Where can I get my credit report and how much will it cost?

Good news!  It’s free!  But don’t go anywhere that say “free credit report” and expect a free report with no strings attached.  The proper place to go is annualcreditreport.com.  This is the site that the credit reporting agencies were forced to set up by law so that you as a citizen can get your own credit report free of charge.

This is a great idea I believe as this information is crucial to you and determines how much you will pay for credit.  You have a right to see this information about yourself without paying a fee for it and you cannot suffer any change in your credit score for looking up our own credit.  This is important because when you attempt to get credit your score is lowered every time a creditor checks your score.  Those who passed this law wanted to make sure that this did not happen to people checking their own scores.

On annualcreditreport.com you will get to choose which credit reporting agency you want to go to.  The three agencies are Equifax, Experian, and Transunion.  You get one report from each agency each year.  You could therefore check your credit for free every four months from one of these agencies.  Checking the credit will show you if you have any mistakes on your credit.  You will not be able to see your credit score for free but you will see which creditors are listed and what the amount of the debts are to see if there are any mistakes.

This is especially important after a bankruptcy to see if these debts are being reported correctly as “discharged in bankruptcy”.  If you did not do a bankruptcy then you still would want to check the accuracy of the information listed there.  If you find any mistakes then you can challenge them with the credit reporting agencies.  Just go to their sites and the will have phone numbers, addresses, and e-mail for you to send the challenges.

Don’t be afraid to do this as this information is extremely important to you.  Most credit reports have inaccuracies on them so go ahead and check and correct them.

I am a bankruptcy attorney in San Diego, CA.  Please visit my websites at www.farquharlaw.com and www.freshstartsandiego.com. .  If you are considering bankruptcy then get my Free e-book; “13 Things You Should Do T o Prepare For Your Bankruptcy Filing” by e-mailing me at farquharesq@yahoo.com.


How to re-build your credit score after bankruptcy! New strategy!

I heard a program on the radio the other day that was talking about how to improve your credit score in general so I listened.  The announcer said some of the things that I have been telling my clients with some differences.

First of all he said that you must have credit cards.  Many of my clients say that they will never use credit cards again after the bankruptcy and that is absolutely wrong.  You must have credit and use credit if you are ever to improve your credit score.  Your credit score is determined by the three credit scoring agencies who look at your financial activities for the month to determine if your score should go up or down.  These three reporting/scoring agencies are Equifax, Transunion, and Experian.

It is important to remember that you must get over the aversion you have to credit cards after a bankruptcy.  You must begin to use them wisely so they can help you and build your credit score instead of tear it down. Don’t be afraid to use them and use them wisely.  They will help you rebuild your credit score.  Don’t allow emotion to enter the equation.  You can use them to your advantage if your smart and diligent.

I was telling people to have two credit cards and this announcer said to use at least three credit cards to improve your score but we both agreed that having both credit cards and using them regularly were essential to get a maximum credit score.

He said that he paid bills with his cards and that he had around five cards each used to pay a different bill.  One was for the cable bill, one for the utility bill, one for the water bill, and others for other bills.  He would pay the bills with the cards and then pay the credit card balance in full each month.  I believe that this is a good idea.  You will therefore carry no balances and pay no interest on your credit cards.  You will though be using the credit cards to rebuild your credit score.

This kind of activity is apparently what the credit reporting agencies are looking for.  It does you no good to have cards sitting there unused.  You need to show activity and a payoff each month to slowly but steadily build your score.  And remember that multiple cards (excess of three) will build the score the fastest.

The last thing is to keep your balances low.  Never exceed 30% of the available credit on your card.  So if you have a $500 limit only charge$150 and if it’s a $1000 limit then only use $300.  Traditionally people have advised not to exceed 50% of your available credit but now 30% seems to be the better number so I’m sticking with that.

After a bankruptcy you will be deluged with credit card offers so if you file one then be prepared to use these to build your credit score.

I am a bankruptcy lawyer practicing bankruptcy law in San Diego CA.  For more information please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call may office to speak to an attorney for free about bankruptcy or any other debt related issue at (619) 702-5015.  If you or someone you know are considering bankruptcy then get my Free e-book; “13 Things You Should Do To Prepare For Your Bankruptcy Filing” by e-mailing me at farquharesq@yahoo.com.

Short Sale and foreclosure- watch out for the small lenders! Can bankruptcy help?

