Life After Bankruptcy: Better than you think
Life after bankruptcy should be one of comfort and peace. Think about the stress that your debts have caused you during the last few months or years of your life, now imagine those debts have vanished and you can focus on your future with a clean slate. Being debt free is a liberating feeling and will allow you to rebuild your financial health.
The Effect of Bankruptcy on Your Credit:
Many people get hung up on a piece of paper or computer entry called a credit score. However, one must not lose sight of the big picture, which is your net worth is more important than your credit score. Although a bankruptcy can stay on your credit report for up to ten years, this does not mean that your credit will be ruined for ten years. In truth the effect of a bankruptcy on your credit is unpredictable and depends on a wide variety of factors.
For most people your credit score shoud not be a factor in deciding to file a bankruptcy. If you are seriously delinquent on a number of debts your credit score will already be low. A bankruptcy is unlikely to make things worse.
In fact, there is evidence that the filing of a bankruptcy may actually help you grow your credit score. You are actually one of the safest credit risks around. Your debt to income ratio is now almost perfect as you will have discharged most, if not all, of your debts. Moreover, creditors will know that you cannot file bankrtupcy again for a significant period of time.
Although a bankruptcy will affect your ability to get a conventional mortgageg for a period of 2-4 years, most lenders will not hold a bankrtuptcy against you after that. In short, with proper planning you will be able to obtain a mortgage even after you file bankruptcy.
Your ability to buy big ticket items such as a car or obtain revolving credit, such as credit cards, may suffer in the short term after filing a bankruptcy but shouldn't hurt you in the long run. The filing of a bankruptcy has a temporary affect that can be minimized with proper planning and a solid rebuilding strategy. We find that many people are able to purchase a vehicle almost immediately after filing bankruptcy although it does take a bit more leg work. The same time table often applies to credit card offers with some debtors receiving offers of credit within weeks after receiving their discharge. We can provide you with a specific credit rebuilding program designed to fit your individual needs.
In fact, we find that we are more concerned with our clients receiving easy credit shortly after bankruptcy and falling back in to debt than we are about people not being able to get credit.
Our bankruptcy attorney will help you plan your financial future every step of the way and in doing so we help you get a head start on the road to recovery.
Bankruptcy Solutions from The Owens Law Firm.
Although millions of Americans have resorted to bankruptcy to find relief from these devastating economic times -- including some of the most rich and powerful -- most people still feel uneasy when they first consider it for themselves. You should not.
Most of the time, we know that the financial distress facing you is not your fault and often could not have been prevented. That is why bankruptcy laws were created. So that good people could find relief from situations beyond their control, get out from underneath the mountain of debt burying them and start a new life.
These laws are not meant to only help people like Harry S. Truman or E. Howard Hunt or Larry King or Gloria Vanderbilt (although you may feel just a bit better knowing people like these, too, have faced tough times and even gone broke). Our laws are meant to help each and every American find a responsible, reasonable way to deal with financial adversity, survive debt and restore their financial stability.
What it is Bankruptcy – Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law. It will stop all creditor calls, collections activities and harassments, wage and paycheck garnishment, repossession of your car or other personal property, postpone or stop foreclosure on your home, and eliminate all or most of your debts. It will also restore or prevent termination of utility services and allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
Chapter 7 Bankruptcy-(Straight Bankruptcy). The basic idea in a Chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for you giving up your non-exempt property to be sold, with the money distributed to your creditors. In most cases, all of your property will be exempt.
If you want to keep property like your home or car and are behind on mortgage or car payments, Chapter 7 will probably not be the right choice for you since it does not eliminate the right of mortgage holders or creditors to take your property.
If you income is above the median family income in your state, you may have to file a Chapter 13 case. The national median family income for a family of four in 2009 was about $69,000. If your income is higher than this, you must fill out “means test” form with detailed information about your income and expenses. Based on this information, if you have enough income left over that could be paid to unsecured creditors, the bankruptcy court may decide that you cannot file a Chapter 7 case unless there are special extenuating circumstances.
A chapter 7 bankruptcy will cancel most if not all of your debts but you may have to let the bankruptcy court or trustee's office sell some of your property for the benefit of your creditors. However, most people do not have a lot of non exempt property and can therefore keep all of their property and still receive the benefits of the bankruptcy discharge. We will perform an analysis on the property that you have and any property that you wish to keep and explain to you if this property would be exposed by filing a bankruptcy.
Even if you otherwise qualified a bankruptcy court may dismiss your case if it thinks you've tried to cheat your creditors or conceal assets. Red flags typically occur when you transfer assets to friends or relatives, run up debts immediately before filing, concealing property or money and generally being untruthful or deceptive in any filing with the court.
Chapter 13 (Reorganization). You should consider filing a Chapter 13 plan if you 1) own your own home and are in danger of losing it because of money problems; 2) are behind on debt payments, but can catch up if given some time; 3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time.
In a Chapter 13 bankruptcy case, you file a plan showing how you will pay off some of your past-due and current debts over three to five years. The most important thing is that a Chapter 13 case lets you keep your home, car and other valuable property if you can make the required payments. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with extra payments to catch up on the amount you have fallen behind.
