Rebuilding Credit | Raise My Credit Score | Savannah & Hinesville, GA

 

Many people associate bankruptcy with bad credit, but in fact there are several reasons why Chapter 13 or Chapter 7 can actually help rebuild a credit score. A major factor in your credit scores is outstanding balances on your debt. Discharging the debt obviously reduces the balances to zero, and can be beneficial to your credit. A second factor is unresolved, delinquent accounts. Including these accounts in chapter resolves them and neutralizes their effects on your credit score going forward. Obtaining some new credit and using it wisely after discharging debt is how credit scores are rebuilt. There may well be other reasons why discharging debt helps credit scores; we can say that most of our clients report improvements in their scores after filing. Some credit increases are dramatic, some modest.

One of our favorite clients bought her first home at the age of 60 during her chapter 13 case.  She had built her score up to 650 and was still in bankruptcy, a little over two years into a five year chapter 13 plan.  Her mortgage payment was $485 which was less than her rent of $950 and she had the dignity and pride of owning her own home for the first time. Typically, one can purchase a car or home during a chapter 13 case. For a chapter 7 case, one can purchase a car five months after filing or a home four years after filing.  In either case, a credit score can definitely be improved.

A good rule of thumb is if you know you can resolve all the adverse accounts within a few years, then do so; otherwise discharge the accounts with a chapter case and start over with a clean slate. Read on below for more examples of way to reduce debt and raise your credit score.

Loans on Household Goods

If your lender had you list your personal property, like TVs, stereos, or recreational vehicles as collateral for the loan, then specific plans can reduce the amount you need to repay to keep and redeem those possessions. You do not have to - but you do have the right to - give back property in order to reduce your debt. Most people choose to keep their personal property and just include the loan in their individualized plan. 

Credit Card, Medical Bills and Other Unsecured Debt

How do I raise my credit score? That’s a popular question here, and we plan to help and prepare you with the knowledge you need in order to understand your credit score and he factors that affect it. Our goal is to have all your “How do I raise my credit score?” questions answered. If you have no property that a creditor could repossess, then your loan is unsecured. Certain plans can greatly reduce the amount you are required to pay on unsecured debt and no interest or penalties will accrue on unsecured debt.

Unfortunately, there is no "quick fix" to raise your credit score overnight. Your credit score is something that has been built over years, and will take time to repair. One of the first things you should do is review your finances. Ideally, your outstanding balance on credit cards should be only about 30 percent of your available credit. If yours is much higher than this, your top focus should be on paying down your balance as soon as you are able. Once you pay it down to below 30 percent - or pay it off completely - you must keep your balance low for your credit score to start improving. Another change to make to your credit card usage is to lower the number of credit cards in your wallet. Creditors look at how many credit cards have outstanding balances - even if they are only small balances. For your credit score, it is better to have two cards with $500 total outstanding than to have five cards with $100 outstanding on each.

Income Taxes in Savannah and Hinesville, GA

Income tax debt for tax years that are more than three years old and for returns that have been filed more than two years ago can be forgiven in specific cases. More recent tax debt can be paid over three to five years under the protection of the court and with no accruing interest or penalties. There are additional rules and deadlines governing whether a tax debt can be forgiven with which we are familiar. You will be informed what part, if any, of your tax debt will be paid in full through your case and what part will be paid only pennies on the dollar. 

Student Loans

Student loans, in some bankruptcy cases, will defer during the process and interest will accrue on the balance of those loans if your plan does not pay the interest. At the end of your case, you can apply for the William Ford Income Contingent Repayment plan, under which a large portion of your student loans may be forgiven. John E. Pytte and his staff have the application if you want to see if your loans qualify for this program. Our experience has been that in general, two thirds of our clients' loans qualify for this program. 

Discharging Student Loans

Under certain circumstances, an Adversary Proceeding can be filed to seek discharge or forgiveness of student loans. This is a separate lawsuit that is filed in the bankruptcy Court. Presently, John E. Pytte, PC has two clients who are seeking to have their student loans forgiven on the grounds that paying the loans after their case was over would cause them an “undue hardship.” Student loan forgiveness used to be something of a rumor, assumed by most that they’d be paying back loans forever, but believe us folks - it’s real and it’s helpful.

Free Lawyer Consulation in Savannah and Hinesville, GA

Contact us today for a free first lawyer consultation with John E. Pytte in Savannah or Hinesville, GA. Give us a call or swing by the office and let's talk about how you can rebuild credit and raise your credit score starting today!