Bankruptcy Attorney Serving Twin Cities
While it is not something that happens often, it is possible for your Chapter 7 bankruptcy case to be dismissed by the court. What a bankruptcy dismissal means is that you do not qualify for the bankruptcy process and thus the filing is dropped. While this sounds particularly scary, if bankruptcy is your last option, it is unlikely to happen to you. Yet, it is best to understand why it might happen and what your options are.; Usually a chapter 7 bankruptcy is dismissed if the client didnt tell the lawyer that they owned something valuable, like a car, house or business.; Walker & Walker works with you to make sure we have everything.; In my experience, most people have nothing to hide because bankruptcy laws are actually quite generous on what you can keep in bankruptcy.
The Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management. 11 U.S.C. §;727; Fed. R. Bankr. P. 4005.
How Can I Clean Up My Credit Report After Bankruptcy
My spouse was married before, and they accrued a lot of debt and filed bankruptcy. This was over eight years ago, but the bankruptcy still appears on credit reports. We’ve also taken care of a lot of old debt, but it still shows up on our credit report as unpaid. How can we fix it?
Chapter 7 bankruptcy typically stays on a credit report for 10 years. There are circumstances, however, where it can be removed. And there have been plenty of times where credit reports have been inaccurate.
You can clean up an inaccurate credit report with the credit bureau itself. There is a form called “request for reinvestigation” that is available with your . You could fill this out and submit it to the credit bureau, or you can write the credit bureau and include all of the inaccurate information that needs to be updated.
In your letter, ask the bureau to reinvestigate all of the inaccurate information. If the bureau insists that the information is accurate, you can directly contact the creditors and have them verify that the debts have been satisfied in writing. Then, send that writing to the bureau as proof, and ask them to update the information. You can also call the customer service line of the credit bureau.
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What Happens After A Bankruptcy Discharge
Once a final order of discharge is issued in a bankruptcy case, the court clerk will send official copies of the discharge notice to all the creditors involved. This notice is also sent to the trustee and the trustees lawyer in addition to the debtor and their lawyer.
The discharge notice is meant to let creditors know that they can no longer contact you asking for payment on your debt. If creditors continue to contact you after a discharge notice has been issued, you can file a motion in court and the creditor may be sanctioned as a result.
However, creditors who provided you with a loan secured by a lienon property such as a car or homecan attempt to repossess that property after a discharge is issued. If this happens to you, speak with a bankruptcy attorney to learn more about whether you can defend against the action.
What Are Usda Loans
USDA loans are backed by the U.S. Department of Agriculture for low-and-middle-income borrowers who may not qualify for a conventional loan. The mortgages have low down payments and no closing costs for those who buy a home in a qualifying rural area, which includes about 97% of the U.S. A borrowers income cant exceed 115% of the median income for the area. Mortgages are 30-year, fixed-rate.
While the USDA doesnt set a minimum credit score, most lenders who process USDA loans require a minimum of 640.
Waiting period for applicants who have filed for bankruptcy:
- Chapter 7 Eligible three years after discharge.
- Chapter 13 Eligible after 12 months if theyve stuck to their plan payments.
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Making Changes To Your Bankruptcy Forms
Your bankruptcy forms are signed under penalty of perjury. When you file, you’re declaring that the information in your bankruptcy forms is true and correct to the best of your knowledge. If you accidently leave something out or make a mistake, you’ll need to make changes to your forms.
This is done by filing an amendment with the court. You might need to file an amendment because you forgot to list an asset or a , you need to add information that was originally missed, you change your mind about signing a reaffirmation agreement, or the trustee requests that forms be amended.
Can Tax Debt Ever Be Discharged Through Chapter 7 Bankruptcy
The bankruptcy court MAY discharge your tax debt if ALL of the following elements are met:
- The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy
- You did not commit fraud or willful evasion
- The debt is at least three years old
- You filed a tax return
- The IRS assessed the income tax debt at least 240 days before you filed your bankruptcy petition or has not yet been assessed
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Nondischargeable V Dischargeable Debts In Chapter 13
The list of nondischargeable debts in Chapter 13 is similar, but shorter than, the list of nondischargeable debts in Chapter 7. Here are some examples:
A. Nondischargeable Debts
Student loan debt is nondischargeable. Therefore, if the student loan debt was not paid in full through the plan, the debtor is liable for the unpaid portion after receiving the discharge.
Most tax debt is nondischargeable, and must be paid in full over the life of the plan, unless the taxing authority consents to different treatment.
