How Does Chapter 7 Bankruptcy Affect My Credit Score
Weve covered this topic in more detail in our article what does bankruptcy do to my credit score?. More often than not, debtors report an INCREASE in their credit score after filing for bankruptcy. How can this be possible? At ARM Lawyers, we do more than simply help you eliminate your debt. We will work with you to rebuild your credit score after bankruptcy! After your Chapter 13 Plan is confirmed, we will enroll you in the 7 Steps to a 720 Credit Score program FOR FREE. This $1,000 program is available to my clients FOR FREE just for being my client.
Budgeting After Chapter 7 Bankruptcy
Many people file for bankruptcy due to no fault of their own after experiencing an unexpected event, such as an illness, job loss, or divorce. Even so, everyone can benefit from cutting unnecessary costs and building a nest egg to fall back onnot just those who filed for bankruptcy to wipe out credit card balances.
Reviewing your spending habits and making a comfortable budget is a commonsense place to start. Avoid buying items on credit that you can’t afford to pay for in cash. If you take out new credit cards, pay off most, if not all, of your account balance each month so that you don’t accrue interest.
How Long After Filing Bankruptcy Do Creditors Stop Calling
Are debt collectors calling you day and night, demanding to be paid? Have you received threatening letters from debt collectors by mail, warning you about penalties for refusing to pay them? You might think that filing for bankruptcy in Arizona will immediately stop these harassing calls and letters from debt collectors. Filing for bankruptcy usually triggers an automatic stay, meaning that all debt collection activity must cease until your bankruptcy filing has been resolved, normally through discharge. However, sometimes the nasty calls and mailings continue after you have filed for bankruptcy in Arizona.
What To Do If You Realize You Forgot To List This Creditor Completely
If it turns out that this creditor did not receive a notice about your case because they were not listed as a creditor on your schedules , you should prepare and file and amendment to your Schedule F so that this missed creditor can receive a copy of all future notices. There is a $32 court filing fee to add a new creditor . If you intentionally fail to list this additional creditor now that you know they exist, the balance you owe them may not be discharged. Even if you forgot to list the creditor on your initial schedules, as soon as you tell the creditor that you filed for bankruptcy protection, they have to stop contacting you.
What Only Chapter 13 Bankruptcy Can Do
Chapter 7 and 13 each offer unique solutions to debt problems. The two bankruptcy types work very differently. For instance, how quickly your debt will get wiped out will depend on the chapter you file:
- Chapter 7 bankruptcy. This chapter takes an average of three to four months to complete. Learn more about erasing your debt in Chapter 7 bankruptcy.
- Chapter 13 bankruptcy. If you file for Chapter 13 rather than Chapter 7, you’ll likely have to pay back some portion of your unsecured debts through a three- to five-year repayment plan. However, any unsecured debt balance that remains after completing your repayment plan will be discharged. Find out how to pay off or discharge your debts in Chapter 13 bankruptcy.
Chapter 7 is primarily for low-income filers, and therefore, it won’t help you keep property if you’re behind on payments. But, if you have enough income to pay at least something to creditors, then you’ll be able to take advantage of the additional benefits offered by Chapter 13.
Here are some of the things that Chapter 13 can do.
Stop a mortgage foreclosure. Filing for Chapter 13 bankruptcy will stop a foreclosure and force the lender to accept a plan that will allow you to make up the missed payments over time. To make this plan work, you must demonstrate that you have enough income to pay back payments and remain current on future payments. Learn more about your home and mortgage in Chapter 13 bankruptcy.
Applying For Credit Cards
Though traditional credit cards may be out of reach for a few years, you can accelerate that process by applying for a secured credit card. A secured credit card requires a refundable safety deposit as your credit line, so if you deposit $500, you can receive a credit line in the same amount. After approximately 12-18 months of on-time payments to your secured card, you should start receiving offers for traditional cards.
Checking Your Credit Reports After Chapter 7
If you filed Chapter 7 bankruptcy, wait until your case is dischargedyou’ll receive a letter from the court informing you when that’s done, usually no more than six months after your court filing. Wait 90 to 120 days after receiving the letter so your credit reports have time to update with the bankruptcy information, and then request your credit reports from all three national credit bureaus . You can get a free Experian credit report every 30 days. You are also entitled to one free report a year from each of the three credit bureaus at AnnualCreditReport.com.