I believe that short sales are preferrable to foreclosures because of the credit score hit that you take in a foreclosure.  Most large banks should readily do a short sale for you but watch out for small lenders who may lure you in with the promise of a short sale only to cancel the short sale at the last-minute and sell the house at auction.  Watch out for the game they play where they lure you in thinking you have a short sale approved only to find out that you don’t and the house is sold at auction to a third-party buyer.

Don’t worry the big banks are involved in 95% of loans these days so chances are you don’t have a small lender at all.  The big banks like Chase, Wells Fargo, and B of A are usually all very amenable to short sales.  They have too much foreclosed housing inventory currently and they prefer to execute short sales of homes whenever possible.  My realtor told me of a case where they told the owner to go get a realtor and do a short sale.  They apparently had no interest in a foreclosure if it could be avoided with a short sale.

This is good for you because short sales are better for your credit score.  A foreclosure can last longer on you credit report than even a bankruptcy which prevents you from getting a FHA loan for 2 years.  A foreclosure prevents FHA loans for 3 years traditionally and there are stories of them precluding FHA loans for 5 years.  A short sale appears on your credit report as a “settled” debt which is also two years so even with a bankruptcy you would only have to wait two years for a loan.

The problem I just faced in a case was with a small bank that falls in the 5% of loans category.  My client had his loan sold from a big bank to one of these small ones years ago.  We attempted to do a short sale on the property but the bank stalled our efforts from the beginning.  In the end we had a great buyer and all the docs in and the bank came up with an excuse at the last-minute and went ahead with the sale on the courthouse steps.  It was clear after that they never really wanted a short sale at all and that they were determined to do a foreclosure from the beginning.  I just wish they told us that before we jumped through all the hoops and wasted everyone’s time.

We looked up this company and discovered that they approve less than 10% of short sales brought to them.  We speculated that they are getting some government bonus for the foreclosure because the government appears to want to see more foreclosures.  It seems silly as this is hurting people’s credit but the government disincentive programs are often hurtful and wrong.

A chapter 7 bankruptcy would have stalled the foreclosure sale it is true (This client had insufficient income to fund a chapter 13).  But then the bank could have filed an immediate motion for relief from stay and it would have been granted by the bankruptcy court quickly.  Once the relief was granted, the stay lifts and the bank can proceed with the sale.  So a bankruptcy filing can only stall a foreclosure and it will not force a determined bank t accept a short sale.

I just looked up a case for a client who had a stay lifted in 3 weeks and a new sale date scheduled three days after that.  So it’s possible that a chapter 7 bankruptcy will only stall a foreclosure sale for 20 to 30 days.  But it is all dependent on how quickly they file the motion.  I have seen them take 6 weeks to file but two weeks is more common and they could file the motion for relief within just days of the bankruptcy filing.

If you have one of these small banks then the most you can do is stall them with a chapter 7 bankruptcy unless you can afford to fund a chapter 13 for years to come.  Most people cannot afford this so they opt to do a chapter seven or hope that they can get a sale through as we did.  But then you run the risk of the bank pretending to want a short sale and then cancelling it at the last moment when it is too late to file a bankruptcy.

A bankruptcy can still get rid of most of your other debts though if you have them so don’t be afraid to use bankruptcy where necessary.  A chapter 7 can’t stop a foreclosure sale but only delay it though and it can’t get your house back once it’s sold to a third-party buyer.

Beware of the tricks these small banks play on you!

I am a San Diego bankruptcy attorney.  For more information please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call for a free consulation on any debt or bankruptcy matter at (619) 702-5015.  Call now for a free credit report and analysis!

If you or someone you know needs to file a bankruptcy then get my FREE E-BOOK “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by emailing me at farquharesq@yahoo.com.

What can I do if I can’t file bankruptcy for some reason? That’s easy, we settle!

(See my update on whether to use a debt settlement company or a bankruptcy attorney).

Yes, we can settle your debts!  Usually at a steep discount over what is owed.  You may have already received letters from creditors offering these discounts if you have held this debt for some time.  If a bankruptcy attorney calls the creditor and explains that you may file bankruptcy then you might even get a better settlement offer.

If you can’t file bankruptcy that means usually that you have too much income or too much property to file.  If your debts are fairly low then you may want to use that property or income to settle them.  Some of my clients have gotten or are getting a large payout on a lawsuit or an inheritance of some kind and they then would have too much money to file.  We then call the creditors and offer settlements and they are happy to get their money usually at a deep discount.

