Convert Your Case in Bankruptcy


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Can I Convert My Case?

Whether you file a Chapter 7 or a Chapter 13, situations often change and converting your case to a different chapter is often the best option. This blog post will highlight when you should consider converting your case and how to go about the conversion. As always, it is best to consult with a bankruptcy professional before making any decisions in your case. If you already have counsel, you should contact them immediately. If you represent yourself or are no longer represented, our office offers free consultations. Contact Detroit Lawyers at 248-237-7979.

Converting from a Chapter 13 to a Chapter 7

In a Chapter 13 repayment plan, monthly payments must be made to the Trustee in order to advance the case to discharge. Oftentimes, it is no longer necessary for Debtor’s to be in a Chapter 13 Plan. Below are some examples:

Reduction of Income: Many times an individual has to file a Chapter 13 is because they make too much income to file a Chapter 7. If you receive a reduction of income or lose your job, it might be in your best interest to convert the case to a Chapter 7 and discharge your debt in 90 days.

Example: Debtor A was making $75,000 and filed a Chapter 13 bankruptcy with a payment of $300 per month. Debtor A paid on your plan for 7 months, but was laid off. Debtor A now may able to convert his case to a Chapter 7 and discharge all his debt without having to go on the court ordered payment plan.

Surrendering Secured Debt: Another reason to file a Chapter 13 is to keep a home or car that has built up a large arrearage. If you are in a Chapter 13 repayment plan and no longer want the property, you can surrender the property and convert to a Chapter 7 to eliminate the remainder of your debt.

Example: Debtor B was facing a foreclosure on his home that had an arrearage of $10,000. He filed a Chapter 13 and was paying back the arrearage over 5 years in a Chapter 13 plan. This winter, he decided that it was too cold in Detroit and was going to move to Florida. Debtor B can convert to a Chapter 7, surrender the home, eliminate the rest of his debt and go enjoy the Florida sunshine.

Current on Secured Debt Arrearage: Similar to above, if you are in a Chapter 13 repayment plan and you cure the arrearages on a home or vehicle before the plan is through, you can convert the case to a Chapter 7 without facing recourse from the Creditor.

Are you eligible to Convert? It is important to consult with an attorney concerning conversion as there are a number of factors that will determine if you can convert. This includes if your income is low enough to file a Chapter 7, if all assets are going to be able to be protected in a Chapter 7 and if you have not filed a Chapter 7 in the previous eight years.

Steps to Convert Your Case from a Chapter 13 to a Chapter 7

  1. File a Notice of Conversion with the court. Once the court receives the Notice, the court will send a notice to your employer to stop any active payment orders. Any funds that accidentally come in post confirmation will be refunded to the Debtor.
  2. File Amended Schedules with the Court: You must file an amended Schedule I and J to reflect your current monthly income and expenses.
  3. File Disclosure of Attorney Fees (If applicable)
  4. Pay the difference of the filing fee between a Chapter 7 ($335.00) and a Chapter 13 ($310.00): You must pay $25.00 the court.
  5. Attend the Chapter 7 341 Meeting (regardless if you already attended a Chapter 13 Meeting)
  6. Complete your Online Debtor Education Course: This must be done 45 days after the 341 Meeting is held. We suggest using Debtoredu.com.

 

Converting from a Chapter 7 to a Chapter 13

Although it’s rare, there are a few instances when it would be beneficial or required to convert to a Chapter 13:

  • If the US Trustee issues a “Presumption of Abuse” and finds that your monthly income is too high to file a Chapter 7, they may file a Motion to Dismiss your case based upon your income. You would then have the option either to contest the motion or voluntarily convert your case to a Chapter 13 where you will be subjected to a five year repayment plan.
  • If you fall behind on your car or mortgage payments, it may be necessary to convert the case to a Chapter 13 in order to pay down the arrearages over time to avoid repossession or foreclosure.

