We believe that everyone deserves a fresh start. There are legal solutions available that can help you achieve that fresh start. Through this monthly newsletter, it is our goal to offer you information, as well as solutions, garnered over 38 years of combined legal experience practicing bankruptcy law and student loan law. If you need assistance with your student loans, our goal is to demystify student loans and put you in control of your options. If you are considering bankruptcy, we understand the seriousness of choosing to file bankruptcy, and we want to give you power through knowledge to help you make that decision. Please contact us for a no-cost consultation.
Sincerely,
Jonathan Leiderman and Zach Shelomithwww.lslawfirm.netlslaw@lslawfirm.net954-920-5355
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 One of the biggest fears that our clients have about filing bankruptcy is the impact to their credit scores. Sometimes, the fear alone of a hit on a person's FICO credit score is enough to prevent someone from even seeing a bankruptcy attorney. Credit has become such a staple in our lives that living without good credit can be a huge inconvenience. However, the impact of bankruptcy on a person's credit is not as scary as some may think, especially considering how filing a bankruptcy can positively change a person's life. There is much misinformation on the internet about bankruptcy and credit. As far as how long a bankruptcy will stay on a person's credit report, the rules are: - A Chapter 7 bankruptcy will stay on your credit report for 10 years from the filing date
- A Chapter 13 bankruptcy will stay on your credit report for 7 years from the filing date
Technically, it does not matter when a bankruptcy is discharged. In fact, according to Experian, it does not matter if a bankruptcy discharge is received. If a bankruptcy is filed and it is later dismissed before a discharge is entered, the above time periods will still apply. A dismissed bankruptcy will still appear on a person's credit report. It will simply contain a notation stating that the bankruptcy was dismissed. Now, the important thing to note is that even though the bankruptcy will stay on a person's credit report for either 7 or 10 years, it does not mean that the person will be unable to obtain credit during that time period. Many of our clients have been able to completely rebuild their credit within 2 years after receiving their bankruptcy discharge. Much depends on making smart financial decisions that can re-establish credit promptly after bankruptcy. Those clients who were able to rebuild their credit quickly focused on the following techniques: - Obtain a copy of your consolidated credit report. By obtaining a consolidated credit report, you are able to see all of three major credit reports in one report. Review your bankruptcy schedules and check the status of your debts on your consolidated credit report a few months after your discharge. These debts should show a balance of $0.00 and no longer be listed as delinquent. If something isn't being reported correctly, ask the credit report issuer to make the change and check with the original creditor.
- Obtain a secured credit card. The best way to rebuild your credit is to start re-establishing a good credit history. A secured credit card requires you to give the credit card company a lump sum of money, which they keep as collateral. You are then issued a credit card with a limit equal to the amount of money you supplied. The advantage of a secured credit card is that you will get the credit card and not be rejected (as it is fully collateralized). You must pay the card either immediately or at the end of every month. Do not carry a balance from month to month. Try to obtain a secured credit card with a limit of above $1,000.00, to boost your credit score even more.
- Obtain a car loan. Car loans are generally easier to get than other types of loans, especially if you are able to offer a significant down payment. If you need to buy a car and you can save money for a down payment, begin shopping within six months of completing your bankruptcy. Establishing a good credit history with a new car loan is a great way of exhibiting a positive payment history on your credit report.
Note that there is not a "one size fits all" approach to credit after bankruptcy. There are various other ways to improve your credit after bankruptcy. Depending on a person's credit history and other factors, the time frame of one person's improvement in their credit score may not be the same as another person's time frame. Also, there is no quick fix. If it sounds too good to be true, then it probably is. Beware of the "credit repair" companies that will charge you more than the fees and costs of the bankruptcy itself, in order to "remove" the bankruptcy from your credit report. Many of these companies use false and fraudulent methods to dispute a legitimately-filed (and discharged) bankruptcy with the credit reporting agencies. Not only do these methods not work, but you end up wasting thousands of dollars, instead of focusing on legitimate ways of re-establishing your credit. While a bankruptcy will definitely impact your credit, the degree of the impact and your ability to restore your credit are usually much more favorable than people realize. In comparison, living with unmanageable debt can have a serious effect on a person's life. Living with debt can lead to marital problems, can affect your mental and physical well-being and can hold you back from enjoying financial freedom. Don't let the impact on your credit score prevent you from obtaining the fresh start that you deserve. If you are considering filing bankruptcy and you are concerned about the effect of bankruptcy on your credit, contact Leiderman Shelomith, P.A. to schedule a no-cost initial consultation.
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A Story of Credit Redemption
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A few years ago, Leiderman Shelomith, P.A. filed a Chapter 7 bankruptcy for a young couple with three children. They were extremely wary of filing bankruptcy, due to the perceived effect on their credit. Their financial lives were in shambles. Their home was in the late stages of a foreclosure lawsuit and was worth significantly less than what was owed. They had over $100,000.00 of credit card debt. They had a car lease, which was coming due in a few months, and a car loan with two years left to pay.
They had periods of unemployment and were just getting back on their feet with new employment, but their income was nowhere near sufficient to meet their current basic needs and pay their credit cards, home mortgage and other debts. Since they wanted to ultimately move to a new home and needed two cars to drive to work and to take their children to school, they were extremely concerned about the impact of a Chapter 7 bankruptcy on their credit. However, they needed a fresh start more than anything, and decided to file the Chapter 7 bankruptcy in order to discharge their credit card debt, other unsecured debt and the potential deficiency claim(s) relating to their home mortgage.
Immediately upon filing their Chapter 7, a huge weight was lifted from their shoulders. However, potential trouble was around the corner, as their car lease was up in a few months. They didn't have any savings and had no friends or family members who could help them with a significant down payment on a new vehicle. Would they be able to finance a new car?
