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Credit Repair After Bankruptcy
A credit report is a documentary account of a persons borrowing history and generally sets out the consumers credit accounts, payment history, and credit inquiries (the number of times the report has been requested and by who).
With access to a credit report a potential lender can ascertain how much debt an individual is carrying, whether the accounts are being paid on time, whether the individual has accounts in collection, judgments or bankruptcy.
When you apply for credit the lender will review your present income and your accounts in order to make a decision whether to extend you more credit. The more times you apply for credit and get turned down, the harder it becomes to get a loan
The lender will sit down with you and your credit report and your pay information and work out a budget. If it appears that you can manage your existing obligations and still make room for another repayment loan without infringing on what you need for normal household expenditures for you and the kids, they may give you another loan, otherwise they will tell you you are overextended. Often times they will do an objective analysis using IRS and census bureau standards to determine what your reasonable needs are for family size and location.
The IRS and the US census bureau have established statistical data standards for transportation, housing, utilities and personal expenditures. The purpose of this data is to establish tax brackets according to income although many other agencies uses these standards for other things. It works like this: The Federal Government determines that it needs X dollars to fund the war powers, the postal powers, regulate commerce, and give states aid in certain areas. They use the census bureau standards to determine how much of a tax they can impose without breaking down a family and taking away necessaries in favor of taxes. However if they used the same percent for someone in the $15,000 per year bracket as they used for someone in the $50,000 per year bracket, there wouldn't be enough funds to maintain the national defense and other necessaries for the government. Consequently, since they've determined that they can't tax the $15,000 per year family more without breaking them, they have to gradually increase the burden on higher income families to meet the X dollar goal. The practical outcome of a flat income tax is that the government would have to abandon much of its military and defense spending.
Banks often use the data established by the US census bureau in determining eligibility for credit, and under the 2005 Bankruptcy reform act, the bankruptcy court uses these standards for Chapter 7 Eligibility.
Now, credit reporting is subject to certain standards. The Fair Credit Reporting Act is an American federal law that regulates the collection, dissemination, and use of consumer credit information. Along with the Fair Debt Collection Practices Act, it forms the base of consumer credit rights in the United States. It was originally passed in 1970, and is enforced by the US Federal Trade Commission. To pass the tests established by this act, the information reported on a credit report must be 1) Truthful, and 2) it must relate to a reported individuals financial history.
In short, a person who gets a bankruptcy discharge has a big advantage over where he was before the bankruptcy was filed. This is so even though the bankruptcy is now correctly reported on his report. He is now eligible for credit based on income to debt ratio. There is room in the prospective borrowers disposable income for loans and credit again. Being earnest hardworking and trustworthy cannot vitiate being overextended on credit
Now you have you're bankruptcy discharge, you are solvent, but are you trustworthy? Generally you must re-establish trust by paying your mortgage, your utilities and any other debt that you have re-affirmed in full, on time in the correct amounts. It will help to get a small secured loan such as a set of Encyclopedia Britannica's and make sure you make every payment. Trust can be re-established much easier when you're solvent than when you are not.
People often ask us whether they should hire a credit repair law firm after the bankruptcy to help the process along. As with anything else, you can hire somebody to do something that you can do yourself. We recommend that you take a positive, pro-active self help approach to straightening out any problems in your credit report after bankruptcy. Generally you can avoid additional fees charged by credit repair lawyers simply by keeping a copy of your bankruptcy papers after the bankruptcy, and sending certified letters to any credit reporting agency that you feel is make an inaccurate or untruthful account. Credit reporting agencies may need a little nudge sometimes to get things right, however once the correct facts are brought to there attention they willingly and quickly take steps to correct their reports. |
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