RE-ESTABLISHING RE-ESTABLISHING CREDITCREDIT

AFTER DISCHARGEAFTER DISCHARGE

Office of Frank M. Pees, Chapter 13 Office of Frank M. Pees, Chapter 13 TrusteeTrustee

130 E. Wilson Bridge Road, Worthington, 130 E. Wilson Bridge Road, Worthington, OHOH

614-436-6700, 1-800-282-1001614-436-6700, 1-800-282-1001

What can be done during What can be done during bankruptcy?bankruptcy?

During first year, check credit reports During first year, check credit reports to see that all accounts involved in the to see that all accounts involved in the bankruptcy are noted as “Included in bankruptcy are noted as “Included in bankruptcy” or “Chapter 13” or “wage bankruptcy” or “Chapter 13” or “wage earner plan.”earner plan.”

Continue to monitor credit reports Continue to monitor credit reports annually to avoid any surprises at end annually to avoid any surprises at end of case. of case. www.annualcreditreport.com

This website is Safe, Approved, This website is Safe, Approved, Regulated, and FREE:Regulated, and FREE:

What can be done during What can be done during bankruptcy?bankruptcy?

Opt-out of “pre-approved” credit offers Opt-out of “pre-approved” credit offers to limit companies from pre-screening to limit companies from pre-screening credit reports. credit reports. www.OptOutPrescreen.com oror1-888-567-8688.1-888-567-8688.

Pay utility bills, new medical bills, or Pay utility bills, new medical bills, or any other bills or living expenses on any other bills or living expenses on time. Recent collection accounts have time. Recent collection accounts have a greater negative impact than older a greater negative impact than older collection accounts.collection accounts.

Closing procedure & Closing procedure & DischargeDischarge

Closing Procedure takes Closing Procedure takes approximately 90 to 120 days to approximately 90 to 120 days to complete. complete.

Begins with payment termination Begins with payment termination letter. letter.

Certification of Final Payment & Case Certification of Final Payment & Case History issued 4 to 6 weeks later.History issued 4 to 6 weeks later.

Closing procedure & Closing procedure & DischargeDischarge

Order of Discharge issued Order of Discharge issued approximately 30 days after the approximately 30 days after the Certification.Certification.

Expectation is that creditors will Expectation is that creditors will update accounts after receipt of update accounts after receipt of Discharge Order but often they are Discharge Order but often they are slow to do so or even fail to update.slow to do so or even fail to update.

Keep Discharge Order and Keep Discharge Order and Certification of Final Payment & Case Certification of Final Payment & Case History for minimum of 10 years.History for minimum of 10 years.

Credit Re-establishmentCredit Re-establishmentafter Discharge – Review Credit after Discharge – Review Credit

ReportsReports

The first step is to obtain all three The first step is to obtain all three credit reports for each person who filed credit reports for each person who filed bankruptcy bankruptcy beforebefore applying for new applying for new credit.credit.

Review each one carefully and highlight Review each one carefully and highlight any incorrect or outdated information. any incorrect or outdated information.

Dispute incorrect or outdated Dispute incorrect or outdated information to the credit bureau which information to the credit bureau which is reporting the information.is reporting the information.

Credit Re-establishment afterCredit Re-establishment afterDischarge – Review Credit Discharge – Review Credit

ReportsReportsCheck all information including name, Check all information including name, DOB, past and present addresses and DOB, past and present addresses and employers.employers.

Check each trade line for incorrect or Check each trade line for incorrect or outdated information.outdated information.

Check for duplicate accounts.Check for duplicate accounts.

Check to see what inquiries are listed at Check to see what inquiries are listed at end of report.end of report.

Credit Re-establishmentCredit Re-establishmentafter Discharge – Review after Discharge – Review

ReportsReportsBankruptcy should be noted in the Bankruptcy should be noted in the

Public Record section as DISCHARGED. Public Record section as DISCHARGED. Balance of each discharged debt should Balance of each discharged debt should

be reported as zero balance, including be reported as zero balance, including unsecured debts paid less than 100% unsecured debts paid less than 100% and debts listed as NOT FILED on the and debts listed as NOT FILED on the Certification of Final Payment.Certification of Final Payment.

