Tag Archive: restoring credit

  1. The White House Explores Student Loans and Bankruptcy Options: What You Need To Know

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    87801562The Wall Street Journal reported recently that The White House is looking into ways to help people who are burdened by insurmountable student debt to alleviate some of that stress through new bankruptcy options. Currently, neither federally backed or privately-issued student loans can be discharged in a bankruptcy, but through the Chapter 13 Process you can force an income based payment on your student loan servicer for 5 years.

    The plan that the White House is exploring could go a step further than this. However, there are few things you should know about the plans that The Obama Administration is exploring, and points to consider if you have crippling student loans.

    1. This Would Only Cover Private Student Loans.
      It is likely that this plan would only cover the privately issued student loans from financial institutions, not the federal student loans that most college graduates have. As noted in the Wall Street Journal Article, these private loans account for somewhere around 10% of the loans out there, so it’s nowhere near a majority of the population.
    2. It Would Likely Help with Debt for Unaccredited or For-Profit School
      Many of the private loans that are taken out by students who are attending unaccredited institutions, and for-profit schools. Because of issues in recent years with these schools using Federal Student Loans to make a profit, private loans have become a bigger part of paying for these kinds of degrees, which in many cases aren’t worth what borrowers pay for them.
    3. Private Loan Servicers can be Ruthless
      Part of the reason this may be a helpful choice is that the servicers of private student loans can be ultra-aggressive in their collection efforts. They know that these loans are non-dischargeable and fully use all options available to them including wage garnishments.
    4. Many Private Student Loans include Parents as Co-Signors

    While a borrower may have ensured the benefit of their education, student loan servicers don’t differentiate between parents and students when collecting their debt. This measure would help to lessen the burden on parents that have co-signed for private student loans. However, be aware that filing a Chapter 13 Bankruptcy now for student loans can help protect co-signors from collection because the Court can enter an order protecting co-signors if one of the parties files a Chapter 13 Bankruptcy.

    Unfortunately, while this bill may add some additional tools to our arsenal for managing student loans this relief may never actually pass the Republican controlled Congress.

    Until we find out what is going to happen, there are still options; if you have federal or private student loans from creditors who are being overly aggressive, or if you can’t afford your student loan payments, or even if you just want some options, call us at 1-877-332-8369. We will give you a consultation and you can find out more about how the Debt Doctors can help you manage your student loans and help you prepare “for life after debt”.




  2. Restoring Your Credit Following Bankruptcy

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    The goal in bankruptcy is to have your debts discharged. Your discharge will remain on your credit report for 10 years. However, you can rebuild your credit in two to four years. During this time, you will receive offers for credit cards and car loans from lenders because you are determined to be a good risk. Following a bankruptcy discharge, creditors know you have few debts and you can’t file for bankruptcy for eight years.

    When banks lend, they examine your last two years of credit history. After your bankruptcy discharge focus on obtaining new credit by opening three new accounts that you can pay on time for 24 months. If you plan to buy a car be sure you can afford it. Coming out of bankruptcy, you will be charged a high interest rate so buy a cheap car that can last for two years; you can trade it in once your credit improves.

    I advise most clients to open three new credit card accounts, or two accounts and a car loan, and to pay the balance every month to avoid the high interest rates. Do not incur debts and carry a balance. If you can do this for 24 months, you can restore your credit and then consider buying a home or buying a car at a good interest rate. After bankruptcy, with careful monitoring of your spending, you are able to restore your credit much sooner than you would assume.

    If you’d like to learn more, I offer a free consultation. I can be reached by filling out the contact form on our website or by calling our office at 1-877-332-8369.

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