Steps to Convert your case from a Chapter 7 to a Chapter 13

  1. File a Motion for Conversion with the Court: This should outline the reasons you are converting and show that you can pay your Chapter 13 Plan. The motions are usually approved.
  2. File Amended Schedules with the Court: You may have to amend some of the schedules to include any income changes and any new debt.
  3. File Chapter 13 Plan
  4. Attend the Chapter 13 341 Meeting (regardless if you already attended a Chapter 7 Meeting)
  5. Attend the Chapter 13 Confirmation Hearing (if necessary)
  6. Complete your Online Debtor Education Course: This must be done before the conclusion of the plan.

Rebuild Bad Credit with Credit Cards

A GuiIMAG1069de for Credit Cards

Reestablishing your credit can be a daunting task, but it doesn’t have to be! Believe it or not, one of the most effective—and efficient—ways to rebuild your credit is to reenter the credit world. Although you may be thinking, “Credit cards are what got me into this mess in the first place,” opening up a new credit card can also pull you out of it, and put you on the right path to developing a positive credit history.

The question that remains, then, is, “Which credit card should I choose?” The best options are the credit cards that offer the most benefits/rewards, with no annual fee, and a low annual percentage rate (APR). We did some research for you, and we’ve provided a breakdown of our top-choices in the list below.

Cash Back

Cards that offer cash back rewards usually do so by contributing a set percentage of cash back on all purchases, or purchases made at specific places such as, a gas station or restaurant.  If you’re interested in opening up a card for this purpose then some good choices would be:

  • Citi Double Cash Card: This card has no annual fee and a 0% APR on purchases and balances transfers for up to 15 months. Not only does it offer 2% on all purchases, but it also gives you your credit score on each statement which is a good way to ensure you stay on track and don’t start falling behind!
  • Discover It: This card has no annual fee and a 0% APR on purchases and transfers for up to 12 months. It offers 5% back in cash on certain interchanging categories and 1% back on all other purchases (if you’re big on online shopping this would probably be a great choice for you).

Balance Transfers

If you’ve found yourself carrying a balance on a credit card that you know you won’t be able to pay off any time soon then you of course would want to try avoiding getting charged interest each month. A way to prevent this could be to transfer over your balance to a different card; this is essentially to help you get caught up and completely clear your balance(s). When opening a card with the intent to transfer over a balance you would want to try your best to avoid any balance transfer fees; some credit cards that offer this are:

  • Chase Slate: This card doesn’t charge anything to transfer over a balance as long as it’s done within the first two months from initial sign up. There is also no annual fee and it allows up to 15 months to pay off your balance with a 0% APR.
  • Digital Credit Union Visa Platinum: This card has a $0 balance transfer fee and no annual fee. It offers a borrowing rate of 8.5%, which is less than half of what the average borrowing rate usually is. However, when signing up you will be required to open a savings account with a minimum of a $5 deposit and you’ll need to become a member of an associated nonprofit organization.

Travel

If you think of yourself to be a frequent traveler then you would want a card that offers rewards you could make the most of. For instance, some cards offer mile rewards based on how much you spend while others may offer hotel rewards that could get you discounted prices for things such as, nightly stays, parking, dinner(s) etc. Some cards we feel that offer several traveler rewards perks would be:

  • Barclaycard Arrival World: The APR on this card ranges between 16%-24%. One of the biggest perks is this card has no annual fee (usually travel cards require an annual fee after the first year of enrollment). The Barclaycard offers two miles for every $1 spent on travel and dining and one mile for every $1 spent on anything else. There’s also a 5% bonus when you redeem miles for travel spending.
  • Chase Sapphire Preferred: This card has a 16% APR and a $95 annual fee after the first year. When signing up you get the opportunity to earn 40,000 points if you spend up to $4,000 in the first three months. Every $1 spent on travel and dining earns you two points and each $1 spent on anything else earns you one point. This card also offers 20% off travel when you redeem your points for things such as, air fair or car rentals.