Obligations to pay child support or alimony generically referred to as domestic support are nondischargeable.
B. Dischargeable Unless The Creditor Successfully Challenges Dischargeability
Three types of debt that are dischargeable unless the creditor successfully challenges their discharge are: debts incurred through fraud, debts that are the result of a breach of a fiduciary, including embezzlement and larceny, and debts that are the result of doing willful and malicious harm to a person. The process for challenging the discharge of such a debt involves a full-blown lawsuit called an adversary proceeding, so the dollar amount must be large enough to make the challenge worthwhile to the creditor.
C. Dischargeable In Chapter 13, But Not In Chapter 7
A debt that is the result of doing will and malicious harm to property is dischargeable in Chapter 13, but not in Chapter 7.
A debt that is incurred to pay a tax is dischargeable in Chapter 13, but not in Chapter 7.
What Are Fha Loans
FHA loans are mortgages backed by the Federal Housing Authority, designed for people who may have trouble getting a conventional loan because of a poor credit history or income. FHA loans have easier credit requirements and lower down payments.
Since the U.S. government backs the loans, lending institutions are more willing to offer them to applicants with poor credit scores, although the lower your credit score, the harder it can be to find a lender.
A borrower with a FICO score of 580 can qualify for an FHA mortgage with a down payment of 3.5% and someone with a 10% down payment can qualify with a 500 score. The lower the score, the higher the interest rate and the harder it may be to find a lender. While applying with a credit score less than 600 is possible, less than 2% of FHA mortgage borrowers had a credit score that low early in 2021.
The waiting period to get an FHA loan after a bankruptcy without extenuating circumstances is:
Chapter 7 Two years from the time of discharge.
Chapter 13 Two years if plan payments have been made on time and the trustee of the bankruptcy gives an OK.
Some banks have a three-year waiting period, which overrules the FHAs waiting period.
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What Is Chapter 7 Bankruptcy
Chapter 7 is known as the liquidation bankruptcy because it discharges most of your unsecured debt. That includes , medical bills and personal loans.
Its the quickest, simplest and most common;type of bankruptcy. According to the American Bankruptcy Institute , 63% of the 774,940 bankruptcy cases filed in 2019, were Chapter 7.
An even more encouraging;bankruptcy statistic: 94.3% of Chapter 7 filings had their debts discharged, meaning forgiven.
You must pass a means test to qualify for Chapter 7 filing. The bankruptcy means test examines financial records, including income, expenses, secured and unsecured debt to determine if your disposable income is below the median income for your state. The means test income level varies from state to state.
You might be forced to sell any non-exempt assets, though several online sites claim that 96% of Chapter 7 filings are no asset cases, meaning there is not enough equity or value in the property for a trustee to sell it and pay off creditors.
Generally, the Chapter 7 process can be completed in four to six months.
Need To Apply For Chapter 7 Bankruptcy Then Youre Not Alone
The US Census Bureau has determined that the average income, for the past five years, ;for American households leveled at just over $46,000. But for millions of families across the country, they fall not just below the median income, but the poverty line altogether. Statistics indicate that almost 39 million families live below the poverty line.; Astonishingly, more than 40% of the population will be considered below the poverty line in the span of their lifetime.
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Find Help For Car Loans And Mortgages
When the time comes to buy something larger with debt, such as a car or house, you may need to have another party, such as your parents, cosign the loan.
Without this, you may not be able to obtain financing at all. With it, you may be able to get something resembling decent terms on your loan, depending on the credit score of the cosigner. If credit is not available, you may simply have to wait until you can pay for a car with cash or consider a personal loan from your relatives and/or friends.
Also an issue if you’re buying a car: After declaring bankruptcy, you may find that insurance companies are reluctant or unwilling to insure you. If your past credit history puts you in what insurers consider a high risk pool, there are companies that will provide car insurance for youcharging more, but you still need it to drive.
What Happens To Your Credit Score After Filing Bankruptcy
Chapter 7 bankruptcy and Chapter 13 bankruptcy filings show up on your credit report. How long it shows up depends on which type of bankruptcy you file. Chapter 7 bankruptcy stays on your credit report for 10 years after the filing date. A completed Chapter 13 bankruptcy stays on your credit report for 7 years after the filing date, or 10 years if the case was not completed to discharge.
As a result, filing bankruptcy will initially lower your credit score. How much your credit score will drop depends on how high or low it was before bankruptcy. Generally, a decrease between 100 to 200 points can be expected.