Past due balance of each discharged Past due balance of each discharged debt should be reported as zero.debt should be reported as zero.

Credit Re-establishmentCredit Re-establishment- Dispute Incorrect Information - Dispute Incorrect Information

File disputes in writing, online or by form or letter.File disputes in writing, online or by form or letter. Clearly identify the trade line and account number. Clearly identify the trade line and account number. Be specific about what action you expect and why.Be specific about what action you expect and why. Send supporting documentation, if needed.Send supporting documentation, if needed. Keep copies of what you send or who you speak Keep copies of what you send or who you speak

with.with. Follow up with telephone call to number listed on Follow up with telephone call to number listed on

report, if necessary.report, if necessary. Credit bureaus must investigate your disputed Credit bureaus must investigate your disputed

information within 30 days.information within 30 days. If creditor can’t verify their information is correct, it If creditor can’t verify their information is correct, it

must be removed and a new report will be sent to must be removed and a new report will be sent to you.you.

Charged-off AccountsCharged-off Accounts Charged-off accounts are considered bad debts Charged-off accounts are considered bad debts

that are at least 180 days past due.that are at least 180 days past due. Before a bankruptcy case is filed,lenders can Before a bankruptcy case is filed,lenders can

pursue bad debts through their internal collections pursue bad debts through their internal collections department, sell or assign the debt to a collection department, sell or assign the debt to a collection agency, or pursue legal action.agency, or pursue legal action.

Lenders make a cost-benefit analysis in Lenders make a cost-benefit analysis in determining their plan of action.determining their plan of action.

Higher debt amount or higher credit score makes Higher debt amount or higher credit score makes it more likely lender will actively pursue collection.it more likely lender will actively pursue collection.

Secured debts are more likely to be pursued Secured debts are more likely to be pursued through legal action. through legal action.

Charged-off AccountsCharged-off Accounts

Some companies refuse to remove Some companies refuse to remove the “charge-off” notation even after the “charge-off” notation even after discharge.discharge.

If account was already charged-off at If account was already charged-off at the time the bankruptcy was filed, the time the bankruptcy was filed, the notation does not have to be the notation does not have to be removed.removed.

But, always ask to have derogatory But, always ask to have derogatory info removed after discharge info removed after discharge because most companies will do so.because most companies will do so.

Why Have Credit Reports?Why Have Credit Reports?• The end result of credit reports is to The end result of credit reports is to

generate a credit score.generate a credit score.• Several different scoring models exist but Several different scoring models exist but

over 90% of credit lenders and insurance over 90% of credit lenders and insurance companies use the FICO scoring system.companies use the FICO scoring system.

• Your score depends on information on Your score depends on information on report on the day the score is requested.report on the day the score is requested.

• Credit score at bankruptcy discharge Credit score at bankruptcy discharge depends on what credit score was at time depends on what credit score was at time bankruptcy was filed.bankruptcy was filed.

Credit Re-establishmentCredit Re-establishment- third step: Buy Credit Score- third step: Buy Credit Score

The third step is to buy your credit The third step is to buy your credit scores to know what they are and how scores to know what they are and how much rebuilding has to be done. FICO much rebuilding has to be done. FICO score is used by most creditors.score is used by most creditors.

Credit score at discharge depends, in Credit score at discharge depends, in part, on credit score at time bankruptcy part, on credit score at time bankruptcy was filed.was filed.

Credit scores can be shared with future Credit scores can be shared with future creditor grantors before applying to find creditor grantors before applying to find out whether approval is likely or not.out whether approval is likely or not.

Credit scoringCredit scoring Credit scoring is done by Credit scoring is done by

computer. Gain points for computer. Gain points for positive info & lose points positive info & lose points for negative info.for negative info.

Most creditors use FICOMost creditors use FICOscore: 300-850.score: 300-850.

FICO scores can be obtainedFICO scores can be obtained at at www.myfico.com.. VANTAGE score is 501-990VANTAGE score is 501-990

& uses letter grades, A to F. & uses letter grades, A to F. To calculate estimated FICO To calculate estimated FICO score from a VANTAGE score,score from a VANTAGE score,multiply it by .86.multiply it by .86.

