Credit Reporting During a Chapter 13

[Rw1016]

Hi everybody, I am new to this forum so I apologize if this post has been touched upon. My and my wife's scores are downright terrible right now. Mine are in the 480's, while my wife is 524. We are in the process of filing a chapter 13. We have a ton of credit card debt and personal loans unfortunately and life has completely spiralled out of control for us. The proposed chapter 13 plan payments would allow us to get our life back and back on our feet. Although we should have filed much sooner, we are at a point in life where there is no option any more to delay. My question is as follows:

How are accounts reported during a pending chapter 13? We both have numerous derogatory information on our accounts such as late or missed payments, charge offs, some collections etc. I understand that during the chapter 13 the accounts should be noted as included in a chapter 13 bankruptcy but are the balances and late payment notations still reported?

I'd greatly appreciate any advice or comments on this! Thank you in advance!!

[FireMedic1]

Welcome @Rw1016 . I take it you have looked into both Chapters 7 & 13? Which one would apply the best for the 2 of you?

[Rw1016]

Hi there! I have looked into both - with our combined incomes, we don't qualify for a chapter 7. So 13 it is.

[FireMedic1]

Theres so much to go over. Its best to find a lawyer and see whats in store for your particular case. No 13 is the same as someone else. Do you have a mortgage, car loans, and total debt as of now.

[Rw1016]

I've went over everything with my lawyer. I'm just wondering how the accounts included in the chapter 13 will be reported on our credit reports other then the standard accounts included in BK. I'm wondering if the balances are included as well and if they keep dragging down our scores for the next 5-7 years?

[FireMedic1]

Balances or util %'s on the accounts act the same with or without a BK. But you have to remember that the BK filing ding outweighs everything else. As the util % go down scores go up. Not as much as if there was no BK. But they do. Chapt 7 everyone takes a severe hit in the beginning. But after rebuilding it recovers and then stalls until the BK falls off. Thats probably where I'm at now. I broke 750 on EX for 2 months until an old account was removed.  Either way we all filed for one of the Chapters and take a hit. And we all have to rebuild. Separate routes. But the end game is a successful rebuild/recovery plan.

[Rw1016]

Thanks Firemedic, appreciate your insight.

Does anyone know anything regarding my initial post? I'm just curious how accounts that have gone delinquent, charged off late, have late and/or missed payments are reported by the credit agencies while in a chapter 13 bankruptcy? Thank you so much!

[FireMedic1]

Anything negative before the file date of a BK will remain. Once filed, that is the cut off date for anyone to place negative info on your reports from before BK. But that isnt a free ride in a 13 once the plan is in place. You cant have anymore lates, ect. Then the creditors will do the same during a 13 repayment plan as they did before filing. Trustee wont go for lates and so on. You have a boss that has to be paid on time to him/her then.

[Rw1016]

Thanks again for responding, really appreciate it. So if I'm understanding you correctly, no negative stuff can be reported once my wife and I file? Just want to make sure. Of course this presumes I make on time payments to the trustee as you noted but I was under the impression that late payments to a trustee isn't reported to the credit bureaus.

[FireMedic1]

If you are paying through the bankruptcy trustee, a late payment is a problem. The trustee is not going to contact the lender to say that the payment is coming soon. If your payment due date is prior to the trustee distribution date, the trustee will not have anything to send to your creditors. Trustees could aggressively file a motion to dismiss the Chapter 13 case if something like this happens. You can save your case by opposing the motion to dismiss, but that will likely cost you more in attorney fees and also make you scramble to get that previous payment and the subsequent payment in on time. Dont play with fire.