This may not seem like an option for you but you would be surprised how often this happens.  If you have some money or if you are due for a big payout in the future then it does not make sense to file for bankruptcy.  If the trustee finds out then he can keep the case open until those funds come in.  He will then use those funds to pay the debts in full if each creditor files a proof of claim and they usually do.  Since you are bound by law to report to the trustee anything that could be considered property to the estate it just does not make sense to file bankruptcy in some circumstances.

Some people just don’t want to file for bankruptcy.  If this is the case then you can also settle your debts.  The creditors will be happy to get paid.  Settling is not as bad as you might think.  A bankruptcy attorney has more clout and the threat of filing bankruptcy to use as leverage to get you a better deal.  A bankruptcy attorney should offer this as a service for those who cannot file for bankruptcy.  After settling these debts will be reported as “settled” on your credit report and in time your credit score will rise as these debts will no longer be reported as delinquent.

I am a bankruptcy attorney practicing bankruptcy law in San Diego CA.  Please visit my websites if you have more questions at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Is filing for bankruptcy the “responsible” thing to do?

(See my blog about bankruptcy and the bible).

I would argue that yes it usually is not just smart to file for bankruptcy if your debts have gone beyond your ability to pay but that it is also the responsible thing to do.  That is because bankruptcy gives you and you creditors finality and it puts you on the road to good credit as you can now re-build our credit score and become a more productive person.

Many people ask me this question about responsiblity because they seem to think that filing bankruptcy and discharging your debts is somehow not honoring their promise to pay for the debts that they have incurred.  They feel that they are being irresponsible and dishonorable.

I remind them that debts have a creeping quality that can slowly accumulate and take over all of your available resources until there is nothing left to pay your ongoing bills.  This can happen insidiously without your noticing and with out you intending for it to happen.  It is just a miscalculation on your part but one that can lead to disaster if left unchecked.

Also it is true that your financial situation can change where you income is cut by a job loss or just a loss of hours at work.  There can be divorce, sickness, a new baby, an accident or a business downturn or any of a whole host of reasons why you cannot honor your debts like you originally intended.  These intervening circumstances can cause your financial situation to become critical in a hurry like a nuclear meltdown.  One day you find that you can’t afford to buy groceries but the phone is ringing fifty times a day from some collection agent who is trying to get you to promise to pay money that you don’t have.  It’s not responsible to let this situation continue.

So it is not irresponsibility that usually leads a person to need a bankruptcy.  It is just the facts of life with its ups and downs and twists and turns.   It is also true that we are human and therefore inherently imperfect.  We make mistakes all the time.  We can’t predict the future but we are naturally optimistic about it.  We always expect things to turn out well but that expectation is not always realistic.  When things don’t turn out well some may need bankruptcy.

Now I would argue that if your finances get far out of hand and your ability to pay your debts is not there then it is time to throw in the towel and do the responsible thing.  Admit that you were wrong.  I have done it personally many times in my life.  Once you admit that then you can notify your creditors that you are choosing the legal, moral, right, and responsible thing which is filing bankruptcy.  You are notifying them that you will not be paying their debts back.  The creditors will go away and stop bothering you for debts you cannot pay and they will move on to someone else and use your bad debt as a tax write-off.

Now you can re-build your credit score.  With that you can once again get financed to so you can buy things like a car and a house if you choose to.  Your score will be better on average three years after bankruptcy and a fresh start than if you choose to try to pay those old debts back because on average most people will fail to do so.

So do the responsible thing.  File bankruptcy.

I am a bankruptcy attorney practicing bankruptcy law in San Diego, CA.  Please visit my websites for further information on bankruptcy at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office to speak to me about any bankruptcy issue for free at (619) 702-5015.

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Should I settle my debts with my creditors or file for bankruptcy?

(See my update on whether to use a debt settlement company or a bankruptcy attorney)

I have blogged about this issue in the past but I am often asked by my clients about the value of debt settlements.  It is a big decision you face when your debts have gotten out of hand so I decided to write about it again.

Settling debts is when you pay a percentage of your total debt owed to each creditor.  These settlements can run from 20% of the balance (if you are real lucky) all the way up to 80%.