Students

Many parents of college students are usually nervous when it comes to their child entering into the credit world; it holds a lot of responsibility and sometimes students don’t understand how something as simple as one missed payment can have a vast impact on their credit. Luckily, however, there are credit cards out there that can help students, or anyone for that matter, manage their cards responsibility.

  • Northwest FCU FirstCard: This card has an APR of 10%, no annual fee, and no balance transfer fee. The good thing about this card is its $1,000 credit limit; this can help individuals avoid getting themselves into any major debt trouble.
  • Discover It Chrome for Students: This card has a 0% APR for the first six months and afterwards it ranges between 13-22%. There is a 2% cash back reward on up to $1,000 spent at certain places and a 1% cash back reward on everything else. There is also a $20 cash back reward at the end of each school year if you receive a GPA of 3.0 or higher.

Although it may seem that credit cards offer nothing but stress and financial struggles, they do offer a helping hand when it comes to reestablishing your credit. As seen, there are cards that offer plenty of benefits and rewards, unfortunately though, these tend to go overlooked. It’s time to find the card best suited for you and utilize all that it offers; if they’ve already taken from you then why not at least obtain from them what you’re entitled to!

Although it may seem that credit cards offer nothing but stress and financial struggles, they do offer a helping hand when it comes to reestablishing your credit. We’re always happy to discuss your credit card debt, and/or how to effectively rebuild your credit through the use of credit cards, and other efficient methods, either over the phone or in our office during a free consultation!

 

Bankruptcy and Divorce

 Which Should Come First? Bankruptcy or Divorce?

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Most of our clients do not want to file for bankruptcy.  However, a life changing event usually makes bankruptcy the best option to eliminate their debt and start rebuilding their credit.  One of the most common life changing events is divorce.

Prior to filing for divorce or bankruptcy, it’s important to examine the timing of each and the impact it may have on filing bankruptcy.  Below are a couple examples of how the timing of a divorce can impact a bankruptcy filing.

 

Filing Bankruptcy Prior to Divorce

There are numerous reasons to file bankruptcy prior to getting divorced.  Filing bankruptcy prior to the divorce may alleviate some friction.  Since the majority of debts will be wiped out there will be no need to decide which spouse is responsible for which debts.

Another advantage to filing bankruptcy prior to a divorce is related to the cost.  There are three major costs associated with filing bankruptcy – attorney fees, court filing fees, and credit counseling courses.  Since you’re married you can file a joint bankruptcy.  By filing jointly you’ll only have to pay one attorney fee, one court filing fee and one credit counseling course fee.  This could end up saving you more than a thousand dollars!

By filing bankruptcy before you get divorced you’ll also be able to use the bankruptcy exemptions to your advantage.  In Michigan, when you file for bankruptcy you can choose between federal exemptions and Michigan exemptions.  There is a special type of Michigan exemption that can be used for property that is owned jointly between a husband and wife.

 

Filing Bankruptcy During a Divorce

If you need to file bankruptcy while in the middle of a divorce it may cause a slowdown in the divorce case.  This is primarily the case when property is being divided between the couple.  Once your bankruptcy is filed, all of your assets become property of the bankruptcy estate.  As property of the bankruptcy estate, the property cannot be transferred to your spouse while the bankruptcy is pending.  This may prevent the divorce from becoming finalized.

If you need to file bankruptcy while in the middle of a divorce it may cause a slowdown in the divorce case.  This is primarily the case when property is being divided between the couple.  Once your bankruptcy is filed, all of your assets become property of the bankruptcy estate.  As property of the bankruptcy estate, the property cannot be transferred to your spouse while the bankruptcy is pending.  This may prevent the divorce from becoming finalized.

Generally, filling a bankruptcy in the middle of a divorce makes things more complicated.  However, it might be the only option as some divorces take years to get resolved.

