Month: March 2017

Tax Lien and Civil Judgment Removals from Credit Reports to take effect July 1, 2017

The three major credit reporting agencies, Transunion, Equifax, and Experian, have made a decision to exclude tax liens and collection lawsuit judgments from their credit reports.  This is expected to increase credit scores by more than 40 points for three quarters of a million people and by less than 20 points for about 11 million.

This may make creditors more likely to extend credit.  The information is still available of course – such things are a matter of public record.  However, excluding it from the credit reports will make sure information more costly to obtain.  Furthermore, for major credit cards, it will probably never show up on their radar unless they change their internal procedures to include other credit reports that are not associated with the big three.

The changes may increase the risks creditors take, since those with judgments are twice as likely to default on a loan.   Although most people have some sort of inaccurate information on their credit reports, statistics are inconclusive as to how much of the inaccuracies actually effect credit-worthiness.  Much of this has been probably the result of lawsuits filed by the New York attorney general.

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Holding onto repossessed collateral is not a violation of the automatic stay in 10th Circuit

In a newly decided case, WD Equipment v. Cowen (In re Cowen), 15-1413 (10th Cir. Feb. 27, 2017), the 10th Circuit ruled that holding onto repossessed collateral is not a violation of the automatic stay.  In the 9th Circuit, which encompasses all of California, it is.  The 10th Circuit case creates a wider split between the two interpretations, which may pressure the Supreme Court to make decision regarding this issue to resolve the controversy.

Typically, the scenario where this is relevant would occur when secured property like a car is repossessed or a home is foreclosed after the bankruptcy is filed.  Ordinarily, the car would be returned or the sale of the home reversed.  However, during the interim period, while the bankruptcy is pending, the creditor may or may not have to return the property to you depending on which circuit you are in.  This creates leverage issues, such as reaffirming debt that would otherwise be discharged for debtors who may need the property during the three or four months that a Chapter 7 bankruptcy takes.