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Grapevine Legal, LLC - Vancouver WA Bankruptcy Lawyer
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Credit Reports

Today's topic involves a reoccurring issue about items on your credit report. The misconception is that filing a bankruptcy 'gets rid" of negative credit events, such as missed payments. (The technical term for this is a 'derogatory'.) But a credit report is a factual history of your credit affairs. Legitimate credit events that have not expired will continue to remain a part of that history even though the debt has been discharged in a bankruptcy. And that's what the credit report will cite - that the debt has been discharged in bankruptcy. There is no legitimate way to remove a valid and accurate credit event but you can contact a credit reporting agency if a credit item fails to notate that it was discharged.

Derogatory credit events on your credit report begin to fade in relevance in the months and years after a bankruptcy filing. You can also take affirmative steps to rebuild your credit, like using secured credit cards. Responsible use and timely payments of these kind of credit instruments will help you regain your credit worthiness.

Understanding Reaffirmations

An important transaction in a Ch.7 filing is the reaffirmation agreement. These are typically issued for car loans. Nearly everyone can keep the vehicle they have through a bankruptcy because the lender doesn't want the car - they want the value of the car loan.

Your car loan (i.e. promissory note) is eliminated when you receive a bankruptcy discharge. This means that a car loan agreement must be issued and signed after you file your bankruptcy. Otherwise the lender will repossess the vehicle because your promise to pay is secured by the lender's ability to recover the vehicle if you default on your payments.

It's important to keep in mind that reaffirming a car loan removes it from your bankruptcy protection. This means that if you default after reaffirming your car loan then the lender can hold you liable for the difference between the vehicle's auction value and the amount you would owe on the loan.

How have the Bankruptcy laws changed?

The reforms enacted in October of 2005 were
designed primarily to prevent abuses. For the
vast majority of Chapter 7 filers (liquidation of
debt) these changes will not affect their ability to
gain a fresh start.

What is the difference between
Chapter 7 and Chapter 13
bankruptcy?

Chapter 7 is a liquidation of debt, excluding
debts for taxes, student loans, intentional
acts (liabilities due to fraud, embezzlement,
due drug and alcohol induced acts, etc.), and
support obligations, to name a few. Chapter 13
is a 3-5 year repayment plan which allocates
​debt repayment from income that exceeds
reasonable living expenses.

Will I be able to keep my house
or my car?

In most cases, yes. It depends on how much
value it has over what you still owe on it.
If the value is less then you can usually
retain the property or car as long as
payments are kept current. If there is
significant value beyond what you owe on
it (equity) then it needs to be evaluated.

What about my pension and/or
retirement accounts?

Most retirement accounts are fully exempt.

###

This is a debt relief agency. We help
people file for bankruptcy relief under
the bankruptcy code.

Disclaimer
This site is intended to provide general
information only. No advice from this site
should be construed to apply to your situation
nor should you act upon the information
without consulting a licensed attorney. Any
phone calls, emails, initial consultation, or any
other communication do not create an attorney-
​client relationship - that will only occur when a
written agreement is signed.

(Copyright 2016) Grapevine Legal, LLC
All rights reserved.​​

Just got off the phone with a caller who was facing some serious financial difficulties.  She was not quite at the threshold of bankruptcy but needed some advice to sort things out.

I wish more people would take this precautionary approach.  It is very useful to get an understanding of the facts as they apply to money worries.  For example, many people take early withdrawals from their retirement accounts, which lead to stiff penalties and tax consequences. They do this to stay afloat during rough times.  Yet many of these people end up filing a bankruptcy anyway because their hope of things getting better evaporate when the reality of their situation becomes clear.  They then learn that that their retirement funds are completely exempt from their creditors when they file a bankruptcy and, to make matters worse, that their tax debt is non-dischargeable.

If you or someone you know is facing tough times it is critical that you seek professional advice.  Costly mistakes can be avoided and many attorneys offer free consultation, as we do here.  And even though I spent 45 minutes on the phone with this lady I regard it as a public service that many in this profession dedicate themselves to.
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