Credit Report Questions - Part One

by Natasha Meruelo, Esq.

How Long Is A Debt On Your Credit Report?

Clients often come into my office confused about the information on their consumer credit report and want to clean up negative information on their report.

Delinquent accounts are often a barrier to clients obtaining new credit, which can be integral to helping you clean up your credit and obtain products and services you need.

So, let's go over some basic rules about how credit reporting of negative information works.

The Fair Credit Reporting Act

The Fair Credit Reporting Act or FCRA sets forth rules related to information that may be contained in credit reports. The following items can be reported on your credit report (also known as a consumer report)(See § 605 - 15 U.S.C. § 1681c).

1. Bankruptcy cases - no more than 10 years 'from the date of entry of the order for relief (filing) or the date of adjudication (discharge), as the case may be'.  

2. Civil suits, judgments and records of arrest (from the date of entry)- no more than 7 years.

3. Paid tax liens (from the date of payment)- no more than 7 years.

4. Accounts placed for collection or charged to profit and loss ("charged off") - no more than 7 years. HOWEVER:

• The 7 year period begins when the delinquent account is placed for collection, charged to profit and loss or subjected to any similar action.

• An account will not usually be placed for collection or charged to profit and loss until 180 days have passed since the delinquency began.

What this means: The 7 year period won't begin to run until the account is more than 180 days past due. So, making "partial payments" or any other payments that prevent the debt from getting charged off can mean this debt may legitimately be on your credit report for longer than 7 years.

5. Any other adverse item of information- no more than 7 years.

6. Generally speaking, there are also restrictions on the reporting of medical debts in order to protect the nature of the medical services, products or devices used by you from being disclosed.

BUT, these rules do not apply to consumer credit reports that may be used in connection with a) credit transactions which involve $150,000 or more, b) insurance underwriting for insurance with a face amount of $150,000 or more or c) employment of an individual who is expected to be paid $75,000 or more. 

So, mortgage companies, insurance companies and potential employers may be able to access negative data about you that normal consumer finance companies will not know about you even after the time frames above have passed. It is therefore in your best interests to nip negative credit information in the bud as soon as possible before too long a record develops.

How Bankruptcy May Be Able to Help You

I often recommend that a client consider bankruptcy sooner rather than later in order to avoid negative credit information piling up. As explained above, negative information can be accessed by some creditors for a lot longer, so having minimal negative credit information is ideal. 

Once you receive a bankruptcy discharge, debt cannot continue to spiral out of control, be placed for collection or charged off. This is because a bankruptcy discharge eliminates your liability for the debt and therefore your obligation to pay for it (which is another benefit of bankruptcy). 

Debts discharged in your bankruptcy case are typically reported as having a $0 balance and discharged in bankruptcy. A creditor certainly cannot continue to report the debt as having a balance due. These trade lines should drop off after 7 years and will no longer be visible to typical consumer creditors (lending you less than $150,000, not selling you insurance or pulling it for employment purposes). 

Creditors who look at your credit report will also see that you have a much lower debt to income ratio after the bankruptcy discharge compared to your ratio pre-bankruptcy. Creditors also know you cannot file bankruptcy again until certain time frames have passed and may view you as a better credit risk than a similar person with similar income who has debt (even if they are not delinquent). This is because since you have less debt, you have more ability and resources to pay for new credit.

Judgments will not automatically fall off your credit report, but they will be unenforceable against you personally and there is a way to remove them from your county clerk's records here in New York State as a result of your bankruptcy discharge.

Finally, debts discharged in bankruptcy have no tax consequences.  Debts  discharged through debt settlement or even as a result of the creditor's decision to forgive them often result in 1099-c income, which means you may end up owing money to the IRS.

Bankruptcy has many more benefits as well and if you are considering bankruptcy, you should always consult with a qualified bankruptcy attorney to understand your options.

Next Up: Re-Aging of Old Debts On Your Credit Report, Disputing Information on Your Credit Report and Collection of Time Barred Debt

Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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Settling Debts vs. Filing Bankruptcy

What Option is Best for You?

by Natasha Meruelo, Esq.

A lot of clients come into my office and ask about whether debt settlement or bankruptcy are best for them. In my opinion, if you are eligible for bankruptcy, bankruptcy is a much better option most of the time. Let me explain why.