 

Filing Bankruptcy After a Divorce

There are also reasons to file for bankruptcy after a divorce.  If you cannot qualify for a Chapter 7 bankruptcy as a married couple due to your household income being too high, you may be able to qualify after the divorce is complete.  This is due to the means test, which takes into account your household size and household income.  Splitting into two separate households may allow you to qualify since the income limit for a household of two is not twice that of a single person household.

The exemptions mentioned earlier are another reason to file bankruptcy after a divorce.  If the divorce separates the property once owned solely by one of the spouses, and previously unexempt, you may now be able to exempt that property.

There are a number of other factors that need to be taken into consideration when determining the proper time to file for bankruptcy in light of a divorce.  Contact an experienced bankruptcy attorney to help determine the time most advantageous to your specific circumstances.

Dealing with Judgments

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Judgments in a Nutshell

We see it all too often: A family purchases a used vehicle from a dealership down the street. Although initially unhappy about the 24.99% interest rate, they are relieved to have a method of transportation to take them to work and back, drop the children off to school and get groceries. Unfortunately the car doesn’t last. The transmission blows or there are engine problems. There is no warranty on the vehicle and the repairs are too costly to pay. The family is now forced into a decision to stop paying on the vehicle in order to save for yet another form of transportation. After a few months of missed payments, the creditor repossesses the vehicle. Not long thereafter, the family is served a complaint demanding the total unpaid amount on the automobile loan. The family is confused and scared and do not respond to the complaint. A judgment is entered on behalf of the collector. What can the family expect now? Are there any options to make it all go away?

Installment Plans

After receiving judgments, many creditors offer individuals court ordered installment plans in order to pay down the judgment. However, creditors aren’t very flexible with missed payments and a lapse in the payment plan may result in the installment plan being no longer available. This inevitably leads to drastic measures such as garnishments.

Garnishments

In order to collect on their judgment, creditors will often garnish the individual who the judgment is entered against. Garnishments are involuntary; meaning that once a garnishment is entered, there is nothing a person can do to stop the funds from being taken from them.

The first sign of a garnishment is a “Writ of Garnishment” filed in the court and served on the person who judgment was entered against. This pleading outlines the judgment amounts and indicates the Defendant has 14 days to object to the writ. If the writ is not objected to, then funds may begin to be withheld. You can object to a writ for a number of reasons: (1) your income is exempt from garnishment by law such as social security or unemployment income, (2) you have a pending bankruptcy, (3) you have an active installment plan with the court, (4) the judgment is paid in full, (5) the garnishment was not properly issued or (6) the maximum withheld exceeds allowable amount by law. Unfortunately, most individuals do not fall under any of the above categories.

Accompanying the writ, is a “Garnishee Disclosure” which must be filled out by the bank or company instructed to withhold funds. They have 14 days to fill out the form which indicates if the garnishment will be honored. The garnishment will be honored if the individual works at the place of business or has an account at the bank where the garnishment was sent. The garnishment will begin at different times depending on what type of garnishment it is. There are three forms of garnishment that creditors use: wage garnishment, bank account garnishment and tax refund garnishment.

Wage Garnishment

By far the most common form of garnishment we see is a wage garnishment. This occurs when the individual’s employer receives a writ of garnishment. As soon as the employer receives the Writ of Garnishment, withholding will begin on the first full pay period after the writ is served. The amount withheld is usually 25% of disposable earnings (gross income subtracted by taxes). After 28 days, the employer will send the funds to the creditor to pay down the judgment.

Bank account Garnishment

Another form of garnishment is a bank account garnishment. This occurs when a creditor sends a writ of garnishment to an individual’s bank account and the funds in their account are taken out and sent to the creditor. Once the writ is served on the bank, the bank will withhold all funds available. Twenty-eight days later the funds will be paid to creditors.

Tax Refund Garnishment

The final form of garnishment is a tax refund garnishment. This occurs when a creditor sends a writ to the state treasurer and the funds are taken from the tax return and sent to the creditor. The refund will be garnished for the full amount of the judgment or the total refund if the refund is less than the judgment. Twenty-eight days later the funds will be paid to creditors.