You may have heard the ads where the debt settlement companies will say simple things like “don’t file for bankruptcy” or “don’t ruin your credit by filing bankruptcy”  But remember that there are often good reasons for filing bankruptcy if you are eligible to do so.  I believe that there are three main reasons why bankruptcy is better than debt settlement:

1) Credit score– The debt settlement companies emphasize the effect bankruptcy will have on your credit score.  They like to say not to “ruin” your credit.  It is true that your score will decline after you file for bankruptcy.  After your discharge your debts will be reported as “discharged in bankruptcy”.

What the debt settlement companies don’t tell you is that credit scores can be rebuilt.  I have written about this in another blog.  You will get credit card solicitations after you file.  You can use one or two of these to re-build your score.  In fact if you finance anything after the bankruptcy with monthly payments (and you make your payments on time) your credit score will improve.  The same applies if you reaffirm a debt in bankruptcy.

If you do any or all of these things your credit score will then begin to rise and you can re-build your score in two to three years. Your credit is not ruined forever after a bankruptcy.  Telling you that your credit will be ruined forever is just their way of selling you a debt settlement program.

2) You save money– With bankruptcy you don’t have to pay the debts back.  You can discharge these debts in bankruptcy which means that you won’t legally owe them anymore after the bankruptcy is over.  This will amount to a huge savings for you.  It is not unusual for my clients to have $20,000 or $30,000 in debt and some have more than $60,000.  Debtor’s with a business can have $200,000 or more in debt that they can discharge in their bankruptcy.

With a settlement company you will have to pay back a portion of your debt.  In my experience it is possible to get a settlement as low as 20% of the balance.  More often though creditors want 50% to 80% of the balance.  In other words you only get a 20% to 50% discount.  This is a tremendous amount of money to pay to creditors when you could fully get rid of these entire balances if you filed bankruptcy.

Debt settlement companies usually charge more for their services than do bankruptcy attorneys.  This is in addition to your debts.  Then they often charge a percentage of what they save you.  Needless to say this can all be very expensive for you.  A client of mine recently paid a debt settlement company almost $9000 and the debt settlement people did very little for them and they still have to file bankruptcy.

Had they seen a bankruptcy attorney first they could have saved all of this money.

3) You have legal protection– No creditor can attempt to collect a debt discharged in bankruptcy or they will be in violation of federal bankruptcy laws and they will face legal sanctions.  This is not so when a debt settlement company settles your debts.

In a debt settlement situation creditors can and will still sue you.  I have had several clients be sued when they were in the midst of a debt settlement.   The reason why this happens is because of the way they settle debts.  You pay them a set amount every month.  They allow this money to accumulate and then when the amount grows large enough they begin to settle debts one at a time.

But of you have 4 or 5 (or more) creditors then there are a few left for last.  These creditors are receiving no payments or settlements during this period and they get anxious.  Sometimes these restless creditors go ahead and sue.  When they do sue you and you call the settlement companies they will do nothing to help you.  This is my experience in talking with clients who went through this.

Therefore your credit will be better, you will save a lot of money, and you will be legally protected from creditor harassment and lawsuits if you file bankruptcy.

I am a bankruptcy attorney practicing in San Diego.  If you need further help please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Does my spouse have to file bankruptcy if I file?

No!  your spouse does not have to file bankruptcy along with you if he or she does not want to.  You can file alone if you wish without your spouse becoming part of the bankruptcy at all.

If the non-filing spouse has significant personal debts and they want to file with you they can but they are not forced to.  If your spouse does not file then their credit score should not be affected by the bankruptcy.

There are some things you should know about filing individually and filing jointly:

Community debts– You will get a discharge for them even if you file individually.  The non-filing spouse will still be responsible for their separate debts after the filing.  All of the debts that are considered community debts will be discharged though the bankruptcy.

Credit score–  The non-filing spouse should not have their credit score affected by the bankruptcy of their spouse.  Their credit score will remain the same after the bankruptcy is completed.

Household income– The non-filing spouse’s income will be included in the income calculations whether they file or not.  In a bankruptcy a spouse’s income is considered to be contributed to the household.   The non-filing spouse’s income is included in schedule i of the filing spouse’s bankruptcy but they certainly do get a deduction for all of the non-filing spouse’s expenses.

Community property- If you have been married to your spouse for a while in California you are considered to have a community property interest in the assets of your spouse even if they are titled in your spouse’s name.  Thus this interest must be included and exempted in the bankruptcy even if you do not file but your spouse does.