If you qualify for Chapter 7 bankruptcy and your assets can be protected, you generally do not have to pay back any of your debt. There are exceptions for tax debts already owed and other priority debts like child support or alimony however credit cards almost never have to be paid back. If you are eligible for this option another benefit of discharging your debt in bankruptcy is that you will not have any income tax consequences. This is because any debts discharged in bankruptcy are excluded from your gross income according to IRS' own rules. In comparison, any debts you settle or which a creditor voluntarily chooses not to collect may cause you to receive a 1099-c and you may have to pay income taxes on any amount in excess of $600 which you were forgiven or did not have to pay. This is known as cancellation of debt income. So, unfortunately, if you choose to settle your debts for less than you owe, you may end up owing the government taxes.

If it turns out you are only eligible to file Chapter 13 bankruptcy, this is often still a much better alternative to settling debts. Just like in Chapter 7 bankruptcy, you do not have the taxable income problem if you receive a discharge. Your money and payments also go further in Chapter 13. This is because generally speaking, you pay your unsecured debts back at 0% interest and often for just pennies on the dollar. If you must pay secured debts in your Chapter 13, then you can often repay them over 60 months, possibly lower your interest rate and pay any arrears you owe on secured debt interest free. If you owe taxes, you can also derive a lot of benefits from Chapter 13 including eliminating penalties, stopping further interest from accruing, amongst other benefits.

Finally, one of the best parts of bankruptcy is the automatic stay. Many times, when you are negotiating settlements or working with a debt consolidator, you may end up getting sued by your creditors and have a judgment entered against you. While this is not fair and may have other legal implications, it does happen. In bankruptcy, all lawsuits and collections must stop and creditors cannot pursue you in multiple ways. They have to stop the harassment and your debts will be dealt with in the bankruptcy court.

So, if you are interested in saving money, avoiding possible tax problems and stopping creditor harassment, bankruptcy can be a very good way to accomplish all of these things.

Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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How Bankruptcy Can Help You Keep Your Car

And possibly lower your payment too

by Natasha Meruelo, Esq.

Most of the time, people think about bankruptcy as a way to help them eliminate their debts and start fresh. But, did you know that bankruptcy can also help you keep your car or even lower the overall amount of money you have to pay for your car?

In Chapter 7 bankruptcy, if your car is less worth than what owe on it, you have the option to redeem your car for its actual value. What does this mean? This means that if your car is worth $5,000 and you owe $10,000 on it, you can pay $5,000 for your car. This is done by filing a motion for redemption. However, you must be prepared to pay your lender that $5,000 immediately.

What if coming up with the funds is too difficult and redemption is not a possibility for you? Well, in that case, Chapter 13 offers you some options that may make this easier. In Chapter 13 you can spread out your whole loan balance in a repayment plan of up to 60 months. So, if you have 2 years left on your loan, you may be able to spread out the balance owed over five additional years. This will lower the amount you have to come up with less each month to pay for your car. In addition, in Chapter 13, you can reduce your interest rate to what is known as the "Till" interest rate which is generally prime plus 1-3%. So, in today's market, that would be about 5.25%. If you purchased your car more than 910 days prior to your bankruptcy filing and it is worth less than what you owe, you may also be able to reduce your loan balance to your cars current value and also reduce your interest rate.

Bankruptcy, especially Chapter 13 bankruptcy, can be an excellent way to help you keep your car and save you some money at the same time. If you are having trouble paying your credit cards or any other debt and are also having trouble making your car payment, make sure to consult with a bankruptcy attorney to compare what options you may have. The relief available to you may be greater than you think!


Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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So Your Bank Won't Give You a Modification? 

You May Be Able to Modify Your Own Mortgage.

 by Natasha Meruelo, Esq.

Sadly, too many homeowners come into my office after numerous failed attempts to work with their bank to modify their mortgage. There can be many different reasons why your bank wouldn't modify your mortgage. Modifications are complicated. Now, new rules require your servicer to explain why you may not have qualified for a modification but perhaps you didn't have the benefit of these disclosure requirements when you were applying for your loan modification.