Stopping garnishments

At Detroit Lawyers, we have helped hundreds of clients stop garnishments. A Chapter 7 bankruptcy filing will stop a garnishment on the day the case is filed. If a creditor took $600 or more during the 90 days prior to filing, our clients will get that money back shortly after the case filing. Often, our clients have no out of pocket legal fees by using their garnishment recovery to pay for attorney fees.

Judgments can often be a source of major stress and concern. By scheduling a free initial consultation with a bankruptcy professional, you can take back the power and keep your hard earned money.

Employee Stock Ownership Plan (ESOP) & Bankruptcy

What is an ESOP?

Employee Stock Ownership Plan ESOPAn Employee Stock Ownership Plan (ESOP) is a form of employee ownership.  This type of plan gives employees of a company an ownership interest through shares allocated to them.  The shares are held in an ESOP trust until the employee retires or leaves the company.

An ESOP is a form of retirement plan as defined by 4975(e)(7) of IRS codes.  Similar to a 401(k), 403(b), or pension plan, this is frequently an individual’s most valuable asset.    Because of their significant value, clients want to make sure they are able to keep their ESOP if they file for bankruptcy.

What Happens to my ESOP in Bankruptcy?

A two step process is required in order to determine if a client can keep a certain asset.  First, is the asset a part of the bankruptcy estate.  And second, if it is part of the bankruptcy estate, can it be exempt?

The filing of a bankruptcy petition creates an estate comprised of all legal or equitable interests of the debtor in property.  11 U.S.C. 541(a)(1).  Even though a debtor may have an interest in property, it may not be property of the estate.  11 USC 541(c)(2) provides a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law.  Therefore, it allows a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction which is enforceable under any relevant non-bankruptcy law.

The Supreme Court has held that funds in ERISA qualified plans constitute one form of the property described in 541(c)(2) and are thus excluded from the estate.  See Patterson v. Shumate, 504 U.S. 753 (1992).  The court found that the anti-alienation provision required for ERISA qualification constitutes a trust enforceable under applicable non-bankruptcy law.  The anti-alienation provision of ERISA accounts restricts the transfer of funds in those accounts.

Therefore, as long as the ESOP has an anti-alienation clause restricting the transfer of funds in that account, the ESOP will be excluded from the bankruptcy estate.

If you have any questions regarding an ESOP or retirement account being an asset of the bankruptcy estate, then please call our office.

Bankruptcy and Discharging Student Loans | Updates

Discharging Student Loans in Bankruptcy

Department of Education undue hardship letter

Student Loans and Undue Hardship Letter

The Department of Education has just released a letter indicating how it will handle a bankruptcy filing that attempts to be discharging student loans. Although there are no set rules and the practice has not been developed yet, the letter provides a road map for when an attorney should attempt to discharge student loans in bankruptcy.

Costs To Litigate Considered

In order to discharge student loans in a bankruptcy, the attorney must file an adversary proceeding prior to discharging student loans. In the adversary, attorney must allege that requiring repayment on the student loan will result in an undue hardship against the Debtor.  Once the complaint is filed, the Department of Education must make a decision whether to contest the attempt at discharging the student loans. This is where the Department’s letter is important. The letter indicated that if the costs to pursue the matter in bankruptcy court exceed one-third of the total amount owed on the load (included interest and collection costs), then the loan company may accept and not oppose the undue hardship claim.

