The FCRA grants you a number of important rights, including:
• The right to know what your credit records contain.
• The right to be told by a credit bureau the nature, substance and sources (except investigative sources) of the information (except medical) collected about you.
• The right to know the name and address of the credit bureau responsible for preparing a credit report used to deny you credit, insurance or employment, or to increase the cost of your insurance or credit.
• The right to a free copy of your credit report if you are denied credit and the denial is due at least in part to credit record information. (Requests for a free copy must be made within 30 days of your receipt of the notification of denial.)
• The right to review your credit report in person at the credit bureau, by phone or by mail.
• The right to take someone with you to review your file if you visit a credit bureau in person.
• The right to have investigated within a reasonable period of time any information in your credit record that you dispute. (if the credit bureau deems your request frivolous or irrelevant," the law says that the credit bureau need not investigate.)
• The right to have inaccurate information deleted from your credit record if a credit bureau investigation finds the information to be erroneous.
• The right to have information deleted if the credit bureau cannot verify it through its investigation.
• The right to have the credit bureau notify-at no cost to you those you name who previously reviewed the incorrect or incomplete information in your credit file that the information has been removed or changed.
• The right to know who has received a copy of your credit report over the past six months for credit-granting purposes.
• The right to know the names of everyone who has seen your credit record over the last two years for employment purposes.
• The right to include a brief written statement that will become a permanent part of your credit record explaining your side of any dispute that cannot be resolved with a credit bureau. (You may ask that the credit reporting agency share your written statement with certain businesses. The agency must do so without charge if you make your request within 30 days of being denied credit.)
• The right to have negative credit-related information deleted from your credit record after seven years.
• The right to have a bankruptcy deleted after ten years.
• The right to sue a credit bureau for damages if it willfully and negligently violates the law. (if you are successful in your lawsuit, you may collect attorney fees and court costs as well.)
• The right to be notified by a company that it has requested an investigative report on you.
• The right to request from a company pursuing an investigative report more information about the nature and the scope of the investigation.
• The right to know the nature and the substance of the investigative report but not the sources.
The FCRA does not require that:
• A credit bureau provide you with a copy of your credit file. (Some bureaus will do so, however, if you request it.)
• A business or individual do business with you.
• Any federal agency intervene on your behalf.
• A credit bureau add information on accounts not already in your file. (Some credit bureaus will do this for a fee .)
• Also, the FCRA does not apply to applications for commercial credit or business insurance.
NOTE: Credit bureaus may report bankruptcies for longer than ten years and other negative credit-related information for longer than seven years in the case of loans for more than $50,000, insurance policies greater than $50,000 and jobs paying more than $20,000/year. Also, information concerning a lawsuit or judgment against a consumer can be reported for seven years or until the statute of limitations runs out, whichever is longer.
Negotiations with creditors have failed. Repossession is imminent and foreclosure proceedings have begun. Your income is simply not sufficient to pay your bills, no matter how low the payments are. It may be time to consider bankruptcy.
Bankruptcy law evolved as a reaction to the abuses surrounding debtors prison. Before the nineteenth century a prison system existed for those who didn't pay their bills. If a merchant filed a claim, the debtor was incarcerated until his debts were paid. (Women were not found in debtor's prison, not because of chivalry but because they did riot have the ability to borrow). The lender was legally responsible for the expenses of the prison stay, including food, but seldom paid. After all, a debtor would have to sue in order to enforce this law, and it was rather difficult to sue when in prison. As a result, many borrowers languished in prison for years, surviving on what their family could bring to them or, in many cases, simply starving to death. Although some lenders would doubtless not object to the renewal of debtor's prison, fortunately we live in more enlightened times. Bankruptcy was created to provide a second chance (or third, or fourth) to those hopelessly in debt It provides a mechanism to wipe the slate clean and begin anew. As times have changed, though, so has the bankruptcy code. Not all debts can be wiped out. The proceedings can be easily disqualified in the event of improper procedures. There are many things a debtor should know before resorting to bankruptcy.
The Bankruptcy Decision
There are two kinds of individual bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, named for the chapter number in the bankruptcy code, requires a full liquidation of all debts and cancels all no-exempt debts. Chapter 13 bankruptcy is essentially a court-mandated payment plan that sets up affordable monthly payments to your creditors,
The decision to declare bankruptcy is not an easy one. Unfortunately, many bankruptcy attorneys recommend bankruptcy to just about anyone they consult with. All too often frightened consumers are advised to declare bankruptcy just to avoid a few debts. This is a mistake. Bankruptcy should truly be a last resort as the legal system meant it to be. A bankruptcy appears on your credit for ten years, and although lending criteria are slowly changing, many lenders will not even consider an applicant who has had a bankruptcy. What's more, a Chapter 7 bankruptcy can cost you most of your property. Before making a decision to declare bankruptcy, estimate how bad your situation really is. On a piece of paper, make a list of all your assets and the approximate value they could be sold for. On the other side, add up all of your debts. If the debts exceed the assets by a large percentage, you may wish to consider bankruptcy. On the other hand, if it seems that your situation may improve (you may get a new job or a second income), or if your assets are of greater value or close in value to your debts, a different approach may be appropriate.