Review your reports carefully for accuracy and dispute any entries that need correction, taking care to note that:
- All credit accounts covered under the bankruptcy are labeled “discharged in bankruptcy” and list outstanding balances of zero dollars.
- If any debts were excluded from the bankruptcy filing, such as a mortgage, make sure they are not listed as discharged, and that payments are being reported.
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What Happens After My Bankruptcy Ends
When your bankruptcy ends, most of your debts are released and you no longer need to pay them. However, there may be some debts that you still need to pay find out more on what happens to my debts.
Your name continues to appear on the National Personal Insolvency Index showing your bankruptcy has ended.
Think Of Your Financial Future
Do you want to own a home or a car in the future? Or go back to school? After filing for bankruptcy, focusing on your financial future, including these types of life goals, can help you stick to a budget and remain motivated to continue funding your savings.
Making good decisions about finances and managing cash flow is the best way to secure your financial future, says Tayne.
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What To Do After Bankruptcy
If you have done any reading about personal bankruptcy, you know that while bankruptcy eliminates your consumer debts, it also damages your credit severely. Your bankruptcy will remain on your credit report for seven years, during which time you are a credit risk if you do not do anything to re-establish your creditworthiness.
As a credit risk, it is unlikely that you will be able to get new loans and other forms of credit at the most competitive interest rates. To compensate for potential losses from individuals with bad credit, most lenders charge bankrupt people interest rates that are incredibly high.
You cannot keep a creditor from knowing that you are bankrupt as long as the bankruptcy remains on your credit report. However, you can take steps to rebuild your credit that gives creditors reason to be more likely to lend money to you before your bankruptcy falls off your credit report.
As an added bonus, these steps will also help you to manage your money better than you did before bankruptcy, which will reduce your chances of having to file for bankruptcy or seek out another debt solution such as a consumer proposal ever again.
What Bankruptcy Can’t Do
Bankruptcy doesn’t cure all debt problems. Here’s what it can’t do for you.
Prevent a secured creditor from foreclosing or repossessing property you can’t afford. A bankruptcy discharge eliminates debts, but it doesn’t eliminate liens. A lien allows the lender to take property, sell it at auction, and apply the proceeds to a loan balance. The lien stays on the property until the debt gets paid. If you have a secured debta debt where the creditor has a lien on your propertybankruptcy can eliminate your obligation to pay the debt. However, it won’t take the lien off the propertythe creditor can still recover the collateral. For example, if you file for Chapter 7, you can wipe out a home mortgage. But the lender’s lien will remain on the home. As long as the mortgage remains unpaid, the lender can exercise its lien rights to foreclose on the house once the automatic stay lifts.
Eliminate child support and alimony obligations. Child support and alimony obligations survive bankruptcy, so you’ll continue to owe these debts in full, just as if you had never filed for bankruptcy. And if you use Chapter 13, you’ll have to pay these debts in full through your plan.
Eliminate most tax debts. Eliminating tax debt in bankruptcy isn’t easy, but it’s sometimes possible for older unpaid tax debts. Learn what’s needed to eliminate tax debts in bankruptcy.
Eliminate other nondischargeable debts. The following debts aren’t dischargeable under either chapter:
What If Creditors Are Still Calling
Even though youve filed bankruptcy, you may still get calls and other communication from creditors. Theres usually a straightforward explanation, such as the bankruptcy court not yet having processed your claim or notified all of your creditors.
Although uncommon, some unethical debt collectors may pursue collections after a lawsuit has been filed. This may require the help of an attorney. Most of the time, however, you can just inform the creditor that youve filed for bankruptcy and they will contact the court on their end for more information.
What To Do Before And After Filing For Bankruptcy
Being submerged under a huge amount of debt with interest might make it impossible for debtors to repay their financial obligations.
However, filing for bankruptcy can make it possible to get rid of this burden. Despite its negative connotations, filing for bankruptcy is designed to help debtors and creditors alike.