So, is it possible to take your mortgage into your own hands and modify it? The answer may be yes if like many New Yorkers, you own a property which has a mixed use. The most common example of what I mean is a two or three family home which serves as both a primary residence and a rental property. Many New Yorkers bought into homes with built in rental income in the housing boom of the mid 2000s. Many of these homes have lost an incredible amount of value and are now underwater - that is, they are worth less than what the mortgage balance is.

In Chapter 13, you may be able to cram down the value of your home, even if a first mortgage is involved, if your property is more than just your primary residence. So, let's say you own a two family home that went from being worth $550,000 to $350,000 and that provides you with rental income every month. Well, you may be able to cram down the value of your home to its current value of $350,000 and pay this off over 60 payments at a reasonable interest rate. 

Suddenly, that money you were hoping to allocate to a monthly modification payment may take you even further than you ever thought possible and make you debt free in 5 years.

[Photo credit: Mortgage Rates by Mark Moz]

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How is this possible? Well, I've done it before and Bankruptcy Courts around the United States have interpreted the "anti-modification" section of the Bankruptcy Code (11 USC 1322(b)(2)) to only prevent modification of a mortgage on a property which is solely a person's principal residence and was originally intended to be that person's primary residence. The most recent example of a court taking this position is a case coming out of the Southern District of Florida. See In re Ramirez (Bankr. S.D. Fla. Apr. 4, 2014). We have this case law in New York too.

Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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Are You Drowning in Student Loan Debt?

 by Natasha Meruelo, Esq.

Many clients who come into my office feel that there is simply nothing they can do about their student loan debt. They have been in endless forbearance or deferment agreements but these are not long term solutions to their debt. In fact, this may only increase their debt and make it more unmanageable. If they are delinquent, they have simply come to believe that there is no solution or that they can be be pursued for this debt for the rest of their lives.

Well, believe it or not, if you have federal loans (FFEL loans, direct loans, department of education loans) there are many repayment options. If you are also in a profession that would lead you to being eligible for loan forgiveness, it is imperative you enter into the right loan repayment option or you may find that after 10 years of payments, you are not eligible for loan forgiveness after all. Federal loans are serviced by a variety of different companies with Sallie Mae, Nelnet, ACS. MOEHLA, FedLoan Servicing (PHEAA) being some of the most common servicers. Regardless of who your loan servicer is, if you have a federal loan, you have options and I can help you understand what they are. 

For individuals whose trouble with their student loans is more advanced and they are in default, there are also solutions available even though the problem is more complex at this stage. It is possible for you to get out of default, to "cure" your default and obtain a reasonable payment arrangement. If you are experiencing problems repaying your federal student loans, if you have suffered wage garnishment or your tax refunds are being taken every year, I can help you get out of default and take control of your loan debt.

Finally, for individuals who feel their federal student loans are such a hardship that bankruptcy may be their only option, case law is changing and a hardship discharge may be an option depending on your circumstances. I offer free consultations and can help you determine if this is an option that may be available to you.

For a discussion on private student loans, look for a future post that will discuss settlement, defense and bankruptcy hardship discharge of your private loans- yes, it is possible!

 

[Photo credit:Lendingmemo]

Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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Why Did My Neighbor Get a Better Loan Modification Than Me?

Why Loan Modifications are More Complicated Than You Think

 by Natasha Meruelo, Esq.

Unfortunately, obtaining a loan modification is far from a straightforward process. Putting aside the frustration of actually applying for a loan modification with banks that don't seem to care about you, the question of whether you can get a loan modification and what kind of modification you can get seems to be a mystery. It certainly doesn't help that when you call that 1-800 number for your bank, you never seem to speak to the same person twice and every person you speak with tells you a different story. Whether or not you can get a loan modification shouldn't be a mystery but because of all the variables in the process, it may as well be.

So, how do you know if you can get a loan modification? What kind of loan modification will it be? Will it be as good as the modification your neighbor got? 

First things first, don't send a lot of money to a "loan modification company" and then sit back and wait and see what happens. Educate yourself about what kind of mortgage you have, pay attention to the notices and letters you are getting from your mortgage company, keep in mind that every case is different and highly fact specific and then consult with a professional like a bankruptcy attorney.

