Cleveland Bankruptcy Lawyer Blog

A commonly asked question about bankruptcy is how long will it affect a debtor’s credit report. A bankruptcy filing will generally be reported on your credit report for seven to ten years. A Chapter 13 (repayment plan) will usually be reported for seven years, while a Chapter 7 (fresh start) will usually be reported for ten years. However, the actual length of time depends somewhat on the individual consumer credit reporting agency.

Your credit score will drop when the bankruptcy is first reported and then will gradually improve over time once you have received your discharge and as potential creditors begin to view you as someone with little or no unsecured debt (i.e., credit cards) that cannot file bankruptcy again for a while, rather then someone with a lot of debt that might file bankruptcy at any time.

You should also be aware that the bankruptcy court does not have any influence on your credit report and does not report any information directly to the credit bureaus.

After filing bankruptcy and receiving a discharge it is a good idea to obtain a credit report to make sure that the bankruptcy has been properly reported and that your debts are showing the proper status and/or have been removed. If your credit report has errors or discharged debts have not been removed, your bankruptcy attorney should be able to help you get your report corrected or guide you in what steps to take.

Under a recent federal law you are entitled to one free credit report per year from each of the three consumer credit reporting agencies. Each of the bureaus may have different information so you should check all three and correct any inaccuracies.

To get your free credit report you can write or call:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
1(877) 322-8228

You can also contact any of the credit bureaus directly by clicking on the links below or calling the number listed:

Visit Equifax or call 1(800) 685-1111
Visit Experian or call 1(888) 397-3742
Visit TransUnion or call 1(800) 916-8800

Contact a bankruptcy attorney to learn more about how a bankruptcy may help you and how it will affect your credit.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Chapter 13 Bankruptcy , Chapter 7 Bankruptcy , Consumer Credit & Credit Reporting

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The Vice President of a Cleveland, Ohio based regional bank recently told a friend of mine that his bank had called thousands of Ohio homeowners who were behind on their payments to discuss their options. Out of these thousands of phone calls, only a handful of people even answered the phone! The reasons are obvious …fear, uncertainty, pride, and denial. Nobody wants to tell someone they can’t pay.

The reason I am sharing this story is to show you that, if you are falling behind on your mortgage, you are not alone. Remember, they were calling thousands of people just like you that, for whatever reason (and there are many), could not pay their mortgage. You may have been a victim of a predatory loan or a layoff. It doesn’t matter the reason, what is important now is that you don’t stick your head in the sand and ignore the problem because it won't just go away. You should talk to the bank or contact an attorney to speak on your behalf. The worst thing you can do is to ignore the problem and let your opportunity to fix the situation slip away.

Once you have fallen behind on your mortgage (usually by three months or more) your lender will consider you in default, accelerate your debt and commence foreclosure proceedings. Ordinarily, once the bank has determined they will foreclose they will stop accepting payments and will not reinstate your loan unless you come up with the entire past due amount plus any legal fees and costs they have incurred.

Even after a foreclosure is filed you have options. Many counties, such as Cuyahoga, have voluntary mediation programs in which you can elect to participate when facing foreclosure (you should receive a notice of the program with your foreclosure papers from the clerk of courts). A qualified attorney may also be able to help you negotiate a loan work out to reduce your interest or payments, but this is more easily done before you incur legal fees and expenses of foreclosure. Depending on your overall financial situation you may want to contact an attorney to explore a Chapter 13 bankruptcy which allows you to keep your house and catch-up on your past due payments while also lowering and eliminating your other debt through a structured repayment plan. If you are facing foreclosure, contact an attorney now to learn more about your options.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Foreclosure

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Ohio Senate Bill 281 (“SB 281”) will become law in Ohio on September 30, 2008. This is good news for those in Ohio seeking bankruptcy protection. The most important aspect of SB 281 is that it increases several exemptions available to those filing for bankruptcy. What this means is that SB 281 increases the dollar value of certain property that an Ohio resident filing for bankruptcy may exempt from their creditors. Two of the most significant changes are large increases to the primary residence and automobile exemptions:

The exemption for the debtor’s property used as their primary residence increases from $5,000 (current law) to $20,200 (under SB 281).

