Getting A Loan After Bankruptcy
Whether you file for Chapter 7 or Chapter 13 bankruptcy, each chapter can impact your credit score; therefore, hurting your chance at getting a loan. This doesnt mean it is impossible, especially as your credit can steadily improve after bankruptcy if you make smart financial decisions. Regardless, you can still qualify for a loan after bankruptcy, but you may face some challenges such as:
- Paying more up front on a loan or mortgage
- Higher interest rates or longer waiting periods
- Showing more proof of financial stability
While these challenges may not seem preferable, they could be a better option than remaining in debt now and not filing for bankruptcy.
Can The Discharge Be Revoked
The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently; failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate; committed one of several acts of impropriety described in section 727 of the Bankruptcy Code; or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
What Happens When I File For Bankruptcy
Once you file for bankruptcy, the court puts an automatic stay in place. The stay stops most creditor calls, wage garnishments and lawsuits against you. The automatic stay will stop evictions that are still in the litigation stages. Also, an automatic stay will halt foreclosures and repossessions. Keep in mind; chapter 7 bankruptcy will not allow you to keep your home or other possessions if you are unable to pay your debts. A chapter 13 bankruptcy, on the other hand, has a mechanism that allows you to catch up on past payments so that you can keep your assets.
Bankruptcy will wipe out credit card debt and most other nonpriority unsecured debts. Unsecured debts are those that you did not promise to forfeit if you fell delinquent in payments. This includes medical bills, overdue utility payments, personal loans and gym contracts. Everything except student loans. Secured debt includes those such as cars, jewelry, furniture or other electronics that youll have to return.
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Will Filing For Bankruptcy Get Rid Of My Student Loan Debt
First and foremost, lets address the obvious.;Astronomical student loan payments on very little money are why many millennials are continuing to delay marriage and children while simultaneously living with their parents and killing every industry imaginable. As the generation burdened with the most student loan debt and lowest wages, many millennials are barely keeping their head above water. More than 17 million student loan borrowers owe a combined $380 billion in debt. This means that the average college graduate in their 20s has an average balance of $22,135.
So, will filing for bankruptcy get rid of student loan debt? The short answer for a majority of people is no. The long answer is only under certain conditions. While bankruptcy cannot wipe away student loan debt in most cases, it will alleviate some of the burdens from other debts you acquired in college when banks were throwing credit cards and store credit cards at you. Alleviating this debt, however, will make it easier to make payments toward your student loans. Additionally, filing for bankruptcy gives you the opportunity to start over with your credit.
In Most Situations Bankruptcy Won’t Affect Your Current Employment; However It Might Come Into Play If You Are Applying For A Job In Private Industry
By Cara O’Neill, Attorney
If you plan to file for bankruptcy, you might be worried about the effect it could have on your employment. For instance, many people wonder:
- Will an employer find out about a Chapter 7 or Chapter 13 bankruptcy?
- Can an employer fire an employee who has filed for bankruptcy?
- Is it legal to pass over a job applicant due to a bankruptcy filing?
Although your employer might learn about your bankruptcy case, rest assured that in most situations your bankruptcy won’t affect your current employment. However, it might prevent you from getting a job in private industry later.
You’ll find a complete overview of the bankruptcy process in What You Need to Know to File for Bankruptcy in 2021.
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How Does Bankruptcy Work
There are several ways in which bankruptcy can be declared. You can enter into voluntary bankruptcy through a debtors petition, or your creditors may apply to bankrupt you through a court, which is called a creditors petition.
Once you have been declared bankrupt, you can nominate a trustee or the Australian Financial Security Authority will appoint one for you to manage your finances.
You will be classified as bankrupt for three years, and your bankruptcy will be publicly registered on the NPII, National Personal Insolvency List.
When Your Bankruptcy Will End
You will be freed from bankruptcy after 12 months. This ends the bankruptcy restrictions and releases you from most of the debts you had when the bankruptcy order was made.
Youll normally be discharged automatically, even if:
- no payments have been made to your creditors
- youre still paying an IPA or IPO
- some assets havent been sold yet
Assets you had during bankruptcy can still be used to pay your debts once your bankruptcy has ended.
Your bankruptcy can be extended for longer than 12 months if you dont co-operate with your trustee. Check your discharge date using the Individual Insolvency Register on our website. If your discharge status is suspended indefinitely you need to contact the official receiver for an update.
