Credit Card Center Advertiser Disclosure†
08-08-2011 05:52 PM
Hi Everyone - I am considering Chp7 BK because my credit card debt has become unmanageable. I currently have a 675 fico with no late payments on any of my revolving, installment or housing debts. Is it possible to BK with no late payments on any of the accounts? I know it may come as a shock to my creditors but I'd rather BK preemptively instead of having dergos on the accounts and then BKing anyway. Also I believe if I do not have any lates on the BK’d accounts it will help me to restore my fico faster after the discharge. Is this the case?
Any input is appreciated.
08-09-2011 04:53 AM
From a legal standpoint, yes, you can file without any late accounts. Ethically, are the debts truly unmanageable or just "inconvenient"? What's changed since you ran up the debts that makes them no longer affordable? I'm not trying to be judgemental, but to play devil's advocate - if you ran up these debts and discharge them in BK, how will you avoid getting into trouble again?
There are other factors - what have you run up in the last 90 days and six months? A consultation with a BK lawyer is really important to understanding all the rules and traps.
If you decide filing is the right course for you, you're correct, your post-discharge score will be better if you have no "lates" or other derogs.
08-09-2011 01:18 PM
Yes, but give a good long hard look at your debt and understand jow you can solve it.
If unmanigable, think about balance transfers and just paying off the minimum of each card and try to pay off the cards with the lowest balance and work your way up.
Honestly, having utilization rate of 100% and even a late payment or two is way better than filing for bk. A late payment becomes irrelevant in a few years for almost all lenders (including picky ones like Amex) and such high utilization will only affect your score short term. Bk will stay there for a LONG 10 years (yes late payments stay there long but if you talk it out with a lender, it can be removed).
I would look at your lifestyle and work to live below your means just to pay everything off. If you've lost your job then this is a different story atlogether.
Call all your lenders and work out a plan, you'll be surprised how likely they will work with you (especially since you've been on time with all your payments). I would also suggest to stop using your credit cards completely and look around for way to get some of that money back (selling stuff, returing it, etc).
Bk isn't something you want to do at all and should be viewed as a last resort.
08-09-2011 11:46 PM
As has been mentioned, your best bet is to sit down for a free consultation with a BK attorney (or two or three) and go over your options with them. Also consider other options i.e. taking a second job and using the snowball approach to pay debt down. Another good viewpoint can be had by sitting down with any good (you'll have to do your homework on who the good guys are) non-profit credit counseling service. Then you'll know your options, your eligibility (not everyone is eligible to file BK), and the pros and cons. At that point, you'll probably have a pretty good feel about what will work best for you.
09-02-2011 04:24 PM
I concur. If you can avoid BK, do so.
I found out after BK that how many accounts you includle in BK affects your credit score. If you have any small accounts, it may be worth it to pay them off, based on what I've learned.
I also found out after BK that keeping bills paid on time doesn't help your credit score when you file BK. Like you, I struggled but kept my bills paid up to BK. Six months after BK, I had a 599 FICO Transunion score and a 623 FICO Equifax score. FICO's anaylsis said I had the low scores because of a bad payment history, which was not at all true. I had an excellent payment history. But Transunion and Equifax does not show my excellent payment history for the accounts that were included in BK., just that they were IIB. That in itself is degrogatory, resulting in the low score and assessment of bad payment history.
I intend to challenge FICO on this assessment of late payments, which is inaccurate. I have zeor late payments showing on my credit report. And my credit report 10 days after BK also did not have late payments. Only one of my 11 accounts went late with BK (30 days). All my other accouts were paid on time up to BK, but it still didn't help my credit following BK. My BK attorney told me not to pay my accounts if I was going to file and that it wouldn't help me, but I didn't listen to him. I could have taken the $2k I used to pay my credit cards for a couple of months and used it to pay for the BK, and it appears my credit score would have been the same.
Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.