There are three crucial pieces of information you need to have 1) who is your loan servicer- that is, who sends you your mortgage statements every month, 2) who is your investor- that is, who supposedly owns your mortgage, 3) when was your loan was taken out (when did you close on this loan).

The next most important pieces of information, in my view, are 1) what are the sources of income available to you and what is the total monthly pre-tax income that is available to you, 2) what are your annual property and school taxes, insurance costs and any HOA/Condo/Co-op Fees and 3) how much other debt do you have.

Generally and very broadly speaking, there are six kinds or categories of loan modifications.

First, there are the loan modifications for pre January 1, 2009 loans that are owned by government-sponsored enterprises (GSE) like Fannie Mae and Freddie Mac. I would also put FHA Loan Modifications into this category to keep things simple. These loans almost always tend to be primary mortgages as opposed to lines of credit or second mortgages. GSE loans are eligible to be considered for Home Affordable or "Making Home Affordable" (HAMP) loan modifications if the borrower and the loan meet certain criteria. GSE loans may also qualify for special internal modifications offered by each the GSEs. Each of these programs have their own rules which can be varied and complex.

Second, there are HAMP loan modifications (including Tier 1 and Tier 2 modifications) for non GSE enterprises like Chase, Bank of America, Wells Fargo, Citibank, Select Portfolio Servicing, Ocwen, etc. But this gets tricky because these companies do not always own the loans they send statements for every month and although they have agreed to participate in HAMP, the real owner of your loan may have restrictions in place that prevent you from getting a HAMP modification. Again, the "rules" for these modifications are complex because they are often driven by documents referred to as "Pooling and Servicing Agreements" (PSAs) and there are many different PSAs as each investor has their own, tailored to different specifications.

Third, there are private investor modifications or internal modification options offered by private owners of mortgage loans that may have restrictions that prevent you from getting a HAMP modification (or where HAMP is not an option because of the origination date, loan size or some other factor) but are willing to offer you another option that meets their own rules or restrictions.

Fourth, there are loan modifications for loans that were originated after January 1, 2009. Unfortunately, in many cases, especially GSE loans, these options are far less affordable than HAMP modifications and in my experience, this is primarily due to two reasons: 1) the interest rate offered is usually higher and based on current rates and 2) since these loans are fairly new, extending your mortgage that has 25 years left to go, to a new 30 year mortgage (for example), doesn't make that much of a difference.

Fifth, there are modifications of your second mortgage or line of credit. These are worthy of a blog post of their own but generally speaking, they either mimic your first mortgage modification or are modified pursuant to a special investor/owner modification program. Second mortgages and lines of credit tend to be non-GSE owned- it is unusual for a GSE to be the owner of these loans.

Sixth, there are loan modifications that are available as the result of litigation- e.g. the National Mortgage Settlement or other lawsuits filed by various state Attorney Generals, for example.

This is just the beginning of the loan modification discussion. There are quite a few more factors that influence what type of a loan modification you will ultimately be eligible for such as your income, the costs of your property taxes and insurance (escrow) and how delinquent you are.

So, there are no "one-fit-all" approaches to loan modifications. Just because your neighbor, friend, family member or co-worker got a certain type of loan modification and you have a similar situation does not mean you will get the same kind of modification.

This does not mean you should be discouraged. This just means that you should get as pro-active as possible and educate yourself on what kind of mortgage you have, the costs of living in your town/city, get familiar with your own pre-tax income and then seek the counsel of an experienced attorney to see what options are available to you.



Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

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Image courtesy of Jeff Turner "Sign Of The Times - Foreclosure"

What are your questions about Bankruptcy?

I meet with clients every day and answer many questions during our complimentary consultations and would like to open the floor to answer your questions as well.

Please comment on this post and let me know what you are wondering about when it comes to bankruptcy. What questions or concerns do you have?

Feel free to comment and I will do my best to answer them!


Questions or interested in a consultation about your case? Email Natasha Meruelo, Esq. at meruelolaw@gmail.com or call me at (914) 517-7565. The first consultation is always free of charge.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

*Natasha Meruelo, Esq., designated as a Federal Debt Relief Agent by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the US Bankruptcy Code.   Prior results do not guarantee a similar outcome.

THIS IS ATTORNEY ADVERTISING