I am filing for bankruptcy due to medical debt within the next month. I also have a private student loan for over 18,000$ that is in default and with a CA, and a federal loan for 1700$ in good standing (but showing one late payment about two years ago). My attorney says she will help negotiate a payment plan with the defaulted loan since it can't be discharged. So I have questions as to how all of this is going to affect my credit report. I know my score is going to nosedive afterward. Right now it's 607, which is pretty bad but still better than it's been in a long long time. This is due to most of the delinquent accounts either having dropped off, are not being reported for whatever reason, or are very recent and haven't been reported yet. I actually was just approved for an unsecured credit card, which I was planning to hang onto and not use at all until after the bankruptcy. If I am lucky they won't find out about the bankruptcy and close the account. If they do, I guess I haven't really lost anything. I know I will need some credit cards to rebuild my credit after the discharge, and I figured my chances were better now. I haven't had a credit card since I was 19, which was 13 yrs ago. They are all gone from my credit report now, both the ones that were paid in full and closed out and the ones that were charged off. So are all of the discharged accounts going to show back up on my report once they have been discharged? Or will the ones that are over seven years old still not show? Part of the reason I am filing is due to a judgment that occurred over seven years ago. It's no longer on my credit report, but they are getting aggressive with their collection efforts and this is the only way to stop them. My other question is about the student loan in default. This is actually so old it has dropped off of my report. But since it's a student loan they could still sue me for it anytime they want. If I start making payments to the CA now will it show back up on my credit report? Since they have not been bothering me would it perhaps be a better strategy to save up all the money I'd have sent them for a while, and then offer a settlement? I'm willing to take the tax hit if it gets them off my back once and for all. I do want to repair my credit, but I know it will take time, and luckily I have all the time I need. I don't drive, so I won't need any car loans, and real estate is way too expensive to even be a consideration right now where I live. I'd just like to know what I can expect, and what steps I can take to gradually get my credit to an acceptable level.
I'll assume you're filing Ch. 7. You can expect that old accounts will show up on your credit reports after they're included in the BK. They should be reported as "included with bankruptcy" and a "zero balance". A discharge noted on your credit reports will serve as proof that the old debt is no longer legally collectable. If they don't show a zero balance, dispute them through the CRAs. Regarding the student loan, I would rather negotiate a lump sum payment than deal with getting on any type of payment plan. Save your money and then try to take care of it all at once since they're not hammering you at the moment. The debt should not show back up on your credit reports if it's so old that it's already fallen off. Keep us updated on how things progress. Hopefully we can provide some support and good advice along the way as you seek to rebuild your credit.
Thank you. That helps a lot. I figured as much about the defaulted student loan. That way if they start bugging me about it sooner rather than later I will at least have a decent amount saved up, since they will tend to let you do a lower payment if you can put a larger amount down.
Aquarius To add to Joshâ??s advise First - yes your score will take a dip due to the public record of BK â?? but once your accounts that were included in the BK (IIB) report correctly, which is the following: zero balance and Included in BK in the status your score will go back up. How much will depend your total amount of debt IIB and if you have any positive (closed) credit to survive the BK. You will see another small increase once you are discharged, will be due to status from going to IIB to Discharged in Chap (insert number here). I even had my two largest balance cards disappear off my CR complete as some will argue that a creditor is not allowed to collect on a debt during a BK which includes reporting to a CRA so they remove the account completely. Second â?? you are required to list ALL debt regardless of age your lawyer should have advised you of this, and it is in your best interest to list ALL debt because JDB come out nowhere at anytime and all you need to do is recite your court case number and ask them for their fax number so you fax over that discharge order. Third - that CC you planning to hold on will find out about the BK and they will shut that card off. Most CC bankruptcy departments receive daily feeds from the Federal BK courts and cross reference via the SS number. But never fear you will receive offers for car loans, CCs, 722 redemptions etc. I receive my first CC offer 6 days after I filed and it takes over 90 days discharged a BK. My personal advise will be do not do anything till you receive that discharge order and make sure all accounts that are listed on the BK are showing zero balance and status is labeled as IIB or Discharged before you even apply. I purchased a 2011 Chevy Cruze 8 days after my discharge and two months later I received my unsecured Cap One Card and I had a judgment and discharged them in my BK. As we all know student loans are not dischargeable, but because they must be listed on your schedules your creditor(s) can not attempt to collect during the automatic stay protection allowed to you during the BK process. This should allow you some time to save some $$ to offer a settlement after your BK discharges. As for rebuilding after a BK you will need to apply for new credit even if itâ??s a secured card, use the credit wisely â?? only charging what you can pay off every month and as time goes you will find that your score can only go up. Good luck with everything.
