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What Happens to Secured Debts after Bankruptcy?

A “secured debt” is any type of debt that you obtain by agreeing to give the lender an interest in some type of property in exchange for the loan (also commonly referred to as collateral). The most common types of secured debts include car loans and mortgages.

Many people wonder if they will still owe secured debts after filing bankruptcy. The answer to this is yes and no. Filing bankruptcy gets rid of your legal obligation to repay the debt, meaning that the creditor can’t sue you to get paid. However, the creditor can still take bank their collateral if you don’t pay the debt. This means that if you don’t pay for your mortgage or car loan, the lender can’t sue you, but they can repossess your car or foreclose on your home.

For this reason, if you want to keep property that you pledged as security for a debt, it is important that you continue to make payments for it during and after your bankruptcy case. Some lenders may also require you to sign paperwork agreeing to be legally responsible for the debt after the bankruptcy (called a “reaffirmation agreement”). If you have any questions about how your secured debts will be treated after filing bankruptcy, speak to your bankruptcy attorney about it.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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How will Filing Bankruptcy Affect my Credit?

Many people wonder how filing bankruptcy will affect their credit. The truth is that there is not a clear answer to this question. Most people who file bankruptcy are already behind on their bills and often have bad credit as a result. In these circumstances, it is hard to say if filing bankruptcy will make things worse.

The fact that a person has filed bankruptcy can appear on his or her credit report for a period of 10 years after the date the case was filed. However, this doesn’t mean that a person who files for bankruptcy will be unable to obtain credit for 10 years! Because bankruptcy wipes out all of a person’s old debts, he or she may actually be in a better position to pay new lenders after the bankruptcy. As a result, some lenders are willing to extend credit to a person who has filed a bankruptcy soon after the case is discharged. However, the interest rates and fees may be high, so a person who has filed bankruptcy should be careful not to take on debt he or she can’t pay.

After filing bankruptcy, debts discharged in the bankruptcy should be listed as having a zero balance on the filer’s credit report. Debts that are incorrectly reported as having a balance will negatively affect a person’s credit so it is important to check your credit report after filing bankruptcy. Any errors should be reported to the credit reporting agency.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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How Does Bankruptcy Affect My Credit?

Many individuals fear that filing a bankruptcy will hurt their credit score and prevent them from getting further credit. While there are many factors involved in a company’s decision to provide financial products to an individual that has filed bankruptcy, it is important to remember that persistence will pay off in the long run and knowing your options is key.

It is important to understand the time frame that is involved when filing either a Chapter 7 or a Chapter 13 bankruptcy and how that will affect your ability to repair your credit. Typically, it takes anywhere from one to three years to repair your credit after a bankruptcy has been filed.

One common misconception is that filing a Chapter 13 bankruptcy will affect your credit less than a Chapter 7 because you are paying off your creditors. In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time, from three to five years, depending on the size of your debts and income.  A Chapter 13 bankruptcy affects your credit score the same way that a Chapter 7 does, only the time frame for credit repair is greater because you are in the bankruptcy process for three to five years while you are paying off debt to your creditors.

A Chapter 7 bankruptcy, on the other hand, discharges many of your debts and can be filed within a few months. Therefore, the process is much shorter, and the time it takes to repair your credit is less.

It is important to understand your options and how bankruptcy will affect your credit. Knowing your options is crucial to alleviate your fears and misconceptions about the bankruptcy process. Please contact one of our professional bankruptcy attorneys at Hoglund Law Office to discuss your specific situation and find out whether a Chapter 7 or Chapter 13 bankruptcy is right for you.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Credit card use is making a comeback

Consumer spending over the last three quarters of 2011 has shown a reversion to credit card use over debit card.  Silvio Tavares, senior vice president at First Data, which processes card transactions for 4.1 million merchants, notes that “Consumers have spent the last couple of years de-leveraging and reducing credit card use, but the past month — and since April — they’ve been using their credit cards more and are starting to return to pre-recession buying.”  The first quarter of 2011 saw an 8.2% increase in credit card use, followed by a 9% increase in the second quarter and a 10.6% increase in the third quarter.  On the other hand, debit card use increased by 9.6%, 8.3%, and 5.9% in quarters one, two and three respectively.  On black Friday alone, credit card use jumped 7.4% from the same day a year ago.

A major contributing factor to the rise in credit card use is that the banks are encouraging consumers to switch from debit to credit.  Credit card use is more profitable and cost effective for banks compared to debit/checking accounts.  To get consumers to make the switch, credit card mailings have increase 85% since early 2010, and many of these credit card offers come with new perks such as rewards points, miles, or cash rebates.  The number of credit cards offering such perks has increased over the past two years from 6 out of 10 of the credit card offers in 2009 to 8 out of 10 credit card offers today.

Analysts believe that an increase in credit card offers will continue to intensify as debit cards become less cost-effective for banks.  Banks have started to raise checking account fees and charge debit card usage fees, all of which is part of the attempt to get consumers to switch to credit cards.  Although consumers will not be charged with the same usage fees on their credit cards, Bill Hardekopf, CEO of LowCards.com warns consumers to pay off their balance each month because the interest payments will be much greater than any new debit card fee.

 

Source:

Blake Ellis, Credit card use is on the rise, https://money.cnn.com/2011/12/05/pf/credit_card_use/index.htm?iid=SF_PF_LN (accessed 12/7/11)

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Information About Credit Scores

According to data from Credit Karma, the average credit score in the United States is 666. The current trend for lenders is that a credit score of 660 is needed to obtain a mortgage, car loan, or credit card. Approximately 40% of Americans have a credit score lower than 660. This means four out of ten consumers will likely be denied credit or pay high interest rates. This illustrates the importance of credit scores. New federal regulations have increased consumers’ access to their credit scores. However, many think the new regulations do not go far enough. Here are a few things to know about credit scores.

  1. You may have the right to see your credit score for free. If you are denied credit or are forced to pay higher interest rates because of your credit report, you are entitled to see your credit report for free. However, this regulation does not apply to all consumers, only to those who are denied or given high interest rates.
  2. The threshold for obtaining credit is always changing. Previously, a credit score of 660 was considered a good score. During the recession, a score of 720 or 750 became the new standard. Lenders also focus on credit history and other credit details when deciding whether to lend.
  3. Track your credit score. Credit scores change, so it is not enough to just check your score once. Monitor your credit score to see how decisions affect your score and identify areas where you can improve your score.
  4. Do not be surprised if your credit score varies. There are many different credit score models used by lenders. Focus on risk factors, such as amount of debt, number of accounts, and credit use, because improvement in risk factors will likely improve your score no matter what model is used.

 

 

Source:

Justine Rivero, 4 Things to Know About Credit Scores, https://money.msn.com/credit-rating/4-things-to-know-about-credit-scores-forbes.aspx (accessed August 24, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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