.

Payday Loans Are a Terrible Idea

Payday-loans2

Payday loans, or cash advances, are used by twelve million Americans each year, according to a recent study by the Center for Financial Services Innovation.  Payday loans are frequently used to cover necessary living expenses such as water, gas, and electric bills, along with rent and car payments.  The loans work like this: you go into a lender and exchange for cash you give the lender your banking information and allow them to withdraw the loan and finance charge on the next payday.

If the person is unable to pay the full amount (loan plus finance charge) then the individual has the option of only paying the finance charge.  In Michigan, the finance charge is limited to 15% on the first $100, 14% on the second $100, 13% on the third $100, 12% on the fourth $100, and 11% on the fifth and sixth $100.

Why payday loans and cash advances are a terrible idea:

  1. The Interest rate makes them unaffordable

In Michigan, the finance charge on the payday loan is astronomical.  Although the numbers above don’t look astronomical, you have to remember that these rates are for a two-week loan period.  The interest charge on a $100.00 loan is $15.00.  The daily interest charged ($15/14) is $1.071429.  If this is converted into an annual percentage rate (APR) it is: $1.071429 x 365 days in a year = 391%.

  1. Most borrowers pay more in fees than they received in credit

So, typically the person takes out a payday loan of $600.00 the total finance charge is $76.00.  If the person only pays the $76.00 on their next payday, the loan and finance charge will roll over to the following pay period.  This can go on until the loan and finance charge are paid in full.  The average individual typically takes five months to pay off the loan and finance charge.  This means the average person will end up paying over $700.00 on a loan of only $600.  THE PERSON WILL PAY MORE IN FEES THAN THEY RECEIVE IN CREDIT.

  1. Additional Charges

Now, if the customer does not pay the finance charge then the lender can withdraw the funds from the person’s bank account.  If there are insufficient funds to cover the loan and finance amount there will be additional charges.  Your bank will charge you for the non-sufficient funds check and the payday lender can charge an additional $25 for a returned check fee.  These two fees will be on top of the balance owed in the original loan agreement.

  1. Cash Advances may not be Discharged in Bankruptcy

If you take out a payday loan, or cash advance, prior to filing for bankruptcy it may also be an issue.  If the cash advances total more than $925 within the 70 days prior to filing for bankruptcy, the amount is not dischargeable in the bankruptcy.  This amount needs to be taken from one cash advance place, not multiple.

Alternatives

If you are unable to make ends meet temporarily, there are alternatives.  First, you should ask the creditor for more time to pay your bills.  Then, before taking one of the following alternatives, you should speak with an attorney to discuss your legal options.

Lastly, before taking out a payday loan, you should consider a loan from a friend, family member, bank, or credit union.  You could also ask for advance pay from your employer.

The bottom line is that payday loans are almost always a terrible idea and should be avoided at all costs.

For more information about pay day loans or help discharging them in bankruptcy, please contact our office at 248-237-7979.

Bankruptcy and Your Spouse

How Bankruptcy Affects Your Spouse

As more and more married couples keep their finances separated, people frequently ask if bankruptcy will affect their husband or wife.  Since nobody can MAKE you file for bankruptcy, a number of our married clients end up filing bankruptcy without their husband or wife.  Usually the non-filing spouse will want to know “How does the affect me?”.  The impact a bankruptcy filing may have on your spouse varies based on a number of different factors.  In this blog we will explore some of the different factors that may or may not impact a non filing spouse in bankruptcy.

Joint Debts

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Donald Trump has filed many bankruptcies for his companies, but never a personal bankruptcy. If he had,  he would be tremendously concerned on how it would impact his beautiful wife, Melania.

One of the first things to determine is whether or not any of the debts are joint debts.  A joint debt is a debt where more than one personal is liable.  For example, if a husband and wife go car shopping, purchase a new vehicle and both sign for the auto loan.  In this case, the husband and the wife would both be liable for the entire amount of the auto loan.  So if the car were to be repossessed at a later point then the creditor could try to collect from either the husband or wife.

Now, if the husband decides to file for bankruptcy and discharge his liability to the creditor the wife is still liable for the full amount of the debt.  Most spouses do not want to stick their significant other with a large sum of debt they initially agreed to pay together.  Therefore, it’s vital to determine whether the couple has any joint debts so as to not inadvertently stick one spouse with all the debt.

