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All bills current at time of BK filing - how would FICO be affected?

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  • #31
    I was actually so lucky to get 2(!!) of my CC-accounts through BK. My Plains VISA (I think they call it Mid America now) survived and my secured New Millennium VISA did as well. My guess is that New Millennium didn't want to return my deposit so they kept it open and Plains didn't want do dump me since they are a sub-prime bank and I've been paying their fees since 2002.

    Now, more than two years after filing, I'm still using them on a regular basis. I'm sure they were and are helpful when it comes to rebuilding.

    Oh, let me add that they both have a CL of $300 each - which might also be a reason why they survived in the first place. The terms on these cards are probably not to different than those on cards you would obtain after a discharge - so they might have no "auto-cancellation on BK"-clause.
    Last edited by IBroke; 10-06-2012, 12:05 AM.
    Filed CH7 9/24/2010, 341 on 10/28/2010, Disch.&Closed: 1/6/2011. FICO EX: 9/2: 672.
    FICO EQ: pre-filing: 573, After BK Public Record: 568, 10/3: 673.
    FICO TU: pre-filing: 589, After BK Public Record: 563, 9/2: 706.

    Comment


    • #32
      Originally posted by LVunderwater View Post
      ace300s:
      Do you mean that the credit card companies terminated your cards when they received notice of the bankruptcy? I have high credit limits and zero balances on all my cards. I would like to maintain that status even though income will dramatically change in three months (reason for bankruptcy). There is always the hope and possibility that income situation could become better in the not too distant future.
      You stated that your cards were "maxed out." Presumably, the credit card companies closed those accounts as a result of the BK, am I correct? My situation varies from yours in that I am zero balance on all the cards...

      LadyInTheRed:
      According to my research, you're absolutely correct. I wanted to be on record as being reasonable with the mortgage company. Specifically, asking for a principal reduction to current market value, also resulting in a lower payment, short sale with full waiver of deficiency, deed in lieu of (mortgage company receives an immaculate home ready for resale) If they refuse or simply ignore all of the above, then I will file a bankruptcy 91 days after sending them this notice. However, at least I'll have a record of the communication demonstrating my attempt to avoid bankruptcy except as the last resort.
      If you don't have balances on your credit cards and you don't include them in your BK then there's a chance that they could survive, but it's really a toss up. I can't say one way or the other what would definitely happen, but I'd say there's a chance of them remaining open.

      Comment


      • #33
        Originally posted by Faust View Post
        For whatever reason my zero balance victoria's secret card made it through and I have used it a few times. They even raised my limit last year.
        Same here and I just got my new card in the mail the other day. They moved me up to VIP status.

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        • #34
          we had numerous cards with zero balances on our report when we filed (our FICO was over 820) everyone one of them were closed within 90 days of our filing. didn't matter. i know some people that a few cards here and there survived but that is not the norm.

          we paid all our our active cards (against atty's advise) right up until the final second of what would be close to the 90 day mark of our 341. this did work as our scores were not really effected that much since there was not a late payment OTHER than the mortgage on our report. as a result of our continuing to pay our scores they were in the 680 range after we filed.

          however, what does that really mean? nothing. since after you file a bk your even if your scores are alright the fact you filed will effect everything from what you pay for your car to your auto insurance in many states.

          also, why do you continue to pay the mortgage knowing you can only do it for the next three months? that's really throwing good money after bad. use that money for your move or relocation. we were 5 years out of retirement when this hit us...hard. our house was well underwater (literally as well; with REAL water). we knew we were going to surrender the house since a few years ago, when we filed, short sales were simply not an option.

          i also want you to know, you can get cards fairly quickly AFTER you file with your scores still intact. they are no longer going to be the fixed 4.00% more like 12-15% and in some cases over 20%. but, it's start to rebuild your credit you do what you need to.

          if you know for certain you are leaving, i wouldn't pay any more towards your mortgage. however, if your in AZ you are a non deficiency state in MOST cases (there are a few exceptions):

          a quick search yield the following:


          Arizona’s Anti-Deficiency Statute

          "As a practical matter, the scenario where a foreclosure sale completely satisfies the mortgage debt simply won’t apply to most Arizona homeowners who are underwater on their property thanks to the national housing downturn. Assuming your home is underwater and you’re facing foreclosure in Arizona, we’ll move on to the next important set of facts which deal with the type of mortgage you have and the size o

          f your property. Arizona’s anti-deficiency statute is codified in the Arizona Revised Statutes Sections 33-814.G and 33-729.A. Section 33 prevents a lender from seeking a deficiency judgment after foreclosure when the mortgage loan was made to help purchase the home, the property is less than 2 1/2 acres in size and less than two “dwelling units” in size. We’ve included the exact language of 33-729.A below:

          if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary."

          what does this legalese mean? well, a mortgage is given to “secure the balance of the purchase price” of a home when you take out a mortgage to finance your property. if you’re like most of us and couldn’t afford to buy your home in cash, you relied on mortgage financing to buy your house. if you did, the arizona legislature believes that your lender shouldn’t be permitted to sue you for a deficiency and come after your personal assets after they’ve foreclosed on you. As long as your property is 2.5 acres or less in size and you used mortgage financing to purchase the property, you’re protected from a deficiency judgment.

