I received a call today from someone with questions about Chapter 7. I receive many calls a day, but what made this call interesting was that the caller told me that they conferred with another attorney and was told that with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, only 50% of debt was now dischargeable in a Chapter 7. My response was "nope, not true."

The caller also told me that according this other attorney there was no law that required a bankruptcy filing to appear on the credit report for 10 years. According to what the attorney purportedly stated: “Credit card companies want you to believe there is a federal law out there that requires it, but there is not.” My reponse was "that's not my understanding." Since this issue is not a primary one in my practice, it's not something I can rattle off the tip of my tounge, like I might be able to with regard to discharge exceptions. So I decided to take a quick detour from my petition preparations and research the issue a bit further.

Let me start with the easy one: nothing in BAPCPA declared that only 50% of debt would be discharged in Chapter 7. If anyone is telling you that, they do not bankruptcy law.

The claim that there is no federal law that requires a credit card company to report a bankruptcy filing is also hogwash (I could think of another term, but this is a professional site). Title 15, Section 1681c(a)(1) of the United States Code states that credit reports may not contain information concerning “[c]ases under Title 11 or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.” And there is an exception. Under 1681(b)(2) a credit report may contain information about a bankruptcy that is more than 10 years old if the report is to be used in connection with a “(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more; (2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or (3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.”

So the bankruptcy can stay on the credit report for up to 10 years, an din come cases, even longer. If any attorney tells you otherwise, invite them to call me.

Posted by Bill McLeod at 11:58 AM | Permalink | Comments (0) | TrackBacks (0)

People explore all of their available options before filing bankruptcy. Bankruptcy is not for everyone struggling with debt. Some may benefit from credit counseling, while others may benefit from loans from family members. However, there is one option that I am pretty sure does not work for most people I meet: “debt settlement” companies. In many cases, I have represented people who unsuccessfully tried this option and only ended up losing their money and adding to their stress. A conversation I had today with a prospective client reminded me that these "debt settlement" companies are still lurking out there, and people struggling with debt need to think about these issues before signing on the dotted line.

Continue reading "Thinking about Debt Settlement? Think about this..." »

Posted by Bill McLeod at 2:54 PM | Permalink | Comments (13) | TrackBacks (1)

Today I received a phone call from a client who received their Chapter 7 bankruptcy discharge earlier this year. They are applying for a job and as a part of the screening process, the employer is requiring a credit report.

The prospective employer does not have a problem with the bankruptcy, but does have a problem with a $34,000 debt appearing as still being old and delinquent. However, the debt was discharged in the bankruptcy. They do not owe it.

While the prospective employer might be satisfied with documents I provide them, it should not be assumed that other prospective employers will be as accommodating. The reporting of the debt as still being owed is an error. It is either the fault of the credit bureau or the fault of the creditor who is reporting inaccurate information. Certainly, I can point that out, but if a prospective employer wishes to rely on the information in the credit report, they are free to do so - even if it is wrong.

While the client may have remedies to address this incorrect entry on the credit report, as I write this and post it to this blog, the incorrect item is still there. Banks as well as prospective employers and landlords may rely on incorrect information, and may make adverse decisions based on it.

With all of that said, please make it a habit of checking your credit report at least two times per year. If you have filed bankruptcy and a debt you know was discharged is still appearing as being owed, contact an attorney (start with the attorney who handled your bankruptcy). Do not wait until you receive a call that you might not get that credit line, or that job, or that apartment because of an incorrect item on your credit report.

Posted by Bill McLeod at 12:44 PM | Permalink | Comments (0) | TrackBacks (0)