Negotiate with your creditors
Explain your situation and ask for more time to pay. If the creditors refuse and continue to threaten garnishment tell them such action would force you into bankruptcy. No creditor wants to hear the "B" word. Using bankruptcy as a threat is a very powerful negotiating tool, confronting creditors with a choice between getting a little each month or probably getting nothing through bankruptcy. Don't try this tactic on secured creditors. They may decide to repossess your property to avoid having to go through court.
Contact Consumer Credit Counseling
As mentioned earlier in the book, Consumer Credit Counseling is a non-profit group funded by creditors to help consumers negotiate repayment plans. It is often able to negotiate payment arrangements better than the individual because of its constant contact with a variety of creditors. If you can't negotiate a satisfactory arrangement, give these people a try. Remember, the fact that you are using credit counseling may appear on your credit record.
Consider Chapter 13 bankruptcy
This kind of filing allows you to repay your debts in a court-mandated fashion and will appear on your credit record for only seven years, If negotiations fail or there simply isn't enough money to make ends meet Chapter 7 bankruptcy may be your only option. Bankruptcy does not necessarily discharge all debts. If your debts are exempt from bankruptcy, filing will do very little to improve your situation. If a co-signer was used, the debt would then be owed by the co-signer, unless that person also declared bankruptcy. In community property states a spouse's assets and debts would also be included in the bankruptcy, assuming they are community property. Consider all very carefully before deciding to file.
Certain kinds of debt cannot be automatically eliminated by bankruptcy filing. They must meet certain requirements before being eliminated by bankruptcy. If most of your debts are non-dischargeable, bankruptcy may not solve your financial dilemma. The only ways a non-dischargeable debt can be eliminated through bankruptcy are through an exception being granted by the court, a certain period of time transpiring since the debt was due, or because the creditor does not object to the discharging of the debt. Certain debts can only be discharged by an exception. They are:
Recent Student loans
This applies to student loans that became due within the last five years. Any extension of repayment would be added to this time period. Some courts, furthermore, will only discharge payments that are more than five years past due. So if the student loan was due seven years ago and the payments were originally to be made over a five-year period, you would still be responsible for the last three years of payments. The court may also grant an exception to a student loan if it would produce an "undue hardship" for you to pay it. This is rarely granted.
There is one little known and rarely used way to bypass this limitation. Within the bankruptcy code there is a provision for full elimination of all (undergraduate and graduate) student loans. This occurs ONLY when the loans have been presented and denied in a first bankruptcy and then included in a second bankruptcy. Why rarely used? Most people (attorneys, bankruptcy counselors, advisors, and even judges, etc.) only go through one bankruptcy for a client. Seldom does the client go through a second bankruptcy and if they do, it’s usually with a previous court and attorney. At that time, the only questions were when and where was the previous bankruptcy. If you find yourself in this position make sure you demand the attorney research this issue. It is there.
Federal, state, and local taxes are not dischargeable for at least three years after you file your tax return. Even if you've been tied up in tax court for more than three years, any tax assessed within 240 days of filing for bankruptcy is non-dischargeable. Property taxes are dischargeable if they are over one year late, but the lien against your property is not. The bottom fine is that you can count on the government collecting its tax money eventually.
Child Support and alimony
These can only be discharged in special circumstances, which generally include agreements that have not been court-ordered. If one spouse has agreed to assume more than half of marital debts in exchange for lower support payments, the court may not discharge all debts held by the spouse for bankruptcy. Consult an attorney if this situation applies.
Neither fines from a court, judge, or government agency nor surcharges, penalties, and restitution, as a general rule, can be discharged in a bankruptcy. The same is true of debts incurred as a result of damage or liability from driving while intoxicated. The debt incurred from intoxicated driving must be established in court and a judgment must be issued by a higher court. Small-claims, traffic, and municipal judgments for intoxicated driving are all dischargeable. Once again, consult an attorney.
Debts not discharged in a previous bankruptcy
If debts from a previous bankruptcy have been found non-dischargeable, they cannot be discharged in a later bankruptcy.
