Post Chapter 13 Order of Operations

Eppie1983 · ‎04-30-2022

Hey everybody. I am making the last payment to a chapter 13 this week. I am looking to know what the order of things are. As far as rebuild. I did not do anything in the 5 years during my plan, my attorney never said I could and I assumed I couldn't. Being that I haven't been able to get credit for so long, I need some things. This include cash out refinance for an addition, probably a car or two. And probably a credit card or two for my rebuild. What I am asking is what do you guys think about how I should go about that? With no debt and everything hunky-dory should I start with the house because I don't have any debt right now? Then cars then credit cards? My credit scores are in the 600s which is good and I have zero debt to income ratio so that should work in my favor, one would think. What do you guys think about how I should attack this?

FireMedic1 · ‎05-01-2022

What are you current credit card accounts and any open loans? In other words. Whats in your wallet? Congrats on getting it all done!

Eppie1983 · ‎05-01-2022

Thank you brother, its a great feeling.

I have absolutely nothing in my wallet other than a Navy Federal debit card haha

During my Ch13, my attorney made it sound like I could't get cards and loans and I never asked. I just assumed it wasnt allowed and I didnt need them anyways. I just worked with the money I had. I now know it was possible with court approval but I just never needed it.

Thats why I want to do it right.

My Fico scores for mortgage 2,4,5 are around 720. Regular scores are in the 600s. Just tryiing to get some advice on how to attack this. The home addition is important and I also want to build credit. Just not sure whats going to happen when I try to refinance or get a home equity loan. Looking for some guidance, mentorship, whatever you want to call it.

Thanks for any help you can give me.

Justin

FireMedic1 · ‎05-01-2022

Well with the scores you posted. Shouldnt be a problem getting the addition done first. Grabbing cards will just lower your score as new accounts hit your reports. After the addition stuff is complete. Then start looking for some cards. Dont know what you had before. But good ole Cap1 is a good start out of the gate and go from there. If it aint broken. No need to fix it.

DaveInAZ · ‎05-01-2022

Yes, "grabbing" credit cards will temporally lower your score, just space them out. I never use debit cards because they're linked to you bank account, and with a merchant data breach or good fraudster they can empty your bank account and you're left begging the bank for your money back. Credit cards have a maximum liability of $50, but few enforce even that. That's great you're with Navy Federal, why not start with them for a credit card? Your banking history with them should help in getting an approval. Capital One is also good.

Mortgage rates have jumped in the past month or so to around 5.5% - historically still low, but likely to continue to rise as the Feds raise rates further to try to tame inflation. So I think a Home Equity loan or line of credit might be the better way to go. I prefer a Home Equity Line of Credit because you don't pay interest until you use it, and then pay it down when you have excess funds, and then draw on it again when needed for unseen expenses.

Good luck, and remember rebuilding your credit is a marathon, not a sprint race.

Eppie1983 · ‎05-01-2022

Hey Dave, thanks for the info. Only reason I'm hesitant asking NFCU would be that I burned them in my Ch13.

Do you know anyone that had success with mortgage or Home Equity Loan directly following successful 5 year Ch13 order of discharge?

DaveInAZ · ‎05-01-2022

@Eppie1983 wrote:
Hey Dave, thanks for the info. Only reason I'm hesitant asking NFCU would be that I burned them in my Ch13.
Do you know anyone that had success with mortgage or Home Equity Loan directly following successful 5 year Ch13 order of discharge?

I had a Chapter 7 BK back in 2010, all off my credit now for several years and I have around a 750 Fico. But I'm not really that familiar with Ch. 13. We say "burned them" for Ch. 7 because the debt was completely discharged w/no repayment. For your Ch. 13 did you repay Navy Fed, or even partially? And credit unions usually have a "cross collateralization" clause, meaning any funds you have on deposit with them can be seized to offset any credit losses. So I assume you at least partially repaid them?

I have a Home Equity Line of Credit with Penfed credit union. I got it in 2017, when my Ch. 7 BK was still on my credit reports. I really like it as it's currently only 3.75% APR and interest only payments, but I always pay more then just the interest.

Eppie1983 · ‎05-01-2022

Thanks Dave that makes me feel better. Mine is ch 13 and will be discharged when I apply with Pen Fed. My mortgage fico with Equifax is 720, income is 150/yr and I have 0 debt. My fico 8 is low (560 for Equifax) but not sure if they look at fico 8 as well. Do you?

Eppie1983 · ‎05-01-2022

Dave they did get paid but pennies on the dollar

DaveInAZ · ‎05-01-2022

@Eppie1983 wrote:
Thanks Dave that makes me feel better. Mine is ch 13 and will be discharged when I apply with Pen Fed. My mortgage fico with Equifax is 720, income is 150/yr and I have 0 debt. My fico 8 is low (560 for Equifax) but not sure if they look at fico 8 as well. Do you?

Oh yeah, the vast majority of lenders for credit cards use Fico 8, only mortgage lenders use mortgage Fico 2 or 4. But I don't pay for my Fico score, I get TU Fico from my Discover card, EX Fico once a month from my Experian free account, and Penfed gives me EQ Fico 9. Penfed seems to use Equifax Fico 9 for all credit decisions, and they give an EQ Fico 9 every month or two. I also have a Credit Karma account. They use a score called Vantage 3 which is pretty much useless, but it's worthwhile for looking over your credit report to make sure everything is correct & accurate.

I recommend you apply for 1 credit card, you'll get a small hit on your score for the inquiry & new account, but a CC is better to use than a debit card, and it will build your score up over time. I still think you might try Navy Federal, that they've continued your bank accounts is a good sign. But Capital One is also very good at overlooking "glitches" on your credit report. I avoided them as I burned them for thousands of dollars in my 2010 BK 7. But once I found MyFico and read that they're very forgiving of that I applied for Quicksilver in 2014, just 4 years after my BK. I nearly fell out of my chair when they approved me for $10k credit limit.