Undue Hardship Factors

The Letter also listed a number of factors to be considered by lenders whether to contest a student loan discharge.  The following factors are:

  • Whether a debtor has filed for bankruptcy due to factors beyond his or her control and the impact such factor(s) have on debtor’s ability to repay the student loan debt. Which includesa divorce resulting in diminution of family income, which will not realistically be reestablished.
  • Whether a debtor who asserts undue hardship due to physical or mental impairment may qualify for Total and Permanent Disability Discharge (TPD) and/or other administrative discharges available. These include: Death Discharge Closed School Discharge False Certification Discharge False Certification Ability to Benefit Unauthorized Signature or Identity Theft Unpaid Refund Discharge Borrower Defense
  • Veterans who have been determined by the Department of Veterans Affairs to be unemployable due to a service-connected disability.
  • Whether a debtor is approaching retirement, taking into consideration debtor’s age at the time student loans were incurred, and resources likely to be available to the debtor in retirement to repay the student loan debt. Borrowers who choose to incur student loan debt at an older age, whether that debt is for themselves or a dependent (i.e,, Parent PLUS loans), should not be able to rely on their age alone and/or their entrance into retirement to prove undue hardship.
  • Whether a debtor’s health has materially changed since the student loan debt was incurred.
  • Whether significant time has elapsed since the debt was incurred.
  • Whether a debtor’s expenses are reasonable and indicate minimization of unnecessary expenses to provide funds for student loan repayment.
  • Whether a debtor had the mental and/or physical capacity to pursue administrative discharge options and/or income-driven repayment plans, if those options were not pursued, or whether a debtor had any physical or psychological factors that would have made the administrative process more burdensome to the borrower.

 

Hypothetical Examples of Undue Hardship Situations

The Department outlined a number of scenarios in which discharge should be warranted. Here is an example:

Facts: Borrower obtains student loans in order to complete a Master’s degree. Upon graduation she starts working and making payments. A few years after her graduation, her child becomes seriously ill, with no prospect of recovery, requiring round-the-clock care. The child’s illness is followed by a divorce, with no child support or alimony forthcoming. This set of circumstances makes the borrower unable to work full-time due to child care obligations. She works part-time, bringing in only a fraction of her full-time income. Her child’s medical expenses are also extremely high.

Analysis: The facts above show that debtor demonstrated willingness to repay her loans and did so when her resources permitted, and that her bankruptcy filing and circumstances were a result of circumstances beyond her control. Furthermore, the circumstances that caused her financial difficulties are likely to persist. The Department believes that a pattern such as this would warrant exploring some of the income-driven repayment options. If these options are not available and/or do not alleviate the financial hardship, a consent to undue hardship discharge, either in full or part, may be appropriate.

Bottom line, if the consumer and bankruptcy attorney put forward a reasonable and well documented case the student loans will create an undue hardship, the guidance offered today by the Department of Education is “If this consideration leads to the conclusion that repayment would impose an undue hardship, the holder should consent to, or not oppose the discharge, as authorized by the governing statute and regulations.”

So- does this mean I can discharge my student loans in bankruptcy?

The net effect of this letter allows attorneys to understand what the Department of Education deems significant enough to avoid litigation when attempting to discharge student loan debt. Although the practice is far from developed, this letter will result in attorneys trying new cases, which will in turn result in a better understanding on which student loans can be discharged going forward.  We encourage individuals to examine the letter and see if any of the listed scenarios apply to them. Further, if you are student loans are minimal and you have a case that your student loans are causing a hardship; it may be likely that the loan holder does not contest an attempt at discharging them. Regardless, if you are experiencing financial difficulties as a result of student loans, please contact an experienced bankruptcy attorney today at 248-237-7979.

Check the Accuracy of Your Credit Report

via the NYTIMES:

TransUnion, Equifax and Experian Agree to Overhaul Credit Reporting Practices

Over the past few blogs we have talked about ways to clear up your credit history and superficially discussed some of the different things increase your credit score.  In order for your credit score to be accurate, it’s important that there are no errors on your credit report.  With the meteoric rise in identity theft and fraud it is very important to ensure the accuracy of your credit report.  You are entitled to one free credit report (not score) from each of the three credit reporting agencies (Experian, Equifax and TransUnion) once a year.  We recommend that our clients pull a credit report from one of these agencies every four months to ensure information is being properly reported.

It’s also important to remember that not all creditors report to the credit reporting agencies.  Many times credit unions, local retailers, and gasoline credit cards do not report to the agencies.

