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Understanding Credit Debt and Bankruptcy – November Interview

Katherine:It’s time for us to talk with Attorney Peter Daigle, and this month as we’re talking about bankruptcy, he’s going to help us understand the effects of bankruptcy on our credit. I want to welcome you. Welcome Peter back into the conversation. Attorney Daigle welcome back to This Needs To Be Said. Of course we’re all eagerly waiting because we want to know that there is life after bankruptcy and you’re here to help us with that. You’re welcome.

Give us a little bit of background that you share with your clients when they come in with this question. How is my credit affected? Will I be able to begin again?

Peter:What generally happens is in the world of credit and contracts, a contract is good for six years. If you somehow start getting behind on a credit card or a creditor, for up to six years they can continue to pursue you for that debt, assuming you haven’t made a payment, which means that they’ll continue to report negatively on your credit report. What we’re seeing as people are coming in that have hit some type of an event in their life, let’s call it a speed bump, and they’ve missed a few payments because of it. Lost a job, a divorce, loss of a second income, various reasons why they couldn’t keep all the balls in the air.

What happens is that then there’s a few nicks and bruises we’ll them, in the credit report as a result of this period of time. Some folks have only missed it for a few months and others for a period of time. What happens is that you end up with a credit report that’s extremely difficult to heal on its own because the laws allow them to report negatively for up to that six-year period. You’re now dragging around a credit report with some misinformation on it or information that may not be relevant in your life now because you’re back to work and things are going good but this happened in the past.

What a bankruptcy allows you to do is clean the slate. Essentially it takes that credit report that has the nicks and bruises on it and it’ll make you look like you’re 18 years old again which is a clean slate. The score will reset to between 650 and 680 immediately after filing the bankruptcy.

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Katherine:Now that I didn’t know. For thinking about 18, I remember being at the no credit and not being able to get things stage, we are able to rebuild. What are some suggestions other than me being 18 and inexperienced, what are some suggestions to take us from that point? The bankruptcy when you file it is there for a little while, right?
Peter:Right. It’s on for a period of 10 years but the negative effect of all those black marks in your credit is far greater weight on your credit score than the bankruptcy. What the bankruptcy does is it cleans it up and you’ve only got one black mark on it but the black mark of the bankruptcy really only will be a problem for you for one year to buy a car or two years to buy a house. During that first year we work with a program, it’s an independent company, and what they do is they provide educational videos on how to rebuild your credit.

Essentially what has to happened is that you’ll be solicited by Capitol One, by Master Card, by a lot of the credit card companies out there who will have noticed that you filed for bankruptcy and they will welcome you with open arms to help you rebuild your credit. They’ll be giving you small credit cards, $250 cards, $500 cards, secured cards, credit cards that allow you to rebuild your credit. They’re looking at you because they’re looking at you now as a good bet. You’ve got rid of all the debt in your life. You’re all excited because you now want to rebuild your life.

Well, you’re a good credit risk at that point. You’re an even better credit risk when the card is secured, where they have your money in the bank to pay it if you don’t have. There’s a whole industry out there of credit card companies that are more than willing to give you a hand to rebuild your credit. Even though the card may only be $500, you pay it off on time. You charge and you pay it off. What’ll happen is you’ll start getting favorable responses on your credit report to these charges and payments.
Bankruptcy will start fresh saying all the debts have been discharged, there’s your clean slate and now you rebuild it using the small credit cards. Then the small credit cards go to larger credit cards and then before you know it, you can get a house or a car or whatever.

Katherine:My question is, how soon after the bankruptcy can I do this because it sounds like you said a year for a car, two years for a house? For the credit cards is that something that happens within a shorter period of time?
Peter:Shortly after the time you get your bankruptcy discharge, you’ll go to your mailbox. You’ll open the mailbox and the offers will come pouring out. You’ll be solicited to by these various companies. They will bug you to open up a card. They know who you are, they know that you’ve filed bankruptcy and they’re targeting you because they want to help you and they want to help themselves because there’s obviously fees involved.

Part of the learning process is how exactly you go about rebuilding that credit. Simply it’s about getting new credit cards and then paying them off and paying timely with your payments. You’re building a good track record. Twelve months in to the bankruptcy you’ve got a few cards you’ve been paying. Your credit scores come back. You go down to the Ford Dealership and you can now get a car because you have a credit history of paying on time. All those black marks are gone. They’re all gone from the report and so your credit score’s now been changed because you’re making payments on time.

Katherine:Oh, this is good stuff. Attorney Daigle, tell people how they can get in touch with you for even further discussion, maybe something that wasn’t covered in what we shared today and then revisit that company that you were mentioning, 750. I want to know, do they have to go through you to use that?
Peter:They have to go through us. Let me give some information. First of all I’ve written a book on bankruptcy and there’s a whole chapter on the subject. It’s a really easy to read book. Don’t be concerned because it’s about law. It’s very easy to read. You can read it in about an hour. You can request a free copy of my book at daiglelawoffice.com. That’s daiglelawoffice.com, and if you go on the website there’s a place to order the book. In addition you can reach me by phone for a consultation. We offer a free 30-minute consultation. You can reach me at 508-771-7444. That’s 508-771-7444, and we’ll be happy to set you up with a consultation.
Katherine:I want to say thank you again for stopping by. A lot of people get nervous about bankruptcy as you know. That’s your profession and your sharing was something that just opened my mind up and I’m like, “Wow.” Because you just feel like, “okay, well I’m going to get out of one hot pot of grease and get into another one.” You just laid it out for us really quickly how not true that is. Basically be patient. You’ve got a clean slate and be a good steward over it.
Peter:These laws are made for everybody too. That’s why Congress enacted the laws. They want to give people a fresh start. Life happens to everybody. Everybody’s going to hit that little speed bump one time or another in life so this is a chance you get a clean slate.
Katherine:Awesome. Thank you. Until next month, have a wonderful day.
Peter:Thank you Katherine. Bye-bye.
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