Why Bankruptcy is Less Detrimental to your FICO Score than Foreclosure

Your biggest concern in bankruptcy is to defend yourself from creditor claims.  You don’t have thousands of dollars to surrender in a creditor lawsuit; what you do have is a legal defense to file for bankruptcy to ward off creditors.  Bankruptcy is the defense that prevents these claims from rendering you penniless and reduced to serious debt.  It can also defend you from a foreclosure action, which could leave you on the streets.  Bankruptcy also sticks around at the bottom of your FICO score for a period after you file.
FICO scores are strange, elusive things.  Like a shadow, you often forget that it’s there, yet it follows you around for the rest of your life.  They are equally mysterious—consumers do not know exactly how they are calculated, as it a well-guarded secret that only those on the very inside of the credit bureaus are privy to.

There is no denying that bankruptcy will negatively affect your credit score.  But how, exactly?  It is certainly more severe than the impact of a late credit card payment, and slightly worse than maxing out your credit card or a late payment over 30 days.  Consumers should be aware that bankruptcy on this permanent record isn’t exactly permanent—a bankruptcy is listed on one’s credit report between seven and ten years, depending on which form of bankruptcy you file.  Chapter 13 bankruptcy appears on a credit score for up to seven years, less than the decade that Chapter 7 bankruptcy appears; this is because Chapter 13 filing has a covert way of building credit from your past debt, as you make payments each month for three to five years in order to repay your debtors.  During the seven to ten years that the bankruptcy shows up on your credit score, it will be harder to secure a home loan as well as buy a car, but it absolutely does not blacklist consumers.  Bankruptcy is actually considered to be better for your credit score than a foreclosure, as it shows that you took action to maintain your assets. 

Building credit is a process.  In order to start gaining positive credit, you need to repay the debts that are holding you back.  When those debts are overwhelming, bankruptcy can help you come out on top.  When it’s all said and done, you can finally go back to pondering the perplexing ups and downs of your FICO score.

Legal Helpers are attorneys helping the average consumer like you overcome overwhelming debt.  For a free bankruptcy consultation, please call one of our attorneys toll-free at 1-800-260-1402.  www.legalhelpers.com

New legislation for 2^nd amendment rights is peering out from the left corner of Congress.  Hailing from gun-toting Ohio, Democratic Representative John Boccieri wants to make it harder for bankruptcy to claim your guns than from Charlton Heston’s cold dead hands.  Boccieri urged in an email blast with the headline, “**Supported by the National Rifle Association**”, and opines that it is a gross indignity that only ten states list guns as a bankruptcy exemption.  He wants more states to lists guns as an exemption, from the federal order on down.

Listing guns as a federal bankruptcy exemption is sure to outrage a fair share of Americans, not to mention the congressmen on Boccieri’s side of the aisle; indignant tax-payers should remember that the ultimate scope of this legislation will be narrow.  In the first place, only sixteen states and Washington, D.C. allow debtors to use the federal bankruptcy exemptions.  The federal bankruptcy exemptions as of April 2010 guarantee debtors $21,625 worth of their home property and a generous $11,525 of their personal home property, so long as no single item exceeds $550.  States included for the bare minimum exemptions include: Arkansas, Connecticut, Washington, D.C., Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington and Wisconsin.

Allowing firearms as a bankruptcy exemption would affect at least fourteen new states and Washington, D.C., since Wisconsin is the sole overlap that already exempts guns.   Other states that already exempt guns include Louisiana, Montana, Nevada, Oklahoma, Oregon, and Ohio.  That’s right, Ohio—the Representative who is pushing for this legislation stomps on grounds which already exempt guns.  So why write the bankruptcy exemption into federal law?  The federal law would be significantly harder to reverse.

All of the federal bankruptcy exemptions were designed to protect debtors.  For some states like Louisiana, protection means only being guaranteed $5,000 worth of their home.  For those who believe that $5,000 stake of property will be protected by a firearm, this legislation is the answer to their prayers. 

Bankruptcy offers you legal protection if you’re being pursued for money you don’t have.  The exemptions protect property that creditors are not allowed to touch.  If you would like to talk to a professional about filing for bankruptcy, please call our office!  We offer free consultations. Reach us toll-free at 1-800-260-1402 www.legalhelpers.com

Filing for bankruptcy is the one safeguard you have when you cannot afford to pay creditors.  On the rare occasion that bankruptcy filers try to cheat the system, bankruptcy turns into a federal crime.

Accusations of fraud are currently swirling around an elite Chinese Los Angeles private school and their corresponding bankruptcy.   The Montecito Fine Arts School repeatedly asked parents to pre-pay for all four years of school, which new, impressionable Chinese immigrants often agreed to.  They are being sued for defrauding families, then filing for bankruptcy shortly thereafter.  The families were left high and dry, down tens of thousands of dollars and with a huge language barrier preventing them from taking legal action.

If the school is found to be hiding the tuition money of dozens of students, they could be in some serious hot water.  Immigrant families of would-be students allege that they were strategically taken advantage of, since they had no way of knowing that that it was not commonplace in the American school system to pay several years of tuition at once.  What’s more, the concept of bankruptcy protection from lawsuits was equally foreign.  Luckily, these immigrant families have found a way to band together against the Montecito Fine Arts School—77 parents and students have filed a suit against the school and its principals.

Consumers and businesses alike have legal protection from a variety of different lawsuits when they file for bankruptcy.  Businesses may file for bankruptcy when they are smacked with class action defective drug lawsuits backed by hundreds of victims; for them, bankruptcy is their only tactic used for backing out of massive settlements.  On a smaller scale, consumers can file for bankruptcy if they have fallen into the credit trap and are being asked to come up with thousands of dollars they simply do not have.  If they truly do not have the funds, they are in the clear.  However, if the debtor has the money but simply does not want to spend it on paying the bills, this is called concealing assets—precisely what the Montecito Fine Arts School is suspected of. Those concealing their assets can be convicted of the federal offense of bankruptcy fraud.

If there simply is no money to speak of and you are facing legal action from a creditor or someone else, you deserve the legal protection that bankruptcy can afford.  Our office will be happy to answer any and all of your urgent questions.  Call us today for a free bankruptcy consultation at 1-800-260-1402.