The exemption for one automobile increases from $1,000 (current law) to $3,225 (under SB 281).

Ohio Senate Bill 281 also includes other increases to exemptions for recoveries for personal injuries, household items and more. If you are considering bankruptcy, you should contact an attorney to learn more about Senate Bill 281 and how it could help you keep more of your assets in bankruptcy.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Chapter 13 Bankruptcy , Chapter 7 Bankruptcy

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If you live in Cleveland, Akron or Youngstown and find yourself considering bankruptcy, then you are certainly not alone. Bankruptcy filings in Northeast Ohio are on the rise and at their highest level since the surge just before the new BACPA law went into effect in October of 2005.
National Public Radio, WCPN 90.3 FM, reported that filings in the first six months of 2008 were nearly three times as high as the same period in 2007. Filings in Cleveland were the highest, followed by Akron and then Youngstown.

There are many reasons for this. For one, many homeowners are finding that they can no longer tap into the equity in their homes or, worse yet, their home is worth less than they owe on their mortgage. The job market in Ohio is also bleak and many companies are reducing employee hours and overtime to cut costs in the poor economy. Gas and food prices have also been rising steadily. Now the recent stock market collapse has made matters worse and threatens the retirement and financial security of many Ohio families.

If, like many in Ohio, you are struggling in these hard times, then bankruptcy may help you get back on track. Click here to learn how bankruptcy might help you.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Chapter 13 Bankruptcy , Chapter 7 Bankruptcy

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Many Ohioans face the same conundrum ...if I can't pay my bills, then how can I afford to pay the attorney and filing fee to go bankrupt? Once you have resolved to file bankruptcy, then you may be able to stop making payments to some or all of your creditors. This will leave funds available to pay for your bankruptcy instead of using the funds to pay debts that will be discharged upon completion of your bankruptcy. Of course, you should consult with an attorney before you stop making any payments to determine if you can stop making payments and which creditors you must continue to pay.

The legal fee charged will depend on the nature and complexity of your case, but will usually range from $900 to $1200. There will also be a filing fee which is set by the Bankruptcy Court. In the Northern District of Ohio, the Chapter 7 filing fee is currently $260.00 (see Northern District of Ohio Bankruptcy Fee Chart for other fees).

In some cases you may be able to borrow funds through a small loan from a family member. However, if you do this you must be completely honest about the reason you are borrowing the money since they will become your creditor and the loan must be disclosed in your bankruptcy.

I do not suggest or advise that you incur additional debt from credit cards or an institutional lender for the purpose of filing bankruptcy and for this reason our firm cannot accept credit cards for bankruptcy payments.

If you expect to receive a tax refund, you could use the funds to pay for your bankruptcy and begin your new financial start rather then spending the money to catch-up on bills only to fall behind again and repeat the cycle.

A last resort may be to withdraw funds from or borrow against your retirement account such as an IRA or 401(k). Save this is a last resort because you may face steep penalties for withdrawal. However, you can usually exempt retirement funds from creditors in bankruptcy and, therefore, you may be better off to use a small portion of your retirement funds to pay for bankruptcy and discharge your debts rather then depleting your retirement funds in an attempt to pay for bankruptcy. See Ohio Exemptions: Bankruptcy May Save Your Retirement Fund for more on this topic.

As you can see, there are several options that may work to bring debt relief within your reach. Talk to an attorney to find out which option will work for you.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Chapter 13 Bankruptcy , Chapter 7 Bankruptcy

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There is no denying that Ohio is facing a serious housing crisis and foreclosure filings in Northeast Ohio are at record levels. Unfortunately, many homeowners facing foreclosure simply abandon their home or surrender it to the lender. If you are one of the many facing foreclosure, then you should consult an experienced attorney to review your case and discuss your options before you give up your home.

If you are not yet in foreclosure but are behind on your mortgage, then you should also consult an attorney while you still have the most options available. However, even after the foreclosure has been filed, an attorney may find a basis to challenge the foreclosure action or be able to negotiate a resolution on your behalf. If these options do not work, a bankruptcy can also stop the foreclosure and may allow you to keep your home.