Just recently, the three major credit reporting agencies (Experian, Equifax and TransUnion) reported that disputing a mistake on your credit report could get easier.  Today, we will look at what the agencies said and what steps are necessary in order to correct erroneous information on your credit report.

What changes were made?

The announcement on March 9, 2015 indicated that people who contest items in their credit reports will receive more information concerning those disputes, including instructions on what they can do if they don’t like the response.

The credit reporting agencies also said that the effects of medical debt will become less severe.  Now, medical debts won’t be reported until after a six month waiting period to allow time for insurance payments to be applied.  Prior to this change the agencies would often report medical debts that insurance was responsible for paying but had yet to pay due to delays in the processing.  The agencies also said they would remove previously reported medical collections that have been paid or are being paid by insurance companies.

In addition, the three credit reporting agencies will stop reporting debts that are the result of tickets or fines.

You can expect to see these changes over the next several months.

What should I do if I see errors on my credit report?

Accuracy of credit report

Sample Credit Report Dispute Letter

First, throughout this process it’s very important to keep detailed and accurate records.

Under the Fair Credit Reporting Act (FCRA), you are allowed to dispute inaccurate information on your credit report.  To dispute any inaccuracies you need to write a letter to the credit reporting company and the creditor stating what information is inaccurate, what the report should state, the facts that support your position and a request that the information be removed or corrected.  It helps to include copies of statements or bills in support of your dispute.  Send the letter along with any supporting documentation by certified mail with return receipt requested.  This ensures you can document what the credit reporting company and creditor received.

The bureau will then forward a copy of your dispute to the creditor who provided the information.  The creditor needs to review the dispute and provide the bureau with a response.  If the information is found to be inaccurate then the creditor must notify the three major credit bureaus.

You will usually receive the results of your dispute within 30 days.  If the dispute results in a change then the bureau will give you another copy of your report with the corrections on it.  And, if you ask, the credit bureau must send notices of any corrections to anyone who received your report in the past six months.

In The End

In the end, it’s important to make sure that your credit report is accurate.  Because, as we have discussed in previously blogs, your credit report, and in turn your credit score, has an impact on a number of different things.

Give our office a call if you would like help disputing inaccuracies on your credit report.

A 2015 Michigan Foreclosure Crisis?

Saving your house from foreclosure

Although we are a long way from the foreclosure crisis of 2006, experts predict that 2015 will represent a large spike in foreclosures forcing many families out of their homes.  This is due primarily many of the temporary relief measures during the crisis coming to an end.

The government programs, such as HAMP, that reduced interest rates will reset in 2015 resulting in higher mortgage payments.  In addition, many of the home equity line of credits that borrowers took out to get through the bubble years will have increased payments in 2015.

Stop Foreclosure and Save Your House

On top of increased mortgage payments, many families that we talk to face reduced hours and increased expenses.  These changes inevitably result in families falling behind on their mortgage payments. Soon, one past due payment turns into two, two past due payments turns into three …until the arrearage becomes albatross that cannot be overcome. Eventually mortgage companies attempt to foreclose on the property and take the home.

Families that experience this can often feel helpless and without the power or tools to keep their home. Fortunately, after speaking to an experienced bankruptcy attorney, families can regain the power and save their home on an easy court ordered payment plan based on their income.

Filing Chapter 13 Bankruptcy to Stop Foreclosure

As soon as a Chapter 13 bankruptcy is filed, the foreclosure proceedings are immediately stopped. At this point, a plan will be submitted to the court featuring the monthly mortgage payment and the arrearages paid out over a three or five year plan. The plan takes approximately three months to be confirmed.

Most families choose to have their payment taken out of their paycheck. Therefore, they no longer are burdened by sending out the monthly mortgage payment and arrearages.  A Chapter 13 filing can also take care of past due income tax debt and discharge other unsecured debt.

