But this morning, it’s half truths and moralizing by Experian that gets me going.
My fellow California bankruptcy lawyer Jay Fleischman published Experian’s explanation of how long your bankruptcy filing stays on your credit record.
Chapter 13 bankruptcy is deleted seven years from the filing date because it requires at least a partial repayment of the debts you owe. Chapter 7 bankruptcy is deleted 10 years from the filing date because none of the debt is repaid.
Not so. And then, why does it matter for their purposes?
Just the facts
Chapter 13 requires that the debtor makes payments to the trustee. It does not require that payment necessarily reach unsecured creditors. Payments may go to the mortgage lender, the tax collector, or an ex spouse.
When Congress thought it could write a uniform objective test that would require payment to creditors, it failed. If the means test formula is negative, no money need reach unsecured creditors.
Many courts approve plans that pay only the administrative costs of the Chapter 13. Congress created a system that is more expensive than many broke folks can pay for up front, so Chapter 13 allows them to pay their attorneys fees over time.
It’s not, as Experian suggests, a mechanism that necessarily puts money in the pockets of the credit card companies.
Chapter 7 may or may not pay debts. If the debtor has assets that exceed the value of the available exemptions, the trustee gathers up that value and pays it to creditors. So whether or not creditors are paid in Chapter 7 depends on the case.
Most Chapter 7 cases are no asset cases: situations where the property is over encumbered, protected by exemptions, or simply of too little value to be worth selling. But not all.
Further, a Chapter 7 debtor may have debts that he continues to pay after the bankruptcy because they are nondischargeable. So some creditors are paid, just not by the trustee.
The second reason I hate credit reporting agencies and the sanctimonious statements like Experian’s involves making debt and bankruptcy an issue of personal worth.
Bankruptcy is statistically driven by illness, job loss, and divorce. Only divorce is remotely within the control of the individual.
So get off the idea that people who can’t pay what they owe are morally deficient.
And then there’s the fact that credit reports are riddled with misinformation and, in my experience, incredibly resistant to correction.
Come back another time, and I’ll tell you more.
Or read more here
Image courtesy of Count Von Count and the Childrens Television Workshop.