One situation to be careful of is in the case of an authorized user.  Although both husband and wife may have access to a line of credit, it does not mean that both of them are liable for it.  Frequently, spouses allow their significant other to be an authorized user on a credit card.  As an authorized user you are not liable for the debt at all.  For example, if the husband opened up a credit card and allowed the wife to be an authorized user, the husband is still liable for 100% of the debt.  In this case, it may make sense for only one spouse to file.

Joint Property

Jointly owned property is another factor that may impact a spouse when filing for bankruptcy.  As with any bankruptcy it’s important to know what property you own and in what capacity.  Married couples frequently own homes, cars and boats jointly.

Now, if one of these assets has too much equity in it then it may impact the non-filing spouse.  If the debtor cannot exempt all of the equity in the asset then the trustee has the right to sell the entire asset, give the non-filing spouse her half and use the unexempt portion to pay back some of creditors.

If the non-filing spouse owns something in their name only then the bankruptcy will not have any impact on that piece of property.  Therefore, it is important to establish how property is owned in order to determine how it may impact your spouse.

Household Income and Expenses

If only one spouse is going to file for bankruptcy, the bankruptcy Court will still look at the entire household’s income and expenses.  This will require the non-filing spouse to turn over the paycheck stubs for the last six months in order to determine whether a the filing spouse is eligible for a Chapter 7.

If the non-filing spouse makes significantly more than the normal income limits of a Chapter 7 there are still ways to get a person qualified for a Chapter 7.  By using the marital adjustment on the means test to include the non-filing spouses expenses, the household income can sometimes be lowered enough to qualify for a Chapter 7.

This process can become quite complicated and should be discussed with your attorney prior to filing.

Charge Offs

What is a Charge Off?home-restore-your-credit-

Past blog posts have explained the importance of your credit score.  Your credit score can have an impact on your ability to get a job, insurance rates, residential leases and utilities.  There is a myriad of information on your credit report, from creditor names, payment history, recent balance, account status and balance history.  All of this information is used to help determine your credit score.

When we pull our client’s credit report and review it with them, the term charge off often needs to be explained in more detail.  This blog post will explain what a charge off is, what a charge off means and the impact a charge off has on your credit score.

The term “charge off” can usually be found under the status section of your credit report.  It will normally say something along the lines of “account charged off” or “$1,000 written off”.  After 180 days of not being able to collect on an account, a creditor may list the status of an account as charged off.  The creditor has given up on being repaid according to the original loan terms.  The creditor has given up on being repaid under the original terms of the loan and written the loan off their receivables as a loss.  Now, some of our clients think that this means the debt is no longer owed.  This is NOT true.

Most creditors will sell this “charged off” or bad debt to a debt collection company for pennies on the dollar.  At this point, the collection agency will attempt to collect on the unpaid portion of the debt.  Now, the debt will be reported as “charged off” on one spot on your credit report and in collection on another spot – two dings to your credit report.  Both of these dings will stay on your credit report for seven years from the date of your first missed payment.

If the debt is sold to a collection company then you no longer owe the original creditor and any payments you make should be to the debt collection company.  If you pay the account then the status of the account should be changed to show that it was a paid charge off or paid collection.

A charge off will generally have a negative impact on your credit score; however the extent of the impact is often dependant on other factors as well.  If your credit score is low due to your debt to income ratio then paying off the debt will likely increase your credit score.

If you are unable to pay the debt in full, you may be able to negotiate with the original creditor to have the charge off removed from your credit report.  While the original creditor may not be able to delete the account entry and the payment history will still show up, it may be able to change the status to a more desirable status such as “paid in full”, “paid as agreed”, “account closed” or “closed”.

As always, make sure you check your credit report for accuracy.  Check out our other blogs to see how to dispute inaccurate information.

 

 

Stop Co-signing!

STOP CO-SIGNING ON AUTO LOANS!!

A number of our clients come into the office because of a lawsuit they are facing.  Now, some of the time the debt isn’t even “their debt”.  Rather it is debt from them co-signing on an auto loan for a son, daughter, brother, sister, relative or friend.

What is co-signing?