It turned out that within two months after receiving their bankruptcy discharge, they were able to qualify for a new car loan with a major traditional banking institution, at a rate one would not expect for a couple immediately out of bankruptcy. They were able to purchase a new car, which was necessary to take their children to school and after-school activities. They also wisely chose to obtain a secured credit card for emergency purchases, which they paid off every single month. After their home was foreclosed, they moved in with family for a few years, while rebuilding their credit.
After a few years, they re-established their credit score to a level that was even higher than before their financial troubles began. We were delighted to hear that after only three years, they were able to qualify for an FHA mortgage at a rate that one would expect for someone who never filed bankruptcy. They are now living in a new home, where they will be able to build memories with their children for years to come.
Although the Chapter 7 bankruptcy will remain on their credit report until 10 years after their bankruptcy filing, this did not prevent our clients from purchasing a new home and a new car and moving on with their lives.
Note that every situation is different, and what these clients were able to achieve may not be what all potential clients are able to achieve, but our clients' story is a good illustration of the possibilities of restoring one's credit after bankruptcy.
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In the News: Fannie Mae Announces Shorter Waiting Period
for Home Financing After Bankruptcy
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 An offshoot of the "how will bankruptcy affect my credit" question is the "when can I buy a house again after bankruptcy" question. The answer usually depends on the type of financing involved. One of the most attractive home loans is an FHA loan. An FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Lenders can offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements. There is typically a waiting period for new FHA home loans after the filing of a bankruptcy (or a foreclosure). According to the Fannie Mae Selling Guide, the waiting period for someone who files a Chapter 7, 11 or 13 bankruptcy is 2 years after the date of discharge or the dismissal of the bankruptcy proceeding. Note that this waiting period is for someone who can show an "extenuating circumstance", which is typically not that difficult, as the events leading to the bankruptcy filing itself are usually sufficient to show an "extenuating circumstance". Note that for a person with more than one bankruptcy filing within the last 7 years, a 3 year waiting period is required, measured from the most recent dismissal or discharge date (again, with "extenuating circumstances"). Many of our clients are in foreclosure when they file their bankruptcy proceeding. Typically, the foreclosure sale is completed months, if not years, after the bankruptcy is completed. The waiting period for a foreclosure is typically 3 years after the completion date of the foreclosure action (again, if extenuating circumstances can be documented; otherwise, the waiting period is 7 years). (There are numerous exceptions and additional requirements that potential borrowers should be aware of.) Therefore, a client in foreclosure who recently completed their bankruptcy was required to wait 3 years after the completion date of their foreclosure action before qualifying for an FHA home loan - much longer than a bankruptcy client who was not in foreclosure. However, on July 29, 2014, Fannie Mae announced a new policy. According to Selling Guide Announcement SEL-2014-10, "[t]he Selling Guide has been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period." That is, if the underlying mortgage note was discharged in the bankruptcy, then the debtor does not have to wait 3 years after the actual foreclosure to receive a new home loan. Only the usual 2 year waiting period applies. In addition, Fannie Mae also announced that on August 16, 2014 they would be changing the waiting period associated with the purchase of a new home after a short sale or a deed in lieu of foreclosure, from a minimum of 2 years, to 4 years. Many of our prospective clients believe that they can avoid bankruptcy by completing a short sale or giving their bank a deed in lieu of foreclosure. However, based on these new policies, it would appear that a bankruptcy (as opposed to a short sale or a deed in lieu of foreclosure) would be more advantageous to someone looking to purchase a new home, as the waiting period would only be 2 (as opposed to 4) years. This will have a substantial impact on thousands of people in foreclosure who file bankruptcy. These people can purchase a new home years sooner than before. Not only does this help debtors who desire a quicker road to a fresh start, but it no doubt will improve the general economy, as well. The new Fannie Mae policy is currently in effect. |
About Leiderman Shelomith, P.A.
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Leiderman Shelomith, P.A. was founded by Jonathan Leiderman and Zach Shelomith in 2003. The firm quickly built an excellent reputation across South Florida as a boutique bankruptcy law firm, handling both personal and corporate bankruptcy matters, including Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, as well as state court Assignments for the Benefit of Creditors. Felipe Plechac-Diaz joined the firm as an associate attorney in 2014. The firm began representing borrowers with their federal, state, and private student loan matters in 2014, including the defense of student loan lawsuits.
The firm's attorneys have been recognized as a South Florida Legal Guide Up and Comer, a Super Lawyer Rising Star for the State of Florida, a Florida Legal Elite Up and Comer, and a Florida Legal Elite. Our attorneys are members of the National Association of Consumer Bankruptcy Attorneys, the American Bankruptcy Institute, and the Bankruptcy Bar Association for the Southern District of Florida, among other organizations. The firm's attorneys are also frequent lecturers at seminars and community programs, speaking about bankruptcy law to attorneys and the general public.
The firm, Mr. Leiderman, and Mr. Shelomith, are AV® Preeminent Rated Attorney's, awarded by LexisNexis® Martindale-Hubbell®, for having obtained the highest possible peer-review rating for their ethical standards and legal ability.
The firm represents debtors, creditors, and bankruptcy trustees in all aspects of bankruptcy cases, including litigation and appeals, handling both liquidations and reorganizations. The firm also represents borrowers in all aspects of student loan law, including federal, state, and private student loans. Our office is conveniently located in suburban Fort Lauderdale, Florida, and is easily accessible from anywhere in Miami-Dade, Broward, and Palm Beach Counties. We handle bankruptcy debtor cases across the Southern District of Florida, particularly in Broward, Miami-Dade, Palm Beach, and Monroe Counties, and other bankruptcy cases and student loan matters throughout the entire State of Florida.
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