Bankruptcy notation Bankruptcy notation on credit reportson credit reports

Discharged Chapter 13 cases are listed Discharged Chapter 13 cases are listed on credit reports for 7 years from the on credit reports for 7 years from the filing date of the bankruptcy.filing date of the bankruptcy.

Chapter 7 cases are listed for 10 years.Chapter 7 cases are listed for 10 years.Dismissed (uncompleted) Chapter 13 Dismissed (uncompleted) Chapter 13

cases can be reported for 10 years cases can be reported for 10 years from the date of filing.from the date of filing.

Request the bankruptcy information be Request the bankruptcy information be removed after seven years if it has not removed after seven years if it has not been deleted.been deleted.

ChexSystems: A special ChexSystems: A special reportreport

Each notation submitted to ChexSystems Each notation submitted to ChexSystems stays on file for 5 years unless removed stays on file for 5 years unless removed by the reporting financial institution.by the reporting financial institution.

Reports can be obtained at Reports can be obtained at www.ckfraud.org/chexsystems.html..

If debt is discharged, report must show If debt is discharged, report must show zero balance, discharged in bankruptcy.zero balance, discharged in bankruptcy.

Chase offers Chase offers Access CheckingAccess Checking..

US Bank offers US Bank offers Second Chance CheckingSecond Chance Checking..

Know your rightsKnow your rights Fair Credit Reporting Act (FCRA) regulates the Fair Credit Reporting Act (FCRA) regulates the

collection, distribution, and use of consumer collection, distribution, and use of consumer credit information. credit information. 15 U.S.C. 15 U.S.C. §1681§1681

Fair and Accurate Credit Transactions Act Fair and Accurate Credit Transactions Act (FACTA), an amendment to FCRA, allows (FACTA), an amendment to FCRA, allows consumers easier access to receive and dispute consumers easier access to receive and dispute credit reports. credit reports.

Fair Debt Collection Practices Act (FDCPA) Fair Debt Collection Practices Act (FDCPA) creates guidelines for collection of consumer creates guidelines for collection of consumer debts. debts. 15 U.S.C. 15 U.S.C. §1692 §1692

Credit Repair Organizations Act (CROA) prohibits Credit Repair Organizations Act (CROA) prohibits false claims about services and prohibits false claims about services and prohibits payment before services are performed. payment before services are performed. 15 U.S.C. 15 U.S.C. §1679 §1679

Credit repair companiesCredit repair companies Understand that credit repair takes time and Understand that credit repair takes time and

persistence.persistence. Credit repair companies cannot do anything Credit repair companies cannot do anything

that you can’t do yourself for less.that you can’t do yourself for less. Be cautious. Many companies promise far Be cautious. Many companies promise far

more than they can produce.more than they can produce. Must give a copy of the “Consumer Credit File Must give a copy of the “Consumer Credit File

Rights Under State and Federal Law” before a Rights Under State and Federal Law” before a contract is signed.contract is signed.

Must provide a written contract that lists Must provide a written contract that lists consumers’ rights and obligations.consumers’ rights and obligations.

You have a three day right to cancel contract.You have a three day right to cancel contract.

Consumer StatementConsumer Statement When disputes are unresolved or accurate When disputes are unresolved or accurate

negative information remains, consumers may negative information remains, consumers may write a statement to be included in the reports.write a statement to be included in the reports.

Statement of explanation should be 100 words Statement of explanation should be 100 words or less.or less.

Don’t use the statement to complain or whine, Don’t use the statement to complain or whine, use it for damage control: state the facts to use it for damage control: state the facts to explain the dispute or to clarify the situation.explain the dispute or to clarify the situation.

Statement will be provided to anyone Statement will be provided to anyone requesting a report and will remain up to three requesting a report and will remain up to three years.years.

Statement will not affect credit score, but may Statement will not affect credit score, but may make a difference if a loan officer is doing make a difference if a loan officer is doing manual underwriting.manual underwriting.

To Rebuild CreditTo Rebuild CreditOpen a savings account with a chosen Open a savings account with a chosen

bank or credit union and make regular bank or credit union and make regular deposits, each pay period or monthly.deposits, each pay period or monthly.

