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Voluntary Amortization and Your Personal Credit Rating

How your credit rating will be affected by filing an amortization plan (Chapter 128.21) is as individual as the creditors listed in the plan.  Some examples are listed below.

  • Your creditors are being forced to cooperate with a plan that may call for payments that are less than what the creditor normally requires. Without their required payment amount being received, the creditor’s computers may indicate that you are late with your payments. The creditor cannot legally try to collect more money from you than the plan indicated, however, they can indicate that your account is past due according to their normal standards.  A negative credit rating may be reflected on your credit bureau.
  • Some creditors may remove your account from their active records.  This means that they write off your account to bad debt and then apply the payments received toward that bad debt amount. For many companies this is the only way that they can comply with the requirements to stop interest and collection efforts.  Your credit rating will reflect a bad debt charge off, I-9 or R-9; however, the balance must be marked as a paid in full charge off once the Amortization Plan is successfully completed.
  • There are creditors, who adjust your account within their computers so that the payments they require match the payments that the Amortization Plan calls for. In cases like these, your credit rating should not be injured.
  • If you had bad credit before the Amortization, your credit rating may not be any worse, however, it may not appear to be any better either. The positive effect that the Amortization will have is that your creditors will indicate a zero balance when they are paid in full.  A paid account, even though paid late, is better than an account that has never been paid at all.
  • The creditors may not report your account as bankrupt.  If they should accidentally report your account in this way, you may notify the credit bureau and the creditor and the correction will be made.
  • In an effort to explain the Amortization to your creditors, you will be given information regarding a consumer statement that can be placed in your credit bureau.  Your consumer statement will appear each time a creditor inquires into your credit bureau. The statement will explain that you are making payments and it will also list your Trustee’s name and phone number so that creditors can call and verify your status in the Amortization process.
  • No guarantees can be made that you will not experience rejection for future credit purchases during or after your Amortization Plan. Not every creditor is aware of the details of an Amortization. You will need to explain the process and it is possible that inquiries to the Trustee may also be needed before the credit grantor understands.  Although many credit grantors realize the benefits of paying debts in this manner, others will only see the negative and will be closed minded to future credit purchases.

Information provided by Sandie Miske

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