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Posts Tagged ‘credit score’

Willful and Malicious: What the Dukes of Hazzard teaches us about bankruptcy discharge.

Wednesday, April 7th, 2010

The Bankruptcy Code at 11 USC 523(a)(6) says that debts arising from willful or malicious injury to person or property cannot be discharged in bankruptcy.  Defining willful or malicious is like trying to get Daisy Duke to cover up, it’s darn near impossible.

It can be argued that every act a person takes is willful.  Let’s say you slide into the driver’s side window of the General Lee and in so doing kick Bo in the head.  Bo gets a judgment for the damage to his pearly whites.  Is that judgment dischargeable in bankruptcy since you jumped in the driver’s side window on purpose even though you’d never harm an icon like Bo on “purpose”?  The U.S. Supreme Court has held that willful and malicious requires a “specific intent” to invoke harm on a person or his property.  Specific intent is a matter generally left to the trier of fact, i.e., the court that tries the case of Bo v. You.

After we clear the willful or malicious hurdle, like jumping over the river in the General Lee, we need to show injury to person or property.  We all know what a person is; Bo, Luke, Boss Hogg, Sheriff Rosco P. Coltrane, but what is property?  Is a credit score property?  What about cash money?  What about future income? Are these property for purposes of 523(a)(6)?

For example, if because of a transaction gone awry, Luke harmed Daisy’s credit score or caused her a financial loss that is not directly related to one of the intentional torts identified by most courts, i.e., battery, conversion, trespass to chattel, Daisy cannot successfully argue that she was injured under (a)(6) and have Luke’s debt to her survive Luke’s bankruptcy.  Your Los Angeles or Orange County bankruptcy lawyer will tell you that the debt would still be dischargeable under the Bankruptcy Code.  That is a nugget of good news for Luke and is enough to make anyone want to race around Hazzard County in a 1969 Dodge Charger with the doors welded shut.

Bad News and Good News, FICO Farming Edition

Wednesday, March 24th, 2010

First the bad news:  In the world of credit scores, trying to figure out the effect of your life on your credit score is about as clear as a pig in mud.  Even though credit scores are numbers, they appear to have no relationship to what Miss Patterson taught you in first grade.

But the good news:  Fair Isaac, that illusive measurer of credit risk, has let a tiny bit of the horse out of the barn (a nose perhaps).  Short sales and deeds-in-lieu of foreclosure have the same effect as foreclosures on your credit score.  It’s not possible to tell from the credit report if a foreclosure is a short sale, deed in lieu of foreclosure, settled account, regular foreclosure or some other genetically modified version.

After the nose leaves the barn, Fair Isaac goes even further (an ear?) and says they treat foreclosures as serious delinquencies and, “…they have an impact on the score similar to the impact from a charge off, tax lien or account included in bankruptcy.”  Bottom line, if you’re struggling financially, the difference between a bankruptcy (Los Angeles Chapter 7 or Los Angeles Chapter 13) and a foreclosure on your credit score is negligible, like the difference between white and brown eggs.  So Fair Isaac appears to be telling us to make an omelet and get on with breakfast.

It’s official, straight from the horse’s mouth here.

Will filing for bankruptcy ruin my credit score?

Monday, August 3rd, 2009

The better question to ask for most people with debt is: does it make a true difference what the actual credit score is? In other words, when individuals have lots of debt, having a good credit rating will not necessarily allow them access to new credit. And even if it did, what good is it to be able to borrow more money without a realistic ability to pay it back? This is a hole that generally keeps getting deeper.

But the simple answers to the question above are: it depends and not necessarily.

For those that have very poor credit ratings prior to filing bankruptcy, the filing of a bankruptcy can actually help a person improve their credit score.

A common scenario is to see a person with a score in 400-500 range see an increase of approximately 50-100 points approximately a year after the filing of a bankruptcy.

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