Save 5% - 10% of each paycheck from Save 5% - 10% of each paycheck from each wage earner.each wage earner.

Pay all bills on time, including utilities.Pay all bills on time, including utilities.Before buying a car, have a down Before buying a car, have a down

payment and select the most payment and select the most economical car to meet your needs.economical car to meet your needs.

Before applying for credit, ask the loan Before applying for credit, ask the loan officer about their lending policies for officer about their lending policies for persons recently discharged from persons recently discharged from bankruptcy.bankruptcy.

To Rebuild CreditTo Rebuild CreditGet secured credit card Get secured credit card

Use national bank. Avoid online cards.Use national bank. Avoid online cards.US Bank ($300.00 minimum)US Bank ($300.00 minimum)PNC Bank ($250.00 minimum)PNC Bank ($250.00 minimum)

Should report to all 3 credit bureaus.Should report to all 3 credit bureaus.Pay off balance Pay off balance everyevery month. Secured month. Secured

cards have very high interest rates.cards have very high interest rates.Don’t use more than 30% of credit limit.Don’t use more than 30% of credit limit.Look for one which becomes an unsecured Look for one which becomes an unsecured

line of credit after 6-12 timely payments.line of credit after 6-12 timely payments.Be cautious. Many cards have “hidden” Be cautious. Many cards have “hidden”

fees.fees.

If Credit is DeniedIf Credit is Denied• Use the opportunity to find out why.Use the opportunity to find out why.• Ask what actions would be necessary to Ask what actions would be necessary to be approved.be approved.• Ask to be re-evaluated in 6 months if you Ask to be re-evaluated in 6 months if you are able to meet their conditions.are able to meet their conditions.• If you have reason to believe you may not If you have reason to believe you may not be approved, it is better to find out be approved, it is better to find out lending guidelines of a company, bank, lending guidelines of a company, bank, or business before you apply.or business before you apply.• If your situation or credit score does not If your situation or credit score does not fall within their established guidelines, do fall within their established guidelines, do not apply as they will not make an not apply as they will not make an exception for you and your score will be exception for you and your score will be reduced by at least two points.reduced by at least two points.

10 costly mistakes to avoid10 costly mistakes to avoid1.1. Don’t cosign for family, including children.Don’t cosign for family, including children.2.2. Don’t cosign for friends or co-workers.Don’t cosign for friends or co-workers.3.3. Don’t sell your car to someone who will take Don’t sell your car to someone who will take

over the payments.over the payments.4.4. Don’t let car insurance or homeowners Don’t let car insurance or homeowners

insurance lapse.insurance lapse.5.5. Don’t spend money you don’t have, even if you Don’t spend money you don’t have, even if you

know more is coming.know more is coming.6.6. Don’t pay bills before money is in your account.Don’t pay bills before money is in your account.7.7. Don’t be late with regular payments so a late Don’t be late with regular payments so a late

fee is charged or don’t pay a fee to pay a bill.fee is charged or don’t pay a fee to pay a bill.8.8. Don’t borrow from retirement funds to pay bills.Don’t borrow from retirement funds to pay bills.9.9. Don’t get a second mortgage to pay unsecured Don’t get a second mortgage to pay unsecured

debt.debt.10.10. Don’t have multiple credit cards or carry a Don’t have multiple credit cards or carry a

balance from month to month.balance from month to month.

Bankruptcy documents to Bankruptcy documents to keepkeep

Petition, Statements, Schedules of Debts Petition, Statements, Schedules of Debts Chapter 13 Plan, any Amendments, & Chapter 13 Plan, any Amendments, &

Modifications to Plan Modifications to Plan Notice of Intention to Pay Claims Notice of Intention to Pay Claims Notice of Transferred or Assigned ClaimsNotice of Transferred or Assigned Claims Semi-annual reportsSemi-annual reports

Keep these documents for a minimum of 10 Keep these documents for a minimum of 10 years:years:

Certification of Final Payment and Case Certification of Final Payment and Case History History

Order of dischargeOrder of discharge

Park National Bank Chapter 13 Auto Lending

Program

Park National BankContact: Abigail Leibold

614-475-5213 ALeibold@parknationalbank.com