One new defense for homeowners in foreclosure resulted from a ruling last October by Federal Judge Christopher Boyko in Cleveland. In October 2007, Judge Boyko ruled that a foreclosing lender had not filed the proper paperwork to support its right to foreclosure on fourteen Ohio homes (Judge Christopher A. Boyko, Opinion and Order, In re Foreclosure Cases, Case 1:07-cv-02282-CAB, U.S. District Court, Northern District of Ohio, Eastern Division, filed 10/31/2007 ). Previously, many courts let this slide and banks and lenders were often permitted to bypass the requirement to produce the original mortgage note by simply filing a "lost note affidavit" attesting that the original note could not be located and then proceed with foreclosure. Judge Boyko's ruling provides a basis for homeowners to challenge the lender's right to the security (your house) and potentially stay or stop the foreclosure proceedings if the lender cannot produce the original mortgage note.

Since Judge Boyko's ruling, several judges in other jurisdictions have followed suit and required lenders to produce the original mortgage note in order to proceed with their case. Due to the common practice of lumping mortgages together and selling them as mortgage-backed securities, many lenders are not the originator of the mortgage and are, therefore, unable to produce the original note, providing a basis to challenge the foreclosure. Notably, it has been reported that Ohio Attorney General Marc Dann is challenging the ownership of mortgage notes in as many as forty cases in Ohio.

If you are facing foreclosure you are certainly not alone. Foreclosures in Ohio rose eighty-eight percent in 2007. Recent developments in Ohio law as well as the increased willingness of lenders to resolve or "work-out" mortgage delinquencies make it more important than ever for homeowners to explore all of their options when facing the loss of their home.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Foreclosure

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There are important Ohio exemptions that may protect your retirement fund in bankruptcy. It is unfortunate that many people make the mistake of waiting too long to consult an attorney when they find themselves unable to pay their bills. Instead of seeking legal advice, some people make a valiant effort to fend off creditors and pay down balances by tapping into their 401(k) or similar retirement fund. However, this approach usually involves significant early withdrawal fees and penalties and, even worse, it is rarely successful. This is due to the steep late payment penalties and compounding high interest rates on credit card debt which quickly cause the balances to drastically increase if you cannot pay them off lump sum. Sadly, dipping into their retirement funds often leaves these individuals in a much worse financial situation than if they had consulted an attorney first, used available bankruptcy exemptions to protect their retirement funds from creditors and discharged or repaid their debts through a well-planned bankruptcy.

To decide if bankruptcy is right for you, consult with an experienced bankruptcy attorney early in your decision process and as soon as you realize that you will not realistically be able to pay your bills or mortgage as they come due. Contact the law firm of J.M. Smith Co., LPA to speak with an attorney about your specific situation.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Chapter 7 Bankruptcy

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Many people in Ohio struggling with the decision to file bankruptcy are understandably concerned that it will hurt their credit.

While it is true that filing bankruptcy will lower a high credit score, if you are one of the many people that have maxed-out credit cards, several late payments or your credit score is already poor, then filing for bankruptcy protection may actually help you improve your credit more quickly.

Better yet, it will do this with the added benefit of stopping harassment by creditors and giving you a fresh start. Part of the reason bankruptcy may improve your credit score (after you receive a discharge) is that you will eliminate your high balances and improve your debt-to-income ratio. Before filing, creditors may view you as an extreme credit risk due to a lot of consumer debt, little income and the possibility that you may file bankruptcy at any time after they extend you credit. Once you have filed and recieved a discharge, creditors will view you as having little debt, more disposable income and unable to file bankruptcy again for several years all of which make you less of a credit risk. For this last reason it is important that you use credit carefully and responsibly after you receive your fresh start through bankruptcy.

On the other hand, if you currently have excellent credit then you should consult with an attorney before you fall behind on payments to discuss your options and determine if a bankruptcy alternative, such as debt settlement, might work for you. Keep in mind that if you wait until you are already behind you may reduce the options available to you.

Posted by Justin M. Smith | Permalink | Email This Post

Posted In: Consumer Credit & Credit Reporting

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