Getting credit in the future– The non-filing spouse can get credit right after their spouse files bankruptcy because the non-filing spouse’s credit score will not be affected by the bankruptcy of their spouse.  If either of you need to buy something on credit then the non-filing spouse can be the one to do it.

The filing spouse will get credit card solicitations after the bankruptcy discharge.  These cards can then be used to re-build the filing spouse’s credit score.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

Why you should file bankruptcy if you have debts you cannot pay

In celebration of reaching 50 blogs I thought I would update one of my most popular articles to date.  In this article I talk about all of the reasons why you should file bankruptcy.

I find that my clients want to file and they need to file but they are also apprehensive about  filing bankruptcy and they are concerned that bankruptcy is somehow shameful, wrong, or deceitful.  I try to get them to see that it is none of these things and that there are very good reasons to file and great benefits to filing.  I also try to show them that it is a legal, moral, and ethical thing to do that is as old as the bible and that corporations do it whenever they can.

You get a fresh start, you get peace, freedom, anonymity, your credit score will improve, you can keep most of your assets.  I also try to explain that times are tough, you need your money, and that bankruptcy is their bailout and things will probably get worse for them if they don’t file because collectors will not stop trying to collect from them.

I try to get my clients to see all of these things about the benefits to filing.  Often the biggest hurdle is the psychological block that they have to bankruptcy itself.  So please read my article and see if you should also possibly file bankruptcy if you have debts you cannot pay.

 1)  You get a fresh start.  Filing for bankruptcy is powerful and useful tool which allows you to discharge most of your debts and usually keep most of your assets.  You get a “fresh start” with your life and you can begin again financially without the burden of debts you cannot pay.

You can also avoid the permanent debt trap from which it is very hard to escape.  Remember that bankruptcy is nothing new.  It is as old as the Old Testament of the Bible.  It has been around in some form for thousands of years.

The tradition in Old Testament times was to forgive debt regularly every 7 years.  This practice had a tremendously beneficial effect on society and its people as it can on you.  Even back in ancient times people knew that everyone in society is better off if individuals don’t carry around debt long-term.  They knew then that debtors were happier, healthier, and better and more productive citizens when their debt was forgiven.

How badly is the burden of all this debt affecting your everyday life now?  Do you feel the fear, the worry, the anguish we all feel when we are over our head in debt and we don’t know how to get out or what to do.  Bankruptcy is a legal, definitive action you can take that can make the debt all go away and put your life back together to give you a fresh start.

 2) Usually your credit score will improve over and above what your credit score would be if you didn’t discharge these debts.  By the time most people file bankruptcy they are so far behind in their credit card payments that bankruptcy will actually help improve their credit score.  Each month that you don’t pay those monthly credit card bills your credit score remains low.  Since most people are unlikely to pay their debts off this results in a permanently low credit score.

If you are in the same position then bankruptcy will certainly help you.  Your credit score will decrease immediately upon the filing of the case but when your bankruptcy is finished your debts will appear as “discharged in bankruptcy”.  Those debts discharged in bankruptcy will then no longer negatively impact your credit score.

You can now begin to rebuild your credit score with new credit.   You need to have credit in your name and use that credit wisely to increase your score.   If you charge things on your new cards and then pay your payments on time and pay the full balance every month you will slowly and steadily build up your score.  Every month that you pay those payments you should get points added to your score.  These points will add up over time.   You will get credit card solicitations after the bankruptcy discharge so use them wisely to increase your credit score.

Any other payments you make on time for financed items will help drive up your credit score.  Some of my clients reaffirm their cars in bankruptcy so they will get the benefit to their score when they make payments.  Others will finance a new car after bankruptcy for the same purpose.

 3) You get freedom– Shakespeare said “never a borrower or lender be” because as a borrower you become a slave to the lender.  If you owe credit card debt then you are a slave to those big banks to whom you owe money.  You pay huge amounts of interests to these big banks every month to service your debt.  These interest payments only serve to enrich very large corporations at your expense.

Filing bankruptcy can serve to free you permanently from both the worry and the financial strain of continual and unrelenting debt and the stress of the collection actions.  Your discharge is your key that unlocks the debt prison doors.

 4) You can keep most of your assets.  Most people can retain most of their assets in a bankruptcy.  That includes your house and your cars.  Many people think they will lose everything.  We have very generous exemptions in California that allow most people to keep everything they own.  If your house and cars don’t have any equity then you can certainly keep them.  If they do have equity then usually we can find a way to exempt them.