If you do not include a debt on your petition, it will not be discharged. Many people filing bankruptcy keep one or more credit lines with small balances or no balance out of the bankruptcy proceeding to preserve part of their credit resources. Another strategy is to reaffirm debts on the condition that credit continues to be offered. The creditor, confronted with a choice between collecting nothing and maintaining your credit, will sometimes choose the latter. Be very careful when reaffirming debt. You are not obligated to and you should have a new written agreement spelling out all of the new conditions.
Other kinds of non-dischargeable debts can be discharged immediately if the creditor does not object If the creditor objects, these debts will be judged by the court to be either dischargeable or non-dischargeable. The creditor can ask that the debts not be discharged if they claim the following conditions existed:
The debt was acquired by Intentionally fraudulent behavior
Fraud in this case is any dishonest act used to obtain credit. Claiming to be someone you are not, or borrowing money when you have no means or intention of repaying it, would be clear-cut examples of fraud. Not disclosing certain relevant facts could also be construed as fraud. If you make a promise and intend to keep it and believe you will be able to keep it, that is not fraud. Creditors tend to be paranoid and believe everyone is defrauding them, so this excuse for non-discharge is often used by creditor's attorneys.
A blatantly false credit application would qualify. The inaccurate statement must be an important fact and one that the creditor relied on in order for the debt to be judged non-dischargeable. A misspelled name or minor error would not render a debt non-dischargeable. Drastically overstating income or misrepresent a job title would be considered fraudulent.
If you charge "luxury goods or services" in an amount over $500 within 40 days before filing bankruptcy, the debt is likely to be deemed non-dischargeable. The same is true if cash advances are obtained fewer than twenty days before declaring bankruptcy. A lot of small charges, made to avoid pre-clearance, would also be considered fraudulent if you were over your credit limit or obviously unable to pay.
Debts resulting from illegal or malicious acts, embezzlement, larceny, or breach of fiduciary Responsibility
Any money owed because of illegal acts such as embezzlement (taking property left in your safekeeping), larceny (theft), or the failure to fulfill your duties as a trustee can be non-dischargeable. The court will usually de a definition of fiduciary responsibility.
Once you've examined your debts and determined what is dischargeable and what is not, you can determine whether bankruptcy would enhance your current financial situation. There are several other things you should know before you decide whether to file.
A common misconception about bankruptcy is that you lose everything you own to satisfy your debts. In fact, the court will allow you to keep many things essential to your well being, and perhaps even a little bit more. Although there is a federal exemption law, only in states and the District of Columbia allow you to use it These states let you choose between the state and federal exemption laws. The in states are:
The other states require a person declaring bankruptcy to use state exemptions.
Here are some examples of things that may be exempt, depending on the state in which the petition is filed.
· Personal effects
· Cars (up to a certain amount of equity)
· Tools of a trade
· Equity m a residence (sometimes the entire residence)
· Household goods
One very interesting exemption is the homestead exemption. When John Connally, the former governor of Texas, declared bankruptcy a few years ago, many people were surprised that he was allowed to keep his huge mansion, valued at several million dollars. Texas has a homestead exemption that allows anyone petitioning bankruptcy to keep up to one acre in an urban area or 100 acres in a rural area, regardless of value. The ex-governor may have had a very good attorney, but many other states also offer homestead exemptions.
One bankruptcy strategy is to sell non-exempt property before bankruptcy and convert it into exempt property. For example, a Texas resident might sell non-exempt assets and use the proceeds to pay off the home mortgage on her homesteaded property. You would almost certainly want to consult an attorney before attempting this kind of transfer of assets, however, since the court could very easily view such action as an abuse of the bankruptcy laws.
Even if a certain amount of equity is exempt, your creditors can often sell the asset to recover any excess equity you may have. If you own a car worth $10,000, for example, and you only owe $5,000 on it and your state exemption is $1,200, the creditor can sell the car and give you $1,200. Some states allow 'Wildcard" exemptions that can be used to cover the difference.
Knowing which debts are dischargeable and what the law allows a petitioner to keep, a rational decision can be made whether to file for bankruptcy. If you do choose to file, there are several ways of going about it-as well as several pitfalls to avoid.
When you've decided to take action you can begin the filing process. If creditors are knocking on the door and repossession, foreclosure, or garnishment is just around the comer, it may be wise to consider using an emergency filing to obtain an automatic stay. An automatic stay stops creditors from taking any further action until the case goes before a bankruptcy judge. Unlike a bankruptcy filing, which usually contains several pages of information an emergency filing is only one page long and contains a list of your creditors. The rest of the petition has to be filed within fourteen days or the case is dropped. The court will send notices of the pending bankruptcy to the creditors listed, who must cease all further collection action. If they do not cease, send them copies of the automatic stay and request that all further collection action cease. A creditor can ask that the automatic stay be lifted, allowing him to continue collection action. Only a landlord trying to evict you from a rented dwelling will usually prevail, unless there is a long-term lease involved. If you are renting on a long-term lease, which could be considered an asset, the landlord may have to wait for a formal @g in order to evict YOU.