Which Types Of Debt Are Not Subject To The Statute Of Limitations
Under the Ontario Limitations Act, the statute of limitations on most debts expires after two years from the date the account originally became delinquent. However, some amounts you owe are not subject to the statute of limitations, including:
- Government-guaranteed student loans
- Court-ordered debts, such as child support and fines
Its important to note that you cannot discharge some of these debts during bankruptcy. For example, court-ordered obligations are not typically eligible for discharge. You can discharge tax debt unless the Canada Revenue Agency placed a lien on your property. Finally, you can only discharge student loans if more than seven years have passed since you were a student.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
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Keep Up Payments With New Credit Cards
Payment history is the most important factor that impacts your credit score. Its crucial, especially after bankruptcy, to make timely payments once you have new credit.
You can stay on top of your payments by:
- Enrolling in autopay
- Paying off your card multiple times a month
- Setting reminders to make payments
- Arranging your personal finances to help you pay off the full balance each month
Myths About Bankruptcy And Post
Filing for Bankruptcy is a Sign of Weakness & Ineptitude
This myth could not be further from the truth. In reality, individuals who choose to file for bankruptcy are doing something proactive to put an end to their financial woes. Filing for bankruptcy does not mean that you are financially or morally inept. Filing for bankruptcy simply means you are ready to move forward with a reasonable, long-term solution.
Filing for Bankruptcy Can Eliminate All of My Debts
Though bankruptcy can indeed eliminate nearly all debts, bankruptcy does not discharge all debts. Chapter 7 and Chapter 13 bankruptcy each discharge certain types of debts, including credit card debt, business debts, past due bills, collections, and other debts. To learn more about dischargeable and non-dischargeable debts, visit ourDischarging Your Debt page.
Filing for Bankruptcy Will Ruin My Credit Forever
Perhaps one of the biggest misconceptions about bankruptcy, many struggling Americans fail to obtain the help that they need due to embarrassment or humiliation. Though bankruptcy will indeed remain on a credit score for up to 10 years, this does not mean that your credit score will be ruined forever. In fact, with the right support, information, and guidance, you can take steps towards recovering your credit score and living life debt-free –once and for all!
After Filing for Bankruptcy, All of My Finances Will Be Restored
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Hire A Trusted Bankruptcy Attorney In Avondale
If you are struggling with debt, do not let fears about what it will do to your credit score keep you from getting the relief that bankruptcy offers. Talk with a bankruptcy attorney to explore your options. Call My AZ Lawyers today to talk with a bankruptcy lawyer about how Chapter 7 bankruptcy or Chapter 13 bankruptcy may help you. One of our attorneys will review your finances and help you understand which option will benefit you most. Our goal is to help you get the maximum debt relief possible under the law. We represent clients in Phoenix, Tucson, Glendale, and Mesa. Contact us today to schedule a free consultation with a bankruptcy lawyer and learn more.
What To Do If Its Been A Few Days Since You Filed And They Really Should Have Received The Notice From The Bankruptcy Court By Now
If it has been a few days since you filed when you are contacted by a creditor and you have already received the official court notice for your case , find out your creditorâs correct mailing address. This will then allow you to check that information with the information you provided to the court to confirm that the creditor did in fact receive the notice. However, even if it looks like the court sent the notice to the wrong address, you are still protected, and providing the person on the other end of the call your case number should be enough to end future calls.
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Cooperating With The Trustee
Bankruptcy filers have an obligation to cooperate with the trustee throughout their bankruptcy case. Filers will need to provide the trustee with a copy of the tax return for the year the case was filed.
After the meeting of creditors the trustee will file a Report of No Distribution indicating that no funds are going to be distributed to your creditors or a Notice of Claims Bar Date stating the due date for creditors to file claims to receive funds in your bankruptcy. Other than these filings, ideally you will not hear from the trustee after the meeting of creditors.
Whats The Difference Between Chapter 7 And Chapter 13
If youre considering filing bankruptcy, you should understand the options that are out there. Chapters 7 and 13 bankruptcies are the most used alternatives for individuals.
Chapter 7 bankruptcy is also known as total bankruptcy. Its a wipeout of much of your outstanding debt. Also, it might force you to sell, or liquidate, some of your property in order to pay back some of the debt. Chapter 7 is also called straight or liquidation bankruptcy. Basically, this is the one that straight-up forgives your debts .
Chapter 13 bankruptcy is more like a repayment plan and less like a total wipeout. With Chapter 13, you file a plan with the bankruptcy court detailing how you will repay your creditors. Some debts will be paid in full, while others will be paid partially or not at all, depending on what you can afford. Chapter 7 = wipeout. Chapter 13 = plan.
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