Your house is probably secured.  If there is equity in the home then there is a homestead exemption we can use to allow you to keep it.  Your car may be secured and if there is equity in that we can use the car exemption and the “wildcard exemption” together to keep your car (if we don’t have to use the homestead exemption on your house”).

Cars usually have no equity if financed and these days with housing prices low, many houses also have no equity.  Your personal furniture and clothes you can keep under a separate exemption and jewelry and “tools of the trade” also have their own exemptions.  Even your retirement fund, if it’s an IRA or 401k, is protected by federal bankruptcy law up to $1,000,000.

 5) You will get peace back in your life.  When you file bankruptcy your creditors must stop calling you on the phone.  Most of my clients have not answered their phone for some time before they actually consider bankruptcy.  Filing a bankruptcy case will stop all of these collection efforts with the miracle of the “stay” that is created once you file bankruptcy. This stay stops all creditors from contacting you in any way once they get notice from the Bankruptcy Court of the filing.

So remember that as far as you debts go, peace and tranquility are waiting to return to you if you file bankruptcy.

6) No one needs to know.  Many people are afraid of bankruptcy because they think that their landlord or their employer will find out about their bankruptcy and they believe they can be evicted or lose their job.  This is not true and you will still have anonymity if you file.  You don’t have to tell anyone that you filed bankruptcy and probably no one will know unless they do a public record search.  It is unlikely that this will happen though so your secret should remain safe.

Your landlord will probably not be notified especially if you are on a month to month lease.  Your employer need not know unless you already have a wage garnishment that needs to be stopped.  You cannot be fired from your job or thrown out of your apartment or home because you filed bankruptcy if your employer or lenders or landlord do find out.  Discrimination of this sort based upon a bankruptcy filing is illegal.

7)  You have other things to do with your money–   If you are like most people then you need the money you earn from working to pay for your own personal bills and pay for your family and their needs.  You don’t need to give this money to these large banks.  You don’t need to spend this money to enrich large banks for money you borrowed from them a long time ago.

If you earn less than is allowed in the means test then you can probably file bankruptcy and discharge your debts.  You can then use your money for other purposes than paying off old dischargeable debt.

 8) You have already paid the credit card companies back–  If you are like most of my clients then the debts that you owe are probably very old.  You have probably been making payments on these debts for years.  If that is true then you have already reimbursed the creditors for them.  By the time most people file a bankruptcy they have already paid back all of the money they borrowed plus some interest. This is because of the very high interest rates that credit card companies charge.

Remember that the banks borrow money at a very low-interest and then lend it to you at very high interest.  They keep the rest.  It is a most profitable business and the make lots of money doing it.  The banks want to keep you paying them this exorbitant interest indefinitely.  Some of you are paying as much as 30% interest on the money you borrowed.

Don’t make the mistake of feeling that you need to keep paying these companies.  You have already paid them enough so file a bankruptcy, discharge the debts and move on.

 9) Times are very tough and many people need to file more now than ever.  There is a recession on now and you need relief from your debt maybe more now than ever before.  Many people are unemployed and those who are employed don’t know if they may lose their job in the near future.  Even if your job is secure and you expect no pay cut, you still probably need your funds for your ongoing bills.  Why pay for old debts incurred long ago when the money you borrowed back then often went to pay for other bills?

Times are very tough in this recession so explore the possibilities that bankruptcy opens up today.

 10) Personal bankruptcy is your bailout – Corporations file bankruptcies all the time including the credit card companies that you owe money to.  They bail out with bankruptcy so why not you?  In addition many banks have received government bailout money to keep them going.  They then turn around and bug you for money.  That is your money they are receiving from the government but they are not giving you any breaks.

So if big companies can file bankruptcy and get your money sent to them so they can collect more money from you then why don’t you get your bailout?  File bankruptcy.

 11) The creditors absolutely will not stop trying to collect from you until you pay or you are dead or you file bankruptcy.  They only know one thing and that is to collect your debt with all of the interest and penalties that they can add.  They will continue to sell the debt to other collectors and these collection agents have a nationwide network.  They buy, sell, and trade these debts but they keep trying to collect.  They are like the Terminator in that movie.  They are like a machine which won’t stop until you are dead.

If you file bankruptcy then they must stop trying to collect the debt. They will then discard your debt because if they try to collect it after the bankruptcy discharge then they would be in violation of federal bankruptcy laws.