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What To Do When Your Ex Files For Bankruptcy
If youre listed as a creditor youll be notified and will receive information about attending a 341 meeting , deadlines for filing a claim, and the necessary form.
An automatic stay prevents creditors from attempting to collect payment from a debtor. There are exceptions: an ex-spouse can file a lawsuit for support related to divorce proceedings. If you have unpaid support, you may also be able to go through the courts to collect that money.
Ownership Interest In A Chapter 7
If filing a Chapter 7 bankruptcy, the net value of the ownership interest will be assessed with the other assets of the owner, to determine what creditors might receive from a liquidation of assets.
For example: someone owns an LLC worth $500,000. If he also owns another $500,000 of nonexempt assets in theory, there are $1m of assets;that could be sold and the proceeds split up among creditors. However, we stress in theory, because regardless of the book or other theoretical value of a small business, it may be an illiquid assetsomething for which no buyer can be found. Also, many small business, regardless of their gross revenue, have little, no, or even negative value, often because;so much debt has been accumulated to fund or finance them. In these cases, while the ownership interest is an asset that could, in principal, be liquidated for creditors, it may have no value.
- Caveat: Bankruptcy law allows a fresh start exception. This applies to future earnings, and under some circumstances, allows a business to be conducted without being burdened to repay pre-bankruptcy debts.
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What Happens To Your Home
If you own your home it can be sold if it is the only way to pay your creditors.
Sole owners
If youre the only owner of the property:
- the value of the property after any secured debts have been paid transfers to the trustee. This is known as the beneficial interest and is sometimes called equity
- the legal title transfers to the trustee and a bankruptcy restriction is added to the land registry record. This will stop you from selling your home or making deals connected to it
The restriction will be removed once the trustee has been paid for their interest in the property.
Joint owners
If you own the property with someone else:
- your share of the property after any secured debts have been paid transfers to your trustee. This is known as the beneficial interest
- a Form J restriction is added to your Land Registry record and the trustee will be told of any deals affecting the property, including a sale
You can still sell the property, but the trustee will get your share of the money from the sale. The Form J restriction will be removed once the trustee has been paid this money.
The sale of your home
The trustee cant usually sell the property without your agreement for a year from the date of the bankruptcy order if you have a partner or children living with you.
You can stop a sale taking place later if a family member or friend buys the beneficial interest in your home. The buyer should contact the trustee.
Rented property
If You Use A Company Credit Card
If the statement goes directly to your employer and your employer is responsible for payments, you should be able to keep your company credit card after bankruptcy. However, if youve used the card for personal purchases or are liable for the balance, its more likely your company will be notified and take action.
If youre not sure about liability, talk to your human resources department and your attorney.
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Do Bankruptcies Affect Second Mortgages
Second mortgages and home equity lines of credit are also impacted by bankruptcies. If you have a second mortgage or HELOC, youre not responsible for it under a Chapter 7 bankruptcy, but youre required to keep paying on it if you want to keep the house without a problem.
Things become a little more complex with a Chapter 13 bankruptcy. If you can prove that your existing equity isnt enough to cover what you owe on a second mortgage or HELOC, you can present that evidence in bankruptcy court. If a judge agrees, the junior lien taken out after your first mortgage may be stripped off.
One thing to note is that a lender may fight this, so to give yourself the best chance of success, you may want to have an appraisal done before you file for bankruptcy.
How Does Bankruptcy Affect Immigration
To become a citizen or lawful permanent resident of the US, you must prove that you have good moral character.
However, there is no hard and fast rule of what good moral character is and what it is not.
The good moral character requirement enables the immigration case agent to look at the larger picture of your life, and make sure that youre not a trouble maker.
A bankruptcy could be evidence of bad character if you had deliberately run up tens of thousands of dollars in debt, and then filed for;Chapter 7 bankruptcy;or;Chapter 13 bankruptcy, due to:
- Paying for a destination wedding
- Using the bankruptcy laws to avoid paying alimony to your ex-spouse even though you had enough income to pay it
- Funding a lavish lifestyle
You may be asked about taxes, but you wont be asked about debt, foreclosure, bankruptcy or other financial issues.
