Youre Putting Everyday Necessities Onto Credit Cards
Consistently putting groceries or gas on a credit card because you have no available cash is a big red flag that youre on a treadmill of debt. Most people do this because they spend their entire paycheck on debt payments.
This cycle makes your situation worse. You spend $100 on your minimum payment, but you need $100 in groceries, so you charge it to the card you just paid. Your total debt actually goes up from this money trade because of interest.
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 Do I Declare Bankruptcy
You can go bankrupt in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a person bankrupt.
There are several ways to file bankruptcy, each with pros and cons. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.
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How Do I Know If I Should File For Bankruptcy
If you are overwhelmed by your financial situation and things only seem to get worse with each passing month, you may want to consider bankruptcy as a way out. There are plenty of situations where it makes sense to file for bankruptcy despite the consequences.
Here are some reasons to consider filing:
- You have so much debt that it would be impossible to pay it off during your lifetime.
- Youve experienced an extreme loss in income that makes it impossible to repay debts without any help.
- You have been sued for an extraordinary amount of money you cannot repay.
- Your financial situation is grim, and you need a fresh start.
- Collections agencies and creditors are calling you around the clock and you need third-party help.
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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Filing Bankruptcy After Your First Bankruptcy Case Was Dismissed Or Discharge Denied
If your previous bankruptcy did not go through, special waiting periods apply. How long you must wait depends on whether your bankruptcy case was dismissed or denied. In most cases, if your bankruptcy is dismissed, you can file again right away. However, if it was dismissed due to certain factors, such as your failure as a failure to comply with legal requirements, you might need to wait 180 days before you re-file. A prior dismissal could also affect the automatic stay of collection efforts that normally accompanies a bankruptcy filing. If your previous bankruptcy resulted in a denial of final discharge, you are generally eligible to file again immediately.
Filing for bankruptcy is complex, and legal waiting periods make subsequent bankruptcies even more complicated than first bankruptcy filings. An experienced bankruptcy attorney can walk you through the laws and regulations that govern your particular case.;He or she can help you choose; the type of bankruptcy to file that will make the most sense for you. The attorney can explain this complex area of the law in simple terms so that you will be able to completely understand what happens if you file bankruptcy twice.
If you are ready to take the first steps toward financial freedom, call The Law Offices of David M. Offen today at 625-9600 to schedule your free initial consultation. Were here to help you every step of the way.
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You Recently Had A High Income
When you file for bankruptcy, the court looks at your monthly income. However, it determines that monthly income by averaging it over the past six months. It then subjects that average monthly income to the means test, an examination that prevents individuals with a higher-than-average income from using Chapter 7 bankruptcy.
If youre considering filing Chapter 7 bankruptcy, but you recently had a high income from a job you lost, it may be prudent to wait a few months until your six-month average income decreases. Otherwise, you may not pass the means test and your only option will be to file Chapter 13.
Have You Attended Credit Counseling
Another good idea is to go to consumer . These agencies can help you negotiate with your lenders, which can be stressful and ineffective on your own, especially if you dont handle confrontation well. Theyll also help you create a realistic budget and debt pay-down plan and advise you on whether or not to pursue bankruptcy.
Be careful who you go with, though. There are a lot of predatory companies that will take your money without actually helping you. Most reputable agencies are low-cost, and no legitimate agency will promise to wipe out your debts or get your debts forgiven for pennies on the dollar. If someone promises that, run in the other direction. Check this list of approved agencies from the Department of Justice.
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Myth #: People Who File For Bankruptcy Are Stealing And May Go To Jail
Totally False. ;Each year, over one million people choose to file for bankruptcy, whether through Chapter 7 or Chapter 13. ;These are good people, just like you, who are in difficult financial situations.
While there is always a bad seed in every group, the majority of bankruptcy filers are in desperate need of relief and turn to the advantages of bankruptcy to assist them through this difficult time. Whether you lost your job and cant pay your credit cards, or became ill or injured and incurred significant medical bills, you are not a bad person for choosing bankruptcy relief.
Congress created the federal bankruptcy laws to assist hard working people eliminate their debts and move on with their lives. ;If you are facing this type of hardship, our Firm can help.
Determining Whats A Preferential Transaction
Bankruptcy law can set aside the transfer or property or assignment of security during a certain window prior to bankruptcy.
If youve recently sold, transferred, disposed of assets, borrowed money or make big payments to certain creditors, the timing of the bankruptcy could matter as the trustee may have certain obligations to investigate those types of transactions.; If you think any of these types of transactions might apply to you, be sure to discuss them with your trustee before making any decisions about the timing of when to file or whether other options to deal with your debts may be more appropriate.
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When To Stop Digging A Hole You Can’t Escape
Most of us feel we have a moral obligation to pay what we owe if we can.;But typically that ship has sailed by the time people realize they need to consider bankruptcy. They can continue trying to chip away at debts they may never be able to repay, prolonging the damage to their credit scores and diverting money they could use to support themselves in retirement. Or they can recognize an impossible situation, deal with it and move on.
If you can pay your bills, obviously you should. If youre struggling, check out your options for debt relief. But bankruptcy may be the best option if your consumer debt the kinds listed above that can be erased equals more than half your income, or if it would take you five or more years to pay off that debt even with extreme austerity measures.