Once the wolves are at bay, another decision will need to be made: whether to hire a bankruptcy attorney. Attorneys, as we all know, are expensive. In the case of a complicated bankruptcy, however, they can be invaluable. If you have quite a bit of property or valuables, if you are trying to move money from non-exempt to exempt assets, if your creditors try to make your debts non-dischargeable because of fraud, or if there are any other complications, you may wish to hire an experienced bankruptcy attorney. Shop around. Don't be afraid to negotiate. Ask a lot of questions and talk to several attorneys before you make your decision.
If you have a very simple bankruptcy or can't afford an attorney, invest $15 in a good do-it-yourself bankruptcy book. It will give in-depth information not covered in this chapter. Typing services am also available to type up bankruptcy forms. They are reasonably priced and, in the case of a very simple bankruptcy, can take the place of an attorney. If your case is complicated and you can't afford an attorney, do your own research. Read a consumer bankruptcy manual first and then consult a good legal library. There are several legal guides devoted strictly to bankruptcy. Once you or your attorney have prepared your case, you're ready for formal work.
The Filing Process
All the appropriate papers can be obtained from your local bankruptcy court. Consult the yellow pages under Government Services (usually in the beginning of the book) for an address and phone number. The court allows you fourteen days from the date of an emergency filing to complete the formal process. If Chapter 7 bankruptcy is being filed, you will need to send in the following forms after you have received them from the court:
· Statement of Financial Affairs.
· Schedule of Current Income and Current Expenditures.
· A schedule describing your debts.
· A schedule describing your property.
· A schedule listing exempt property.
· A summary of the above schedules.
· Statement of Intention in regard to your secured property and what you intend to do with it
· Statement of Executory Contracts describing contract that will need to be fulfilled, such as auto leases.
· Bankruptcy Petition cover sheet.
· Mailing addresses of all creditors.
· Any required local forms.
A fee will also be assessed, usually $90, due at the time of filing. The court will usually accept installments of a four-month period. An application for installments must accompany the petition.
After your petition is filed, a meeting of the creditors will be arranged. The court appoints a trustee to preside over the meeting and to be responsible for the liquidation of assets. With most smaller bankruptcies, only the person filing and the trustee will attend. The trustee, who is usually a local attorney, will ask several questions about the information on the bankruptcy documents. Call and ask the court clerk what papers you will need to bring (usually financial statements or sometimes even tax returns). If a lot of property is involved, especially if it is nonexempt, property, your creditors may show up to protest any exemptions. They may also attempt to grill you about your intent to pay the bill or about lying on your application. Answer truthfully and there shouldn't be a problem.
If the creditors' attorneys become abusive, demand a hearing before the bankruptcy judge before the proceeding goes any further. If the creditors object to any of your exemptions, they have 30 days after the creditor's meeting to file an objection with the court. The court will schedule a hearing and you will be given the opportunity to respond, although you don't have to. A creditor may also try to claim a debt as non-dischargeable because of fraudulent acts, a @ or malicious act, or embezzlement or theft. He can only accomplish this if he successfully raises the objection within sixty days of the creditors' meeting. To defend yourself, you or your attorney will have to file a written response and be prepared to argue your case in court.
Once all the requirements have been met and your intentions have been made clear, the court can declare the bankruptcy discharged. No formal hearing will be held unless you have chosen to reaffirm your debt in which case the judge will want to be sure that you understand what you are doing. After this time, provided the creditors do not raise any objections, the dischargeable debts are erased.
Picking Up The Pieces
Bankruptcy was once the lowest disgrace that could befall someone. Today, however, it is commonplace. Corporations declare bankruptcy to get out of contracts or avoid legal judgments. Individuals rely on it to protect them from a society that extends credit too quickly.
Bankruptcy does not mean that you will automatically be denied all credit for ten years. In fact, many firms look at bankruptcy as a responsible way of discharging debts when there is no other way out. Creditors fear bankruptcy, but they also realize that if they lend to someone who has declared bankruptcy, they need not worry about another bankruptcy for seven more years (you can only file once every seven years). If you happen to have a good explanation for the bankruptcy, such as medical bills, divorce, or some other catastrophic event, a creditor may be willing to overlook it and extend credit. Ask potential creditors about their policy toward bankruptcies. Their responses may be surprising.