There is a debt limit when filing a Chapter 13 bankruptcy. Currently you do not qualify for a Chapter 13 bankruptcy if your secured debts exceed $1,010.65 or your unsecured debts exceed more than $336,900. Additionally you must be current on your income tax filings. You will need to provide proof that you have filed income taxes for the previous four years. You will also be required to provide a copy of your tax return to the trustee during the life of your plan. You must also show that you will pay all required debts within the plan period. If your current monthly income less reasonable living expenses won't allow you to pay off those debts within the plan period than the courts will not confirm your plan.
Priority debts must be paid in full in order to receive a discharge in a chapter 13 case. A priority debt is an unsecured debt that is considered important enough to take priority over your other debts. For example back taxes and child support arrearages are generally considered to be priority debts and thus must be paid in full within the plan period. For secured debts you must show that you will be able to keep current on the secured debt payments. For example if you are keeping your home you must be a little show that you were able to make your current mortgage payments. If you have fallen behind in your mortgage payment you will also be required to show that you will be able to cure arrearages within the plan period.
A Chapter 13 plan usually last for 36 months or 60 months. The length is determined by your current monthly income as compared to the applicable median income. If your income is less than the state median income, you may propose a 36 month plan. If your income is greater than the median then you must propose a 60 month plan.
What property can I keep? In a Chapter 7 case, you can keep all the property which the law says is “exempt” from the claims of your creditors. It is important to check the exemptions available in the state where you live. NOTE: If you moved to your current state from a different state within two years of your bankruptcy filing, you may be required to use the exemptions from the state where you lived before. In some states, you have a choice between using either the state exemptions or the federal bankruptcy exemptions. But if your state has “opted out” of the federal bankruptcy exemptions, you will be required to choose most of the exemptions under your state’s laws. Even in an “opt out” state, however, you may use a special federal bankruptcy exemption that protects retirement funds in pension plans and IRAs. *Florida has “opted out” of the federal exemptions.
When determining whether your property is exempt, you must remember that the value of your property is not what you paid for it, but what it is worth at the time you file bankruptcy. Especially for furniture and cars, this may be much less than what you paid or their replacement cost. Remember that only the equity in your property counts. For example, if you own a $50,000 house with a $40,000 mortgage, you only have $10,000 in equity. *You can fully protect your $50,000 home with a $10,000 exemption. While your exemptions let you keep property even in a Chapter 7 case, your exemptions do not prevent a mortgage holder or car loan creditor from taking your property to cover the debt if you are behind. In a Chapter 13 case, you can keep all your property if your plan meets the requirements of the bankruptcy law. In most cases, you will have to pay the mortgages or liens just as you would if you had not filed bankruptcy.
What will happen to my home and car? Usually you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it if you pay its non-exempt value to creditors in Chapter 13. However, if some of your creditors have a “security interest” in your home, automobile or other personal property – i.e. if you gave them a mortgage on your home or put your other property up as collateral for a debt – bankruptcy will not make their interests go away. If you do not make payments on that debt, these creditors may be able to take your home or property to sell during or after the bankruptcy case.
In a Chapter 13 case, you may be able to keep some of your secured property by paying the value of the property rather than the full amount owed on the debt. Or you can use Chapter 13 to catch up on back payments and get current on your loans.
There are also several ways that you can keep collateral or mortgaged property after you file a Chapter 7 bankruptcy. You can agree to keep making your payments until the debt is paid off in full. Or you can pay the creditor the amount that the property is worth. In some cases that involve fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase these goods), you can usually keep your property without making any more payments on that debt.
Can I own anything after bankruptcy? Absolutely. You can keep your exempt property and anything you obtain after your bankruptcy is filed. However, if you receive an inheritance, a property settlement or life insurance benefits with 180 days after filing, that money or property may have to be paid to your creditors if it is not exempt.
Will bankruptcy wipe out all my debts? Bankruptcy will wipe out the majority of your debts. But there are exceptions, including: money owed for child support or alimony; most fines and penalties owed to government agencies; most taxes and debts incurred to pay taxes which cannot be discharged; student loans unless you can prove to the court that repaying them will be an “undue hardship”; debts not listed on your bankruptcy petition; loans you obtained by knowingly giving false information to a creditor; debts incurred by driving while intoxicated; mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by creditors).
Will I have to go to court? In most bankruptcy cases, you only have to go to a proceeding called the “meeting of the creditors” to meet with the bankruptcy trustee and any creditors who choose to come. Usually these meetings are a short and simple procedure. If complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. In this case, you will receive notice of the court date and time from the court and/or from your attorney.
Will bankruptcy affect my credit? If you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. Although the fact that you filed for bankruptcy can appear on your credit report for 10 years, because bankruptcy wipes out your old debts you are likely to be in a better position to pay your current bills and able to get new credit.
NOTE: If you do file bankruptcy, remember that debts discharged should be listed on your credit report as having a zero balance. You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is incorrect.
What else should I know? Utilities cannot refuse or cut off service because you file for bankruptcy. But they can require a deposit for future service and you do have to pay bills after you have filed bankruptcy. An employer or government agency cannot discriminate against you because you filed for bankruptcy. Neither can agencies involved in student loan programs. If you lost your driver’s license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back. If someone has co-signed a loan with you, the co-signer may have to pay your debt. (If you file a Chapter 13, you may be able to protect your co-signers.)