          "Similarly, section 33-814.G prohibits the bank from seeking deficiency judgment where they have foreclosed by power of sale. We’ve included the language of the statute below:

          If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.

          This provision adds an additional layer to the Arizona anti-deficiency laws. Foreclosure by power of sale is a quick, inexpensive way for lenders to take back property, however, because there is no judicial oversight, the process is more highly scrutinized by the court. In this regard, Arizona law says that a bank can foreclose by power of sale, but if they do they will not be permitted to seek a deficiency judgment. How do you know whether your home is subject to power of sale foreclosure? Although Arizona allows both judicial foreclosure and power of sale foreclosure, power of sale is the most common. Look at your mortgage documents, if you have a Deed of Trust, your lender is entitled to foreclose by power of sale. It should be noted that the 2 1/2 acre requirement applies in the power of sale legislation just as it does in section 33-729.A.


          Note: HELOC Mortgages and Investment Property Not Protected

          It is important to keep in mind that while Arizona’s anti-deficiency laws are consumer friendly, they are not uniform in application. Section 33 limits protection from deficiency judgments not only to purchase money mortgages and properties that are smaller than 2 1/2 acres in size, but also requires that the number of dwelling units not exceed two (2). This limitation was put in place to protect homeowners from deficiency judgments while classifying real estate investors separately from homeowners. For example, if you own a multifamily apartment building on property that is less than 2 1/2 acres in size and lose the building to foreclosure, you still will be subject to a deficiency lawsuit under Arizona law. Similarly, if you tapped into home equity by taking out a 2nd mortgage on your property, that lender can pursue you for deficiency judgment as well because the money was not borrowed to finance the purchase of your home.


          further:

          "Arizona is sometimes referred to as an "anti-deficiency" state because we have certain laws that prohibit a lender from suing a borrower for a deficiency following foreclosure on a home if the anti-deficiency laws apply. A "deficiency" is the amount equal to the difference between the amount owed to the lender and the amount realized by the lender through a foreclosure on the residence whereby the residence is sold to either the lender or a third party bidder at the foreclosure.

          In Arizona, a lender may foreclose on a residence by either holding a non-judicial trustee's sale conducted by an attorney or title company or by judicially foreclosing on the residence through a lawsuit. It is very rare for a lender to foreclose on a residence through a judicial foreclosure. Instead, the non-judicial trustee's sale process is used in the majority of situations because it allows the lender to acquire title to the property relatively quickly and at a reasonable cost. The Arizona anti-deficiency laws prohibit a lender from suing the borrower for the deficiency after either a trustee's sale or judicial foreclosure if the property is 2 and ½ acres or less and "limited to and utilized as a dwelling". In the case of a judicial foreclosure there is an additional requirement that the loan also must have been a "purchase money" loan used to acquire the home. If the anti-deficiency protection applies, the lender cannot waive its right to foreclose on the residence and instead sue on the promissory note for the loan. Whether the anti-deficiency protections apply to a particular loan depends on the facts and circumstances of the situation, the nature of the loan, and the foreclosure method selected by the lender.

          In order for a short sale to be approved by a lender, the lender must agree to take less than the amount owed to the lender. Since the short sale is a negotiated settlement with the lender for a discounted payoff of the loan, the anti-deficiency laws do not protect the borrower and, unless otherwise agreed by the lender, the borrower remains liable for any balance still owing to the lender after the lender's receipt of the discounted payoff. In a short sale negotiation, the borrower's goal is to have the lender agree to take the sales proceeds in full settlement of the loan with no further liability on the part of the borrower. The lender is going to be reluctant to agree to this, however, if the lender is in a position where the lender would otherwise have the ability to sue the borrower for a deficiency after a foreclosure on the property, since the lender would then be able to collect from other assets of the borrower, including the garnishment of wages. If, on the other hand, the lender knows that after foreclosure it would not be able to sue the borrower or collect against any other assets of the borrower, the lender will be more likely to agree to the short sale with a full release of liability since the short sale will generate a relatively quick cash payment to the lender and avoid the time and expense of foreclosing on the property. If the residence is subject to two or more loans, the negotiations will be much more complicated as all lenders must agree on the short sale price as well as the portion of the sales proceeds to be received by each lender.