Heres what you need to know:
You need a bankruptcy attorney: Its easy to make a mistake in the complicated paperwork, and an error could cause your case to be dismissed. If that happens, you end up with no relief but still have;credit scores tanked by the bankruptcy filing.
Dont wait too long: Theres a misconception that people file bankruptcy at the drop of a hat or when they still have other options. The reality for most is quite different. Some drain assets, such as their retirement accounts, that could have been protected from creditors in bankruptcy. People throw good money after bad until they have no money left to seek relief.
Collection Accounts Can Be Removed From Your Credit Report
Im sure youve heard of credit repair; everyone has. But what is credit repair? Its not what you may think; no attorneys are treating to sue collection agencies or using some genius loophole in the system. All credit repair is, is disputing;negative accounts on your credit report with the Credit Bureaus.
The Credit Bureau has 30 days to contact the creditor and verify the accuracy of the account. If they cannot validate the item, it must be removed from your credit report entirely. Paying off collections doesnt help your credit score at all. But, having a collection removed from your report will have a positive impact on your score.
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Can You File Bankruptcy Twice
Considering filing bankruptcy twice? You can.
There is no legal limitation on the number of times you can file for bankruptcy. However, a certain period of time must elapse before a second bankruptcy can be discharged. An exception would be if you did not get a discharge in your previous bankruptcy. In this case there would be no time limit as to when you could file again. How long you must wait depends on the type of bankruptcy you previously filed, the type that you want to file now, and the final disposition of your previous bankruptcy.;You will want to know what happens before you file bankruptcy twice or more.
How Much And How Soon Credit Scores Can Rise
Using data from Equifax credit bureau, researchers at the Federal Reserve Bank of Philadelphia found that filers Equifax credit scores plunged in the 18 months before filing bankruptcy and rose steadily afterward.
Among the findings:
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The average credit score for someone who filed Chapter 7, the most common type of bankruptcy, in 2010 was 538.2 on Equifaxs 280 to 850 range. By the time the filers cases were discharged, usually within six months, their average score was 620.3.
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The other type of bankruptcy, Chapter 13, requires a three- to five-year repayment plan, which most people dont complete. Those who did and got a discharge, though, saw their scores rise from 535.2 to 610.8, the Philadelphia Fed researchers found.
A recent study by FICO, the company that created the leading credit score, found much smaller gains. Median credit scores for people who filed for bankruptcy between October 2009 and October 2010 rose from the 550s before they filed to the 560s afterward, says Ethan Dornhelm, senior director for FICOs scores and analytics group.
After two years, 28% of bankruptcy filers had scores of 620 and above. After four years, 48% had scores of 620 or above, and only 1% scored 700 or above.
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How Bankruptcy Can Make It Hard To Get More Credit
Some lenders will refuse your loan application as long as a bankruptcy appears on your credit report. Other lenders, typically those focused on subprime borrowers, may accept your loan application once your bankruptcy is several years oldbut you can expect them to charge steep interest rates and fees, and to offer relatively low loan amounts or borrowing limits.
Can You File Bankruptcy On Personal Loans
While you can typically file bankruptcy on personal loans, theres a key difference to be aware of if you have an unsecured personal loan with a cosigner.
Under Chapter 13 bankruptcy, creditors usually cant call your cosigner during your bankruptcy period. Under Chapter 7, creditors can continue to contact your cosigner for payment.
In other words, your cosigner has greater protections under Chapter 13 bankruptcy than under Chapter 7.
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When Bankruptcy Is The Best Option
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Bankruptcy isnt the end of the world. It may even be good for you.
Bankruptcy stops collection calls, lawsuits and wage garnishments. It erases debt. And despite what youve heard, bankruptcy may help your credit scores.
But thats not the whole story.;Most people struggle so long with their debt that their credit is already battered by the time they file for bankruptcy. And once they do, their scores typically rise, not fall. If the debt is erased which is known in bankruptcy court as a discharge scores go up even more.
Within a year, youre way better off, says Jaromir Nosal, assistant professor of economics at Boston College, who co-authored a study for the Federal Reserve Bank of New York about the effects of bankruptcy. Its a pretty rapid rate of recovery.
When To Move Forward With Bankruptcy
If none of the above situations apply to you, bankruptcy may be a viable option. And if your debt is spiraling out of control, dont wait too long to declare it.
Below are a few red flags that can indicate your current financial situation is untenable. In these cases, bankruptcy may offer the only way out.
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You Could Become Homeless
Once you file bankruptcy, the option to buy a home could be off the table for seven to 10 years as well, though there are ways you can try to overcome the situation. More important, filing bankruptcy may lead to a future filled with declined rental applications. Many landlords will check your credit before they approve you for a lease arrangement. Having a bankruptcy is usually a red flag that you could be a risky tenant who wont pay rent.
So Is Filing For Bankruptcy Bad For Credit
Most people have heard things like:
- Bankruptcy is a 10-year mistake or
- You will never be able to get credit again
This is not true.
Most of my clients get new offers for credit in the month between when I file their cases and when their hearing is scheduled.
All of my clients are surprised to see these offers, but to me it makes perfect sense.
Heres why.
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