The good news is that you can begin rebuilding your credit as soon as your bankruptcy discharge is entered. It’s possible to have a better score within 1â2 years of filing. The credit scores of most bankruptcy filers are already lower because of missed payments. After the court grants a discharge, most unsecured debts are erased. Credit scores improve because there are no more missed payments and discharged accounts show a zero balance.
After Chapter 7 and Chapter 13 bankruptcy is filed, you will get credit card offers in the mail. These offers can be for secured credit cards, sometimes called prepaid cards, which require a cash deposit. Or, offers can be for unsecured credit cards, but will likely have high interest rates or annual fees.
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The End Of The Bankruptcy Process
In rare cases, the trustee will need to liquidate property or resolve bankruptcy litigation. If youve received a discharge through Chapter 7, however, your bankruptcy proceeding is most likely complete. The trustee will submit a final report, and the court will follow this with a final decree. This finalization will generally occur 4-6 months after filing your petition.
On your credit report, discharged debts should be marked as discharged. Your bankruptcy case will stay on your report for 10 years, but the impact of bankruptcy on your ability to obtain credit will diminish over time.
Any debts that were reaffirmed will need to be paid, and your creditors and lenders will be released from the automatic stay. You may need to pursue additional forms of relief to avoid foreclosure or repossession, but this relief may be easier to access now that less of your income will be going toward your debt.
Maximizing The Benefits Of Bankruptcy
Ultimately, what you can expect to happen next will all depend on you. Your decisions will dictate how quickly you recover from bankruptcy and how easily you can avoid common pitfalls.
To maximize both the short-term and long-term benefits of this financial fresh start, we recommend the following steps:
Bankruptcy has a clear beginning and end. However, just like you need to prepare for bankruptcy, you must also plan for life after bankruptcy. With thoughtful preparation and intentional financial decisions, you can slowly build solid financial foundations that clear the way toward a prosperous future.
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How Do Bankruptcies Affect A Joint Mortgage
If one person files for bankruptcy, that can have an impact if you both are on the mortgage. There are instances where one persons bankruptcy can cause issues with keeping the home, even if more than one of you is on the mortgage. In order to be fully apprised of what can happen, talk to your attorney.
Which Debts Are Dischargeable
Below is a list of commonly discharged debts.
- collection agency accounts
- social security overpayments, and
- veterans assistance loans and overpayments.
Note about fraud and utility deposits. Any debt-related misconduct or fraud can render an otherwise dischargeable obligation nondischargeable. Also, a utility provider cannot refuse to provide service because of a bankruptcy filing; however, the provider can charge a reasonable deposit to ensure future payment. Find out about utility shut-offs and Chapter 7 bankruptcy.
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Which Of My Debts Are Not Discharged In Chapter 7
While a discharge relives you of your obligations to pay most of your debts, not all debts are dischargeable in a Chapter 7 bankruptcy. Nondischargeable debts include, for example, alimony and child support obligations, certain taxes and fines, certain education loans, debts for death or personal injury caused by the debtor’s operation of a vehicle while intoxicated from alcohol or other substances, and debts you fail to disclose properly to the bankruptcy court when filing your petition. Some debts that are typically dischargeable can be excluded from discharge if the specific creditor requests that the bankruptcy court declare the debt nondischargeable. These debts include debts for money or property obtained by false pretenses and debts for willful and malicious injury by the debtor to another entity or to the property of another entity. If the bankruptcy judge grants the creditor’s request, the debt owed to that creditor will not be discharged.
What Are Conventional Loans
Conventional loans are those originated by banks, credit unions and online lending sources.
They are not guaranteed by the government, but they typically have the best interest rates and terms, which means lower monthly payments. The most common type of conventional mortgage is 30-year fixed-rate, which accounted for 79% of mortgages between; 2019 and; 2021, according to ICE Mortgage Technology.
Conventional loans require a credit score of 620 or higher. The higher the score, the better the terms. One of the biggest advantages is that a down payment of 20% means you dont have to pay private mortgage insurance, which can add thousands to a mortgage.
Even if you dont put down 20% at the closing, once the equity in the house reaches 20%, the PMI is dropped. With an FHA loan, it never drops, and you have to pay a one-time up-front premium of 1.75% of the base amount of the loan.
The waiting period for a conventional loan after bankruptcy is:
- Chapter 7 Four years after discharge date
- Chapter 13 Two years. If the case is dismissed, which happens when the person filing for bankruptcy doesnt follow the plan, its four years.
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