Co-signing is a term used to describe when more than one person signs for a loan.   Frequently, if someone has poor credit, an auto lender will ask the person to get a co-signer because their credit is not good enough to get the loan by themselves.

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Perhaps the most famous “co-signer”, MC Hammer supported numerous friends and family with his earnings until he went broke.

At the request of an auto lender like Gateway Financial, Credit Acceptance, or Reliable Auto Finance, the person will typically ask a parent, brother, sister, relative or friend to co-sign the loan.  This allows the person to get the vehicle they want.  However, it’s a terrible idea for the person who co-signs.

The person who co-signs on the loan is not getting any benefit.  They do not get any money and they do not get to use the vehicle.  The only benefit is they are doing a “favor” for someone else to allow them to drive a better vehicle.

Now, it sounds like a nice thing to do for someone you care about.  Why not let them enjoy the benefits of your good credit?  The problem becomes when the person loses a job, gets in an accident and fails to pay on the auto loan.

Now, missed payments are going to start hindering your credit score.  You’ll probably start receiving calls from the auto-loan company and they may even repossess the vehicle.  If the vehicle is repossessed you will now have a repossession added to your credit report.  The vehicle will be sold at an auction and both the co-signer and original person will be liable for the auto loan deficiency.  The auto loan deficiency is the difference between the amount owed on the vehicle and what it sells for at auction.  For example, if you owe $10,000 on the vehicle when it is repossessed and it sells at an auction for $4,000 then the auto loan deficiency is $6,000.

Both people who signed for the loan are each 100% responsible for the $6,000 and the creditors are often quick to start collecting.  This means the auto lender can try and recoup all of the funds from one of you individually.

You can be sued first!

Our clients are often amazed when they are the first one sued by the auto lenders even though they are the co-signer, not the primary signer.  The auto lender is well within their rights to sue either party for the auto loan deficiency.  Often times the auto lender will sue the co-signer because they have better credit and are more likely to pay the debt back.

If neither of you are able to pay the debt back then the car company may attempt to satisfy the debt in other ways such as garnishments or seizures of property.

These collecting attempts can be stopped by filing for bankruptcy.  However, even if you file for bankruptcy, the primary signer will still be liable for the debt.

Stop Co-signing!

While the original intent was to help out a friend, it leads a number of people to contact our office because they are being sued for large sums of money.

We rarely, if ever, recommend people to co-sign loans for anyone – the rewards rarely outweigh the risks!

If you have co-signed on an auto loan and owe a large debt, contact our office at 248-237-7979 to set up a free consultation.

Why You’re Not Getting Arrested for Student Loans

If you've been on social media in the last week you've probably heard about Paul Aker. He claims he was arrested by US Marshals because he owed student loan debt (who doesn't?).

There is STILL no Debtors’ Prison

arrested for student loan debtI’ll let you get caught up on the facts that were reported in the original story here.  I’m more concerned about what WASN’T reported in the original story. Although they only had a couple minutes in that video clip, I had a hard time believing the story as Mr. Aker told it. The problem? THERE IS NO PRISON FOR OWING A DEBT. In fact, Mr. Aker never even went to prison. He was taken to court for violating a judge’s order to appear.

What you don’t know about this story is that Mr. Aker repeatedly told the US Marshals Service that he would not be appearing in court to answer a summons relating to a 2006 lawsuit. Court records show that Paul Aker was sued in 2006 for $2,600 in unpaid student loan debt. When Mr. Aker failed to appear for that lawsuit (after receiving notice) the judge had no choice but to rule against him for the full amount.

So even though the debt was originally federal student loan debt, refusing to obey a court order to appear is a criminal offense. It was a criminal offense for 10 years before the US Marshals arrested him and took him to court (not jail).

What Lessons Should We Learn from This?

arrested for student loansTake ANY court summons you receive seriously. It doesn’t matter how you feel about the debt. Ignoring anything you receive from the court isn’t going to help you in the end.  Hiring a lawyer will always be your best best, but even appearing on your own will at least avoid a default judgment or having a bench warrant issued because you failed to appear.

In fact, many of our clients make their financial situations worse by coming to us only AFTER a creditor has starting garnishing their wages. Sometimes we’ll see the original complaint (that turned into a default judgment) and realize they could have avoided the entire debt if they had responded in a timely manner.

