DEAR MR. MYERS: I am considering filing for bankruptcy because of some serious financial problems, but I hope to buy a small house or condo one day, after I get back on my feet. Which type of bankruptcy would hurt my credit score the least, Chapter 7 or Chapter 13? How long would the bankruptcy stay on my credit record?
ANSWER: Either choice is going to send your score tumbling, but the fall won’t be as steep if you file for bankruptcy under Chapter 13 of the U.S. Bankruptcy Code rather than using Chapter 7.
Under a Chapter 13 filing, you would restructure your debt to repay your creditors some or all of what they’re owed over a longer period of time. That would suggest to a potential mortgage lender that you’re serious about repaying a loan, even when times get tough.
Generally, a Chapter 13 filing stays on a debtor’s credit report for seven years. Many mortgage lenders, though, will consider providing a loan to a borrower a year or two after such a bankruptcy is filed, as long as scheduled payments under the debt-restructuring plan have been consistently paid.
Conversely, by filing a Chapter 7 bankruptcy – sometimes called a “straight” bankruptcy – you would ask a judge to immediately wipe out all of your debt and thus eliminate any future payments. That likely would stay on your credit record for a full 10 years, and would give lenders pause before agreeing to give you a 15- or 30-year mortgage in the future.
Consult a bankruptcy attorney to discuss your options. I hope your financial situation gets better soon.
REAL ESTATE TRIVIA: About 454,000 new bankruptcy suits across the U.S. were filed during the first seven months of this year, according to the Virginia-based American Bankruptcy Institute. That’s a 7 percent drop from the same period last year, mostly due to a gradual improvement in the overall economy.
DEAR MR. MYERS: We bought a new patio set from Home Depot last year. Now a neighbor says that the store is recalling a bunch of those sets because they are dangerous. I called the store where we bought the set, but the manager didn’t know anything about the supposed recall. What is going on?
ANSWER: The recall is real. It involves about 280,000 Hampton Bay Fall River swivel dining, lounge and patio chairs.
Made in China, they were sold exclusively through Home Depot outlets across the U.S. and in Canada.
The federal Consumer Product Safety Commission announced the recall on Aug. 9, noting that more than 400 complaints had been received about the base of the swivel chairs breaking. At least 16 injuries were reported, a CPSC spokesperson added, primarily bruises and abrasions from falls.
The chairs were sold from October 2012 through January 2015. They had cost about $200 for a set of two, or $550 for a seven-piece patio package.
Home Depot is considered one of the best and most reputable home-improvement chains in the business. The manager you talked to at your local Home Depot store probably didn’t know about the recall because it’s being handled by one of the company’s distributors, Brown Jordan Services.
The CPSC states that owners of the chairs should stop using them immediately and contact Brown Jordan Services for a free repair kit, which includes a new base to easily replace the old one.
DEAR MR. MYERS: We agreed to purchase a home, and followed your advice to make our offer contingent on the property first receiving a satisfactory report from a professional inspector. The inspection uncovered several major problems that would be expensive to fix, but the seller refused to pay for the repairs or to cut his offering price so we could afford to pay for them ourselves. We canceled the sale and got our deposit back, but is the seller also obligated to pay our $425 inspection fee?
ANSWER: Probably not. Most purchase offers require the buyer, not the seller, to pay for the cost of a professional home inspection. If the offer that you originally signed doesn’t state otherwise, you’re on the hook for the inspector’s fee.
No one would like to lose $425 on a real estate deal that later falls apart. But the money could be the best “investment” that you have ever made, because the inspection report helped you to avoid buying a house with lots of hidden problems that would be extremely costly to repair.
David W. Myers’ column is distributed by Cowles Syndicate Inc.