Stop Foreclosure for Past Due Property Taxes

A Chapter 13 filing can also stop foreclosure based upon past due property taxes. Pursuant to Michigan law, a county cannot foreclosure until the property taxes become past due for three years. For example, 2012 past due taxes cannot be foreclosed upon until April 1, 2014.

It is important to file a Chapter 13 bankruptcy before the property is foreclosed. In a Chapter 13 plan, the property taxes are treated differently based upon how long ago they were billed by the city. Delinquent property taxes, or those that are one year old, will be treated in the plan at 12% interest.

Forfeited property taxes, or those that are two years old or longer, will be treated in the plan at 18% interest. Paying the property taxes down over five years in a Chapter 13 plan, even at these high interest rates, are often much better deals than any payment plan the county treasurer can offer.

Save your home now

Oftentimes, families facing foreclosure will contact our office when it’s too late and the property has already been foreclosed. Even though they did not believe the received proper notice and were unaware of the proceedings, it is very difficult to save a property once it has already been foreclosed and title has passed to another party. Even if you are unsure if you are facing foreclosure, contact Detroit Lawyers today at (248) 237-7979 so an attorney can review your situation and keep you in your home.

Credit Scores and Renting from Landlords

This is part 3 in a series on how credit scores can impact more than your ability to get a loan. Previously, we discussed insurance and employment.

Renting | Your Credit Score affects a lot more than credit

Clients often seek our help with their consumer debt issues.  We help clients with debt related to credit cards, medical bills, foreclosures, garnishments, or repossessions.  Often times we find that their best solution is to file for bankruptcy.  After this determination, the next question is usually, “how will this affect my credit score?” or “will I still be able to get a loan?”  The short answer is, it depends and yes.

Many of our clients are aware that their credit score impacts the ability to get a loan or credit card.  However, most people do not know that credit scores also impact other areas of their life.  Over the next few blogs I will examine how your credit score affects insurance, renting, employment, and even utilities.

Today we will look at the impact of your credit score on renting.  In general, whether you’re trying to rent a house or an apartment, there is a good chance a landlord will ask to look at your credit report.  The landlord will use your credit report, employment history, bank statements, rental history and overall financial stability before deciding whether you will make a good tenant.  There are also landlords who will not use your credit report in determining whether or not you’ll make a good tenant.

What if I have a low credit score?

Even if you have a low credit score, there are a number of ways to show the potential landlord that you are going to be a good tenant who pays their rent on time.  The first thing you can do is to get a recommendation from a former landlord.  You can get something in writing or give your potential landlord the contact information for your old landlord.  This gives your potential landlord an opportunity to contact your old landlord to confirm that you were indeed a good tenant who paid their rent on time, regardless of what your credit score says.

Another way to increase your chances of renting with a low credit score is to offer the landlord more money up front.  This shows that not only do you have savings, but that you’re willing to part with those savings to secure a rental unit.  You may even be able to negotiate some sort of discount by paying more money up front as it would be guaranteed money for the landlord.

How can I increase my credit score?

There are a number of factors which will influence your credit score.  Some of those factors include: payment history, debts owed, length of credit history, new accounts, and balance of accounts.

One of the most important factors in your credit score is the amount of debt you owe.  This includes the number of debt accounts you currently have, the types of accounts (credit card, installment, collection, etc.), and their balances. It is best to have a few credit cards and open credit accounts with low balances.  In general, using only 30% of the available credit improves your credit score.

Another factor in your credit score is your payment history.  A long record of on-time payments demonstrates an individual who has been reliable for a significant period of time.  It’s vital to your credit score to always pay your bills on time.

Another factor is the length of credit history.  The longer your credit history with a certain account, the better.  These long payment histories can be for houses, vehicles or even credit cards.

Bottom line on renting

A low credit score may affect your ability to rent an apartment or house.  To give yourself more rental options you should:

  • (1) increase your credit score; and
  • (2) use some of the tips above to increase the likelihood of a landlord renting to you in spite of your low score.

If both those options fail, look for a landlord who does not check credit scores to determine a tenant’s rental payment ability.