Ultimately, it looks like Aker was arrested due to a lack of communication with the court and not because he owed $1,500 in student loans to the government. To be clear, however, I do feel bad for Paul Aker. His defaulted student loan debt is just one small slice of a trillion dollar student loan problem in our country. Americans currently owe over $1.2 trillion in student loans. Only 1/3 of those borrowers are actively paying their student loans down while another 20% are either in default or delinquency.

What are Better Student Loan Options?

If you have federal student loans you have better options than waiting 30 years to get arrested. The National Student Loan Data System (NSLDS) has a website at www.nslds.ed.gov where you can check the status of all your federal loans. It’ll break down your different loans by semester and type and give you the current status (forbearance, deferment, default, in repayment, etc).

The hardest part of student loans is often finding all the information. When your student loans bounce around from different servicers it’s hard to keep track of who you owe. That’s why you should always start with the NSLDS website. The information should also be on your credit reports along with any private student loans you may owe. Once you’ve rounded up all the information about your different loans you’ll be able to decide what repayment options you have.

We’ve written about the different Income Based Repayment options before, but there are also statutory reasons why your debt may be forgiven or discharged as well. You may qualify for a Public Service forgiveness program, closed school, or other discharge based on your circumstances.

There are also bankruptcy options that we may be able to help you out with. Most people are aware that student loans are tough to discharge in bankruptcy, but too many people are under the false belief that it’s always impossible. Either way, talking to someone about the options specific to your student loan debt is always a better choice than “getting arrested for student loans.”

Advice to Kanye West

 

Kanye West leaving building in Beverly Hills after incident- fight with a person- a few minutes before the police showed up- Jan 13, 2014 X17online.com

Although most of what hip-hop artist Kanye West says must be taken with a grain of salt, he recently announced that he was $53 million dollars in debt on a social media site. While this may seem outrageous, Mr. West is experiencing the same issues many consumers face on a much larger scale. In fact, as an article on Time indicated, Kanye’s $53 Million in Debt makes him a typical American. Its estimated that West earns around $22 million per year, which means his debt is approximately double his annual salary. Working with many individuals in the Metro-Detroit area, we find that this disparity is often the case.

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West would be unlikely to fit in our standard Chapter 7 services offered to our clients due to his income, assets and wife’s enormous earnings. However, if we weren’t filing a bankruptcy case for West, we would at the very least offer some sound financial advice to him in exchange for a pair of Yeezy Boosts. These tips are applicable to all individuals struggling with debt.

1. Limit Large Luxury Purchases: West has recently purchased a Mercedes-Maybach which has the MSRP of well over $200,000. In addition, along with his wife, he bought a $20 Million estate in Hidden Hills. By moving into a more modest apartment and driving a Ford Fusion or Chevrolet Malibu, West would have the ability to use some of the funds to pay down a portion of his debt.

2. Consolidate Credit Card Debt at a Lower Interest Rate: While we aren’t privy to the nature of Kanye Wests’ $53 million of debt, we would advise him to explore his options to lower the interest rate on the millions he owes. If the debt is low interest around the prime rate, his annual payment would be around $3 million. However, if the debt is similar to standard credit card debt with interest rates of around 15%, that number would increase to well above $10 million. If West consolidated on a low interest or no interest card, he could reduce his obligation significantly. These cards are available to all consumers who qualify and we encourage our clients to explore them.

3. Invest Funds and Save: As stated above, West earns around $22 million per year from compensation for his music, fashion line and endorsements. West should seek the guidance of a financial advisor and invest intelligently. Even in times of financial distress, we strongly encourage our clients to continue to invest in retirement plans and other low risk investments.

4. Live Below Your Means: Despite facing $53 million in debt, West lives like an individual with reserves of cash. West continues to fly on private planes for $50,000 and recently rented out Madison Square Garden for a fashion show. When facing significant debt, we advise our clients to create a plan to live below their means. This includes spending less on food, entertainment and transportation.

5. Be Compensated for Your Work: Kanye West has just released an album and is not selling the it to the public. The album is available on a streaming service, but at this time it is impossible to purchase. As a result of this, the album has been pirated over 500,000 times in 48 hours. This approach is leaving money on the table that could be used to pay down his debt.

If you are experiencing debt issues or are considering bankruptcy, please contact our office at 248-237-7979 to speak with a licensed debt professional.

