WHAT YOU NEED TO KNOW ABOUT CREDIT REPORTS
Your debtor’s Personal Credit Report, if carefully dissected and analyzed, can be used to help find hidden and diverted assets. Let’s take a look at some of the typical things that we review on a regular case:
REAL ESTATE: Highlight all the active banks and mortgage companies and separate them out by mortgages (“MORT”) and home equity loans (“H/E”). Compare the accounts’ open date (“OPEN”) to the dates of the loans in the County Clerk & Recorder’s Office to match the correct property loans, then take a careful look at the loan balance (“BALANCE”). The original mortgage recording should provide the details you need to calculate the amortized balance. Does it match the balance on the credit report or is it too low? If it’s paid down, then it may be an indication that the debtor is attempting to hide cash funds in property equity. After they have put enough distance between themselves and their debt, they can then sell or re-finance the property and get it back.
The credit report can also show mortgages that don’t match up with the local property you know about. This may be an indication of non-local investment property or vacation homes, none of which can be protected by homestead exemptions.
VEHICLES: Highlight all the active banks and auto finance companies (“AUT”). Compare the current loan balance to estimated vehicle values to find a value range for the vehicles. Just like the real estate loan, the debtor may have paid down their loan balance to hide cash funds in vehicle equity.
The credit report may also show loans for vehicles that don’t match up with the vehicle registrations. This may be an indication that the loans are for vehicles, boats, aircraft, etc. that are registered in commercial entity names.
CREDIT CARDS: Subpoena all active credit card (“R/C” for revolving credit) statements. A careful analysis of these can reveal charges to out-of-state restaurants (for finding the location of unknown real estate), boat and aircraft fuel charges, etc. Statements may also show overpayment of the credit card bills where the debtor is hiding cash funds.
INQUIRIES: Do you want to get copies of recent financial information on the debtor? Then don’t overlook the INQUIRIES section. This is a small list at the end of the report that shows a commercial credit reporting subscriber, the date of inquiry, and their subscriber number (which can be used to find the creditor’s contact information).
Compare the names of the subscribers to see if they are any of the creditors listed in the report. These inquiries are normally just a creditor’s collection department checking to see if there is any new addresses for the debtor or a new employment listed… so you can cross those off. What you have
left are inquires made by financial institutions that may be pulling the debtor’s credit report as part of a loan or revolving credit application.
The most recent inquires, going back twelve months, make excellent subpoena targets to get copies of the loan application and any supporting employment and tax documentations that were submitted with it.
Although a credit report can make a great tool for finding assets, the question often is who can see the reports? In the next article, we will continue this discussion on credit reports and show you how to know exactly who has the legal right to obtain them.
Meanwhile, I challenge you to pull out the credit reports you have on your debtors and grab some highlighters. There’s gold in them thar hills!
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