Tag Archives: Credit

Bankruptcy Basics - Chapter 13, Bankruptcy Basics - Chapter 7, Consumer Finance

How many ways can credit scores cost me money? What can I do about it?

The Consumer Federation of America “(CFA) is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization’s Board of Directors.[i]” The CFA studies consumer behavior and uses focus groups to follow economic trends and how public policy can affect consumers. The use of credit and the cost to consumers when they have low credit scores is a particular area of inquiry for the CFA. Creating pro-consumer policies and increasing communication and awareness about credit issues is a focus of this service organization.

The recent survey and release of findings on credit scores and the costs to consumers

The CFAs sixth annual survey of credit scores today, was released June 13, 2016. The survey findings indicate that over 80 percent of consumers do not understand some basic facts about their credit scores. The following are highlights of the survey as reported in the CFA press release:

  • Credit scores are used by mortgage lenders (88%) and credit card issuers (87%).
  • Key factors used to calculate credit scores are missed payments (91%), personal bankruptcy (86%), and high credit card balances (85%).
  • Ethnic origin is not used to calculate these scores (believed by only 12%).
  • 700 is a good credit score (81%).[ii]

The findings show that the Millennial generation have less an understanding of the credit scoring system when compared to Generation X.

What consumers do not know, can cost them money

A low credit score can affect many aspects of a consumer’s day to day life. Not only is your credit score used to determine the percentage rate you would pay on a car or home loan. The insurance rates you pay can be significantly higher than your neighbor with the higher credit score. When the insurance companies consider a consumer with a low credit score (something under 620) they figure that individual is more likely to file multiple insurance claims, and the statistics back it up.

Many people with low credit scores have more difficulty financing a home and renting is their only option. More bad news for renters with low credit scores – expect to pay a higher security deposit when renting a home or apartment. The assumption is that people with low credit scores have a hard time paying their bills, so the rental owner wants more money on deposit in case the renter with the low credit score cannot pay their rent.

Today is the day you can start learning more about credit and how to maximize yours

By reading this article and the CFA press release, you will know more about credit than many others out there. Here’s something else to be aware of, advocates for reform want more protection for consumers so their lives are not determined by credit scores. If you do some research on the Internet, you can learn how to write your local legislative representatives and tell them you want them to take better care of consumers with protection laws that prevent big companies from charging you more money due to your credit score.

Next steps in repairing, boosting and making your credit score bulletproof

Well, we can’t really make your credit rating bulletproof, but there are several ways you can improve your score and keep it there. If you are underwater on all your payments and your scores suffer every month with negative reports, a Chapter 7 or 13 bankruptcy can help you wipe out the debts you cannot pay and give you a fresh start. Rebuilding your credit is much easier when you are not behind the eight ball. We can connect you with credit repair companies who use advanced systems to wipe out negative debt and “zombie” debts that may be hurting your score. When you also consider secured credit cards, credit unions and more, you can really take control of your credit, save money and live the way you deserve!

 Joseph Wrobel, Ltd., works with clients on consumer issues including bankruptcy and they can offer additional information to find out if you qualify for Chapter 7 or 13 bankruptcy, and your options and rights under the law. The firm will also advise and assist clients with best credit repair options.   

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

Don’t forget to keep up with us on Facebook, Twitter, LinkedIn and Avvo, where you can read client and peer reviews!

 

 

 

[i] Consumer Federation of America, website, About CFA

[ii] Consumer Federation of America, 6th Annual Credit Score Survey Reveals Large Majority Know Credit Score Basics But Don’t Understand Important Details, Jun. 13, 2016 press release.

Bankruptcy Basics - Chapter 13, Bankruptcy Basics - Chapter 7, Bankruptcy Beyond The Basics, Bankruptcy Odds and Ends

What should I do with the car or truck I cannot afford when I want to file for bankruptcy?

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Reaffirm that car loan; you might have a good interest rate you do not want to lose. Too many people incorrectly assume that filing for bankruptcy protection means that you have to give up every possession and asset you own. This is not true. Every day there are individuals who file for bankruptcy protection, everywhere from rural farm towns to big cities. Whether your crops completely failed or you were run down by a limo on the way to a business meeting, bad things happen to good people. When your earning capacity is temporarily or permanently impaired, the bill collectors start swarming like vultures. When you finance your car or truck and fall behind on the payments, the big vultures are ready to swoop in and carry it away if you do nothing to protect the interest in your car.

There are exemption amounts in every state that allow you to keep up to a certain valued amount of personal property and assets, including equity in your vehicle, the amount that is paid off. When it comes to that car you finance, it is not your asset until it is paid off and in your name, and meanwhile all you may have is equity in the vehicle if it is well on the way to being paid off, as opposed to you owing more than it is worth. To learn more, read our blog, Bankruptcy Exemptions in Illinois.

There are a few options for financed cars and trucks when you fall behind or consider bankruptcy.

Got buyer’s remorse? That new “keep up with the Jones” model you absolutely had to have, might feel like more of an albatross when it comes to the monthly payment. Maybe your temporary financial condition makes you wish you never got that car in the first place, and if that is the case, you can surrender it to the trustee or finance company and include any deficiencies in the bankruptcy, whether you file for Chapter 7 (full discharge) or Chapter 13 (reorganization).

If you like the car or truck, or maybe have an excellent interest rate or a decent amount of equity and the equity is more than the exemption allowance, reaffirmation is a good idea. A reaffirmation agreement is just what it sounds like, a contractual agreement between finance company and you the borrower that you promise to keep current with the payments on the vehicle and to keep it excluded from the bankruptcy. Your bankruptcy filing will need to list the vehicle and financial details, including the reaffirmation agreement, to keep everything straight with the court and trustee.

If you have a good deal on your car or truck loan, you might want to reaffirm and keep it.

Remember that your ability to get new credit for a car or truck loan could be limited for a short period after a bankruptcy, and if you do not have a decent down payment then your interest rate could be high, until you are able to refinance the loan. For more on credit repair, read our blog, Credit scores, cards and reports: What you might not know.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can “Like” the firm’s Facebook page and “Follow” Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.