10 Questions with a Client – Part 2

Periodically our office likes to reach out to our clients to give others an idea how the process of filing bankruptcy works with our office. Allowing others to tell their story helps give potential clients a good idea of how a bankruptcy works and may help dispel common misconceptions. We have taken out all identifying information to protect the client’s anonymity.

1.      Tell us a little bit about yourself?

We are 28 and 31, married, employed, and had over 60,000 in credit card debt was out of control, and the high interest rate was making it difficult to pay down. We had been on debt for probably five years, just paying minimum payments on our credit cards. We were getting nowhere and couldn’t even afford an apartment. We had to live with family.

2.       What experience caused you to contact our office for debt help?

After 5 years of constant credit card debt, We first sought out debt management, but it’s not what it seems. You not only pay the company a large sum, but while paying this monthly fee (ours was going to be $1300), you also have to pay your creditors at the same time so that you don’t go into default. They negotiate rates with creditors and new monthly payments, but it all takes time. We just couldn’t afford to pay them and our creditors the same amount each month. So we thought we would see if we qualified for bankruptcy so we could end the suffering. I searched for a law firm on the Internet and was so happy to find Detroit Lawyers.

3.      What was your understanding of bankruptcy before you worked with our office?  

At first we didn’t think we would qualify, and we really didn’t know too much. There is a lot of misinformation on the Internet. We talked with others who had gone through bankruptcy and they all had similar stories of the process; qualifying, filing, court hearing, and then a discharge (pending you qualify for one).

4.      Explain the process of your initial consultation.

The initial consultation was free. Everyone was really nice and it was a smooth process. While my husband was out of town, I met with Scott and he answered a ton of questions for me. I filled out a small form of our debts. He looked over my form and thought he could help us file chapter 7. But at this point, we were fine with whatever chapter we qualified for. This was our last hope.

5.     What did you have to do to get the case filed?

Scott did all of the work filing our case. It was simply filling out our debts and assets. We verified the information in the petition and signed it. It was a super easy process.

6.       How was the court hearing?

We were nervous, but it turned out to be what everyone had said; very simple and quick. You simply answer questions on the record and you have the chance to see other hearings before you go up for yours. I think the whole process took less than 10 minutes after we were called.

7.      How did you feel when the case was concluded?

Relieved. There was no better feeling in the world, than to have your life back and actually feel like you have a life again.

8.      What would you tell others in your position?

Don’t read anything on the Internet! Only get your information from your attorney have them answer all your questions.

9.      What is the most common misconception going into this process?

Perhaps the most common misconception is that you need to “make a certain amount in order to qualify.” We were thinking we made too much in income, and we didn’t. There is a lot more that goes into it to see if you qualify.

10.     How has your life changed since after you filed?

We no longer live with family! We have our own apartment and we aren’t suffering with credit card debt any longer. It was the best decision we ever made!

 

 

10 Questions with a Client – Part 1

 

Periodically our office likes to reach out to our clients to give others an idea how the process of filing bankruptcy works with our office. Allowing others to tell their story helps give potential clients a good idea of how a bankruptcy works and may help dispel common misconceptions. We have taken out all identifying information to protect the client’s anonymity.

  1. Tell us a little bit about yourself?IMG_0047

I am 33 years old and I live in a suburb of Metro Detroit. I work as a project manager at a local advertising company. I have a bachelor’s degree from a large state university. I own a home in Metro Detroit with a mortgage.

  1. What experience caused you to contact our office for debt help?

I racked up a pretty large amount of credit card debt in around my time in college and have been paying the monthly minimums for almost ten years. I made some poor decisions and it came to the point where I could no longer pay off the monthly minimums. The credit card companies issued the accounts to collection agencies and began to send me letters incessantly. I owe over $20,000 in credit card debt and can’t even begin to pay them down. I did a consult with a debt settlement program and they were unable to work with me because the monthly minimum was too high.

  1. What was your understanding of bankruptcy before you worked with our office?

I always thought it was for people that were dead broke without any assets. I never imagined I would be in the position where I would need to file bankruptcy. Frankly, I was embarrassed to even be associated with the term.

