Talk About Bankruptcy

If you are in the position where you are considering whether or not to file bankruptcy, you are probably thinking about your future credit options. Bankruptcy should be your last option when you are in debt, as you will find that your credit takes an even bigger hit when you file. However, this does not mean that you won’t get the chance to start over again once you file and get everything squared away. Always find professional help to hear all of your options, but if bankruptcy is all that you can do, you should know your financial world is not completely dead to you in the future. There is credit after bankruptcy.

There are some companies that will extend you credit after bankruptcy for the simple reason that they know you need it, and they also know there is an extended time between filing and when you might be able to file again. That means early on they know they have a better chance of getting their money out of you because you will not be able to turn around and file again if you default. They know you are a risk, however, and that means any credit after bankruptcy that you get will have a higher interest rate and higher penalties on late or missing payments.

You may even find that some of the companies that just lost out to you will try to offer your credit after bankruptcy. This happens when your debt is discharged and you are no longer in their system. Some companies are so large that they don’t keep track of these old debts that have been written off, and you could be anyone to them. The same rules will apply with this credit after bankruptcy. You will pay more for the privilege of having credit through them, even if they don’t remember that you have already been a customer.

When you are looking for credit after bankruptcy, remember that you have to use your head. You filed bankruptcy because your credit was bad, and you had no way to reasonably pay off all of your debts. If you have filed, you may not be in a better position, and getting credit directly after bankruptcy could put you back in the hole sooner than you think. It doesn’t make any sense to file and then put yourself right back where you started. Think about things before you do them, and make sure you know you are in a better financial position before you attempt any type of credit situation. If you need to, get help with budget, spending habits, and how to save your money for the future. Consumer credit counseling is always a smart idea in these cases.

One of the main purposes of Bankruptcy Law is to give a person who is hopelessly burdened with debt a fresh start by wiping out his or her debts. Under Chapter 7 Bankruptcy the debtor receives a discharge on all dischargeable debts. There are 19 general classes of debt that are discharged under Chapter 7 Bankruptcy.

Chapter 7 bankruptcy, which is sometimes call a straight bankruptcy, is a liquidation proceeding. A trustee is appointed. The debtor turns over all non-exempt property to the bankruptcy trustee who then sells it for cash which is then given to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose, so Chapter 7 will give that person a relatively quick “fresh start”. Chapter 7 is different from other bankruptcy filings because the debtor needs not make a payment to the trustee.

An added advantage with Chapter 7 bankruptcy is that by signing a reaffirmation agreement a debtor is allowed to keep certain property by continuing to pay for a car loan or a mortgage on their home. This agreement is possible because under the US Government Bankruptcy Code a debtor could be allowed to retain some or all of his property.

Even though in some cases a Chapter 7 bankruptcy would mean that you will lose all your assets, this need not always be the case. It is strongly recommended that if you are apprehensive and feel you will lose your assets, discuss the matter with your Bankruptcy Attorney.

Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover (repossess) the property secured by the lien.

If you file under Chapter 7 you must undergo a “means test” to qualify for Chapter 7 bankruptcy. This is how the IRS determines who can or can’t file. Your income and expenses are examined to see how they compare to the standard for your area as set by the IRS.

For example, if you earn less than the median income for a family of your size in your state, you can file for Chapter 7 bankruptcy. However, if your income from the last six months is greater than the median income, and you can pay at least $6,000 over five years or $100 a month, toward your debt you can’t file for Chapter 7.

As soon as you file for bankruptcy, creditors are prevented from trying to collect on your debts through an “automatic stay.” The stay preserves your property and gives you a break from being sued. It’s very important to note that Chapter 7 will not stop repossession or a foreclosure. Automatic stays don’t cover failure of making back payments. Only by filing Chapter 13 can you delay a foreclosure.