 12) Your situation will probably continue to get worse and worse if you don’t file bankruptcy or pay these creditors.  The collection efforts will increase in intensity and eventually the creditors will file suit.  Many people try to put their heads in the sand and hope the debts will disappear.  This is not the case though as the situation will only get worse.  The debts will grow in size as interest and fees grow.  Eventually some creditors will file suit and serve these on you.

If you do not file at this point then you could get a default judgment against you and they will use this judgment to collect money from you.  They can now lien your house and file a lien against you personally.  Some liens cannot be removed in a chapter 7.

In addition creditors with court judgments can garnish your wages so your income could decline.  They can also get access to your bank accounts and remove money from them legally to satisfy your debt.  You may need that money to pay a bill but it could be gone one day.  They can even call you into court for a debtor’s exam to get you to answer questions about your job, your bank account, and your general financial situation and they can get you in there every 6 months.

Not all of these things will happen to all people but these are the tactics creditors can use against you when they have a court judgment.  As you see here your financial situation will continue to get worse over time when you have debts.  It will not get better on its own and the debts won’t go away.  Therefore don’t delay and preserve your rights by exploring your options with bankruptcy.

(See here for my blog about what the bible has to say about bankruptcy.)

Thank you for reading my “12 Reasons to file bankruptcy article” and if I can be of any further help please call for a free consultation.  I am a San Diego bankruptcy attorney.  Please visit my websites at www.freshstartsandiego.com or www.farquharlaw.com.

Douglas G. Farquhar, Esq.

1901 First Ave. Suite 217H

San Diego, CA. 92101

(619) 702-5015  Call now for free credit report and analysis!

E-mail: farquharesq@yahoo.com

Websites: www.farquharlaw.com or www.freshstartsandiego.com.

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Bankruptcy myth #3- Your credit is ruined forever- Wrong!

Your credit could and often does actually improve after bankruptcy.  That is because the negative information that is probably now being reported to the three credit bureaus will turn to positive information.

If you are currently behind on your payments on a number of credit cards then that information is reported to your credit reporting agencies monthly.  This has a continuing negative effect on your score until you take some action.  You can either pay these debts or file bankruptcy and get the debts discharged in bankruptcy.

If you file bankruptcy and receive a bankruptcy discharge your debts will be listed on your credit report as “discharged in bankruptcy”.  The debts cannot then negatively impact your credit score anymore.  Your credit will go down immediately after the filing but you can then begin to build it up.  Your score will not remain low if you take action after the bankruptcy to raise it.

Before you file you could probably not afford to keep up with your payments.  Now, after bankruptcy, you no longer owe the debts and you therefore no longer have to service that debt.  You are relieved for the burden of having to make the payments any longer.

Without having to pay on those old cards you can now get new cards that you can use to re-build your credit.  You will be offered new cards after the bankruptcy so use them to improve your credit score.  Now your credit score can rise as you use these new cards wisely and pay them on time each month.

Re-building your credit score after bankruptcy

See my update on re-building you credit score here: http://bit.ly/K9czCD .

Good news!  You can re-build your credit after your bankruptcy filing.  Bankruptcy will lower your score and in general your score will probably lose around 1/3 of its value before the filing.  Some clients already have a low score though b/c they are behind in their payments so they could see their score rise after bankruptcy b/c their debts are discharged.

You will usually get credit card solicitations after you get your discharge and I recommend clients use these new post-bankruptcy credit cards to improve their credit score.  I recommend they use one card for groceries and one for their gas card.  You buy these consumer items anyway so why not charge them on the new cards and then send a check to the credit card company.  You can pay off your full balance each month and not pay any interest.  You will then get a positive credit on your credit report each month as you pay off your full balance.  In addition if you finance an auto after bankruptcy and you make your payments on time then you will get a positive report on your credit report for that too.  Remember that you must have credit and use credit to benefit your credit score.

I usually tell my clients that if  (for example) they can get the credit reporting agencies raise their score by 5 points a month b/c they pay their full credit balances each month, on time, and b/c they don’t carry high balances on the cards then the effect is cumulative.   A  5 point increase per month (for example) would result in 70 points a year and 200 points in 3 years.

So manage your credit score after bankruptcy, do take on new debt, pay it on time and in full and you will in all probability watch your score rise!

For more info. check out my websites at:   www.farquharlaw.com or www.freshstartsandiego.com.

I am a bankruptcy lawyer in San Diego.

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.