  1. Explain the process of your initial consultation.

Reluctantly, I met with Drew at Detroit Lawyers after searching for debt help online. I really didn’t even want to come in, but Drew assured me it would be a “no strings attached’ free consultation just for informational purposes. I did not believe I would move forward. When I came in, it was very lay back and just like talking to one of my friends. I explained to Drew my situation and he outlined my options. We quickly concluded that a Chapter 7 bankruptcy was the best most cost effective option for my future. I would discharge all of my credit card in three months and get to keep my home and my car under the same terms.  Even at a young age, I felt assured that bankruptcy was not a “death sentence” and that I could obtain credit in the future.

  1. What did you have to do to get the case filed

I had to get together my deed, mortgage documents, paystubs, bank account statements, car title and a few other things. It took me about three days to gather everything. I returned with the documents and we were able to file the case a week after my initial consultation.

  1. How was the court hearing?

It was in downtown Detroit in the financial area near Cobo Hall. The actual hearing took about 3 minutes. There were about 4 other Debtors in the room.  The Trustee basically just asked me a few questions to verify all the information I submitted was truthful, accurate and complete. He also asked me a few questions about the value of my home.

  1. How did you feel when the case was concluded?

When I got my discharge, I felt a relief. I realized I no longer had to pay every penny of my discretionary income to credit card bills that I have owed for ten years.

  1. What would you tell others in your position?

Explore your options. Don’t resign yourself to a life of paying monthly minimums forever if you know you can never get out from under it. One of the things my attorney told me was to treat yourself like a business and make the smartest financial decision without any emotion involved.

  1. What is the most common misconception going into this process?

That everyone knew that I filed bankruptcy and that I couldn’t keep my home and my car.

  1. How has your life changed since after you filed?

I have a savings account! I am able to spend money for my hard work on things other than old credit cards. I am able to partake in activities I have not been able to in the past.

Credit Cards After Bankruptcy

Many of our clients tell us they are never going to open another credit card again once they file for bankruptcy.  While this may help prevent them from incurring debt, it is not the best way to rebuild your credit score after you have filed for bankruptcy.  In order to rebuild your credit after bankruptcy you’ll need to open credit cards to reestablish and build your credit score.  Every day we are inundated with credit card offers.  Whether it is from commercials on TV, email offers, or offers at the store.  However, not all credit cards or credit card offers are the same.  Today, we will look at the different types of credit cards and the impact they have on improving your credit score after bankruptcy.

Standard Credit Card

One type of credit card is a standard credit card or major credit card.  These cards will have a Visa, American Express, Discover or Mastercard logo on them.  These credit cards can also be used where ever the card is accepted.  Even amongst the major credit cards there are a number of differences.  Some credit cards are balance transfer credit cards, some have rewards programs with cash back or airline miles and some have retail rewards cards.

Merchant Credit Card

A second type of credit card is a merchant or store credit card.  These are the types of card that are usually offered at major retailers such as Nordstrom, Macy’s, Target, or Costco.  Normally, they will not have a Visa, American Express, Discover or Mastercard logo.  Another feature is that they can normally only be used at the particular store that issued the credit card.

Secured Credit Card

Another type of credit card is a secured credit card.  Secured credit cards require a cash deposit which becomes the credit line for the account.  So, if you put $500 in the account, you can charge up to $500 on the secured credit card.  Be sure to shop around for the best available secured card.  The interest rate, fees and required deposit are all things you should examine prior to opening a secured credit card.

Rebuilding Credit After Bankruptcy

As mentioned earlier, after bankruptcy you should look to start rebuilding your credit by opening credit card accounts.    If you can, it is best to open three to five major credit cards after bankruptcy.  If you can’t, open a standard or major credit card right away then look to open a secured credit card.  The amount of cards should not include a store or merchant credit card as these cards are not always reported to the credit bureaus.  And, if they are not reported to the credit bureaus, they will not be reestablishing or increasing your credit score.

By having between three and give major credit cards it gives the bureaus a sufficient amount of data to evaluate your credit worthiness.  Anything lower than three will not give them enough information and anything over five may prove difficult to manage.

Lastly, and most importantly, remember to make your credit card payments on time every month.  That is the biggest factor to reestablishing your credit and improving your credit score.

For more information on rebuilding credit after bankruptcy, call a licensed bankruptcy professional at our office at (248) 237-7979.