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What About The Pros And Cons Of Filing Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy are both powerful debt relief options for folks in need of a fresh start. But the pros and cons of filing Chapter 13 bankruptcy are quite different than for Chapter 7. If you have a high disposable income or non-exempt assets you want to protect, Chapter 13 may be right for you. Check out this article to find out more about the pros and cons of filing Chapter 13 bankruptcy.
Regularly Monitor Your Credit Reports
The idea of looking at your credit report after filing bankruptcy can be intimidating or anxiety inducing. Still, you will want to make a regular habit of doing so for a variety of reasons. Its important to monitor reports diligently and consistently to ensure all information remaining on your profile is accurate. Incorrect information can cause your score to be lower than it should be.
If the discharged debt isnt showing up accurately on credit reports, it could count against you as a form of outstanding debt, says Tayne.
Making matters worse, the debt could erroneously be transferred to a new debt collection agency which could be a challenge to resolve.
It is very easy to monitor your credit reports for free online. You can download a free copy of your report from each credit bureau once per year. You can also take advantage of free credit monitoring online tools such as Bankrate or set up fraud alerts through your banks.
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Advantages Of Chapter 7
A Chapter 7 bankruptcy can remain on your credit report for up to 10 years
Although a bankruptcy stays on your record for years, the time to complete the bankruptcy process under Chapter 7, from filing to relief from debt, takes only about 3-6 months.
If you decide against Chapter 7 when it may be the right decision for you, your missed debt payments, defaults, repossessions, and lawsuits will also hurt your credit and may be more complicated to explain to a future lender than bankruptcy.
You’ll lose property that you own that is not exempt from sale by the bankruptcy trustee. You may lose some of your luxury possessions.
Most state exemptions allow you enough so that most things you own will be exempt from bankruptcy, sometimes allowing more coverage to keep your property than you need.
Additionally, you’ll get to keep the salary or wages you earn and the property you buy after you file for Chapter 7.
You’ll lose all your credit cards You may also be able to obtain new lines of credit within one to three years of filing bankruptcy, although at a much higher interest rate. Bankruptcy will make it nearly impossible to get if you don’t already have one Some lenders specialize in lending and home buying for people after bankruptcy Bankruptcy won’t relieve you of your obligations to pay alimony and/or Bankruptcy will alleviate many of your other financial obligations, but only a family court order can suspend alimony and child support obligations.
Can You Lose Your Job For Filing Bankruptcy
Your company cant fire you, demote you, or take any kind of action against you just because of a bankruptcy. Your employer is also banned from discriminating against you because your spouse has filed. However, your employer could potentially fire or demote you if they think you behaved irresponsibly or unethically in acquiring the debt and that it is impacting your work as an employee.;
The reality is that discrimination can be difficult to prove. If your employer fires you after discovering your bankruptcy but says you were dismissed due to subpar job performance, it could be tough to show that you were wrongfully terminated.;
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Bankruptcy Puts An End To Creditor Harassment & Collection Activities
Bankruptcy can be a valuable solution for many people who are facing worrisome debt. It stops most collection actions, including phone calls and lawsuits. Depending on the chapter you file , some of your debt may be eliminated. Bankruptcy often eliminates debt like credit card balances, medical bills, personal loans, student loans, and more.
So, if you are tired of not being able to pay off your debts and deal with creditor harassments, filing for bankruptcy may be a good option for you. However, its important to understand that bankruptcy doesnt stop all creditors, and it doesnt wipe out all debt obligations. If you arent sure which of your debts are dischargeable, you should seek the guidance of an experienced bankruptcy attorney. Our legal team is ready to analyze your case and help you determine which of your debts can be discharged by bankruptcy.
Can You Carry On Running A Business
If you own a business and are made bankrupt, the bankruptcy trustee will take over the rights to your business. This will normally mean:
- the business will be closed down
- the employees will be dismissed
- the assets of your business will be sold.
If you’re self-employed as a sole trader, you can start trading again. It’s worth remembering that you’ll find it very difficult to get credit, which may make it difficult for you to carry on trading.
Going bankrupt will also place certain restrictions on the involvement you can have in running a business. If you break any of these restrictions you’ll be committing a criminal offence. They include:
- you can’t be a company director without permission from the court
- you can’t be involved in setting up, promoting or managing a limited company without permission from the court
- you can be self-employed or trade in a partnership, but if you run a business under a name that’s different to the one in which you were made bankrupt, you must tell everyone you do business with the name under which you were made bankrupt.
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