Should i avoid 30+ day lates before filing?

[HopefulMamma]

Greetings to All...

I've posted in the Chapter 7 section & my question has been addressed somewhat but I'm still having doubts/concerns/questions concerning pre & post bk credit scoring.

In a nutshell I'm agonizing over whether or not to let our car payment go 30, 45 or even 60 days late.

We are set to file at the end of the month (would sooner, but atty must be paid in full) and money will be tight thru mid OCT as all our funds will go to pay for the BK.

In the Ch7 section I had mentioned my concerns about paying late and getting multiple lates & collections on our credit reports and how these lates would later affect us after the BK.

It was suggested that firstly, if we're at the point of filing BK it wouldn't be prudent to worry so much about the credit score, and secondly, that filing for BK damages your credit about as bad as anything could.

It was also mentioned here as well as by our attorney, that ultimately the value of keeping lates & collections from occurring is negligible. That ultimately whether you had a perfect payment history or an awful one before BK, after BK it doesn't much matter what was 'before'.

So I ask those in the 'rebuilding' section of the forum ---- how much does your PRE BK situation affect the POST BK credit score??

Do you wish you'd kept paying your unsecured creditors and not gotten lates or collections on your report?

We have SEVERAL creditors that will probably go into the 30 day late category (because they are already just BEFORE being 30 days late right now)and thus be on our reports for 7 years...

Will my POST BK clean up (credit score improvement asap) be really hard because of all the 30 day lates (at least 20)?

Will it be even worse to have a PRE BK 45 or 60 day late on our reports?

I understand that one has to do what they have to do, but as I have all along these past several years, I've learned to manage things and go 'without', so, I probably can be done in some cases -- paying 'on time' without a 'late' to the credit bureau..

But, we also have shoes our boys need and other things more in the 'really could use' category, that make it hard to put off, if lates on our reports really aren't going to matter POST BK.

Our ultimate goal - and one which I have been striving to keep our credit clean for -- is to buy a home. It is our sincere intention to do things right (now that we'll finally have an actual opportunity to do so) such as save, rebuild credit, etc..

I just don't want my hubby 2 years from now say 'wow, those 30 day lates.. or that 60 day late really messed up our plan'...

Can anyone speak to my concerns?? I keep thinking I must be missing something about how credit reports are read POST BK...

Is it REALLY a clean slate??

I wonder becuase as I've been told & have read -- all your lates and collections that are on your report PRE bk, STAY on your report for 7 years. Therefore it's my thinking that those lates/collections, etc are FACTORED into POST BK scores.

Thanks much in advance!

C

[TXskyblue]

Your attorney is right. Don't agonize over your credit.

Are you planning on keeping the car or letting them repo it? If you want to keep it, you should be current. If you do not plan to keep it, stop wasting money on car payments and keep driving it until they come take it.

Regarding lates, let me be perfectly clear: You are throwing money away if you pay debts that are going to be discharged. Read that again. You might as well throw the money in the fireplace and use it to heat your house because at least that way you'd get some value for it.

Lates, when they first occur, matter a lot to your credit score. You are correct that lates stay on your report for 7 year but after 2 years, they matter very little. Do not worry about pre-BK lates.

Your goal is to buy a house. Great goal! I believe owning a home is a cornerstone of the American Dream. Now, a bit of reality. You probably won't be able to buy a house until 2 years AFTER your BK discharges. There are some ways to get one 1 year post BK but it's not common. Basically, plan for waiting 2 years after BK before trying to get a mortgage.

And now a bit of good news: BK doesn't have to wreck your credit. I had multiple credit cards reporting as 150+ days late pre-BK. I'm 1 year post discharge, and my credit is remarkably good. In the rebuilding forum, look for my thread if you care to see for yourself.

Lenders will scrutinize your post-BK credit report. Anything you're late on AFTER the BK will look horrible. Do not worry about late on the eve of filing BK.

[iswmle]

From my understanding it will be frowned upon because it appears that you are favoring one creditor over another (which you are). I also totally agree with Tx you may as well use the money as toilet paper because you are literally throwing it away, especially if you are forfeiting the car.

Me? I have not thought about my previous lates prior and during BK up until I read the question to this thread. It has not slowed me down. In regards to credit cards it definitely has not affected me. Every card that I have wanted, recently, I have been approved for, and the further out from BK I get the higher the limits have become (my highest currently being 7k). I was also approved for a 2.6something car loan (which I did not take, I decided to keep my paid off car ;)) and I am confident had I taken it to the dealer I would have gotten a lower rate.

What DOES make a difference is how you treat your bankruptcy after it has been discharged. BK really and truly is a clean slate. But how clean do you want to keep it? Do you want to get a bunch of low limit credit and store cards charge on them and make the minimums? Do you want to run out the moment you got those discharge papers in hand and purchase a new car at 10% with 0 down? Or do you want to attain your long term goals, doing what you need to do now to improve your credit and keep it spotless in the interim? Unfortunately, waaaay too many people have chosen the former. They have decided the "happiness" that material possession brings is worth the stress of being in debt all over again.

So to answer your question, are those 30, 60, 90 lates going to make a bit of difference years down the road? No. What is going to make the difference are the financial decisions that you make from here on out.

[LadyInTheRed]

Anything on your credit report has less impact on your score as time passes. My understanding is that late payments 2 years ago have very little effect on your score. If you start rebuilding with a credit card or two and a car loan (only if you need a car to replace the one you are surrendering) after your discharge, the positive reporting will be more important.

I'm on my tablet and am having trouble copying a URL, but if you Google "late payment secrets revealed" you will find an article that says after 2 years, one 30 or 60 day late payment will not be a problem, but 90 days late will be. This is consistent with other articles I have read.

[HopefulMamma]

Just a quick note to you all for your replies - thank you so much!! You comments (not completely read but I will comb over everything later) are of such comfort and make total sense.

I'm at the library just before time to pick up my son from school so I can't reply at length but I'm so grateful for your words of advice and for sharing.

More later... A sincere thanks to you all!

C

[CCsAreEvil]

I'm about 5 years out since I filed for BK. When I retained a lawyer, he advised me to stop paying the creditors.. so I did. Unfortunately, I incurred those 90 day + 120 day lates. This indeed has compounded pushing down my credit score.. by how much? I really don't know. I think I ended up with about 7 negatives which still report until the 7 year drop off (which is only 2 years away now.. yay!).

However, the first couple of years out of BK was difficult credit-wise. When trying to rebuild, I had a hard time.. I was only given toy limits on 2 credit cards. So, a few years out looking back, it wasn't really that bad. Because now I have a couple of credit cards with 5k+ limits.. which really is totally sufficient. I was also able to obtain a used auto loan with less than a 3% interest rate. But.. having those 7 negatives is still hurting my score. But I'm ok with that since I don't really need to obtain anymore credit until those negatives at least drop off in 2 years.

Also, we did have to finance/purchase a home.. however, since I hate the recent FHA requirements (should be a last resort since it seems like FHA is one of the worst programs financial-wise), we had to wait at least 4 years out of BK to obtain a conventional 30 year mortgage loan. So, I'm happy with that.

Good luck on your rebuilding process!

[scotthay]

I may be reading my credit report wrong, but the free Transunion report from credit karma shows all of my closed accounts (closed due to bk) reporting as "closed - no missed payments" even though I probably missed anywhere from 6-12 of them before they were closed due to the bk or turned over to collections, etc.

[AngelinaCat]

We wanted to keep our car, so we kept making the payments.

If you are NOT going to keep your vehicle, then call the mortgage holder and arrange a voluntary surrender. That will look better on your record than in involuntary pick-up.