          If the lender would have the right to pursue the borrower for a deficiency after a foreclosure, the lender will often require a cash contribution from the borrower at the

          closing in order to fully release the borrower from any liability for the remaining amount owed on the loan. If the borrower does not have the means to make a cash contribution, the lender will likely require that the borrower agree in writing that the borrower is still liable for the remaining amount owed on the loan with the terms of the repayment of that amount to be worked out after the short sale.

          The short sale payoff terms ultimately agreed to by the borrower and lender will be documented in a writing signed by both parties. The documentation typically consists of an agreement setting forth the lender's approval of the short sale, any lender requirements for the short sale including any cash contribution requirement of the borrower, and whether the borrower will remain liable for the balance of the loan or whether the lender is accepting the short sale proceeds and/or any cash contribution by the borrower in full satisfaction of the loan. If the balance of the loan is to be paid subsequent to the closing of the short sale, the lender may require that the borrower sign a new promissory note for the amount to be paid following the closing.

          Although the short sale process may seem intimidating, in the long run, a proactive borrower will be successful in negotiating an agreement that is in the best interests of both the borrower and lender. Whether or not a borrower is liable for a deficiency following foreclosure may provide the leverage necessary in order to convince the lender that the short sale is in the best interests of the lender."
          8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

          Comment


          • #35
            All my zero balance cards were closed after by filing. My Cu also closed my debit card for my cking acct. We are in same position we had hopes of selling and retiring, upside down 100K. My credit score was 760 dropped to 625 , now 3 yrs later it is at 701. Your credit will suffer but you will rebuild. It was well worth it for me.
            chpt 7 ,5-2009

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            • #36
              I just don't get why everyone is so worried about the effects of bankruptcy on their FICO scores, whether or not their banks will close their credit/debit cards, etc. If you are considering bankruptcy, then these should be the least of your worries. The biggest worry should be whether or not bankruptcy will fix your financial problems, and the second biggest worry should be to avoid or minimize losing assets in bankruptcy. After your discharge, you can then start to rebuild credit, and obtain new credit/debit cards and bank accounts. In fact, the only thing I really NEED a credit or debit card for is to be able to buy stuff online, or to purchase airplane tickets when the very rare need to travel arises. I currently use a debit card for these things, but if for some reason that got canceled due to bankruptcy, then I don't see why a pre-paid card such as a Walmart Money card could not be used instead.

              Comment


              • #37
                Originally posted by bcohen View Post
                I just don't get why everyone is so worried about the effects of bankruptcy on their FICO scores, whether or not their banks will close their credit/debit cards, etc. If you are considering bankruptcy, then these should be the least of your worries. The biggest worry should be whether or not bankruptcy will fix your financial problems, and the second biggest worry should be to avoid or minimize losing assets in bankruptcy. After your discharge, you can then start to rebuild credit, and obtain new credit/debit cards and bank accounts. In fact, the only thing I really NEED a credit or debit card for is to be able to buy stuff online, or to purchase airplane tickets when the very rare need to travel arises. I currently use a debit card for these things, but if for some reason that got canceled due to bankruptcy, then I don't see why a pre-paid card such as a Walmart Money card could not be used instead.
                i really think it's how society has conditioned our thinking process of the importance of one's FICO score. unfortunate, but in a way there is truth to that, since one's FICO score does effect everything from your auto insurance to whether a doctor will take you on as a patient. sad but true.

                but i think you are correct, and at this point, i think so many people in this country have blemishes on their credit something is going to have to eventually give. although, to me it's just another way for companies to get more money from us, or basically rob us in another form. because i filed bk my auto insurance rate should go up although in 40 years i have never had a accident nor a ticket? or prior to losing our jobs in over 30 years were were never late with one bill.

                time will heal one's credit, but for many just starting this process, it's just scary and people don't know what to expect will happen to them after they file. it's fear of the "unknown". for many of us who have gone through this we now know life goes on after going bk and we do get credit back at some point, keeping in mind even those with perfect credit and have never had a bk are now having a difficult time getting credit.
                8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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                • #38
                  Thank you for all the replies. The bottom line seems to be some cards may survive but that is more the exception than the rule.

                  Comment


                  • #39
                    Originally posted by LVunderwater View Post
                    Thank you for all the replies. The bottom line seems to be some cards may survive but that is more the exception than the rule.

                    that's correct.
                    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                    Comment


                    • #40
                      'Hub's ex, who just filed CH7, to get out from under her underwater manufactured house, just had her Target card cancelled, although it was a zero balance, and the attorney checked a box in her paperwork that said: 'wish to retain'.

                      She wanted to get rid of the home, but doesn't seem to understand that her credit cards were going too. Nor, did her attorney get through to her.
                      "To go bravely forward is to invite a miracle."

                      "Worry is the darkroom where negatives are formed."

                      Comment


                      • #41
                        Originally Posted by kawh (slightly modified)
                        "Getting used to bad or mediocre credit is not nearly as frightening as the spectre of living under a bridge passing the Riunite."

                        Keep On Smilin'

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