How to Buy a Home After Bankruptcy

Declaring Chapter 7 or Chapter 13 bankruptcy is often devastating and can turn your home buying plans upside down.

Going into bankruptcy shuts down your ability to borrow money or use a credit card, severely lowering your credit score. It will take some time to build back enough credit to apply for a new credit card or to take out a mortgage on a home. However, with proper preparation, patience and financial planning, you might be able to purchase a home sooner than expected.

Discharge and Organize
First things first: The bankruptcy must be discharged. If you are still in the process, or if you are still in credit counseling or any other program that takes over your finances, no mortgage lender will speak to you.

Once your bankruptcy is discharged, organize and scrutinize your credit report. If there are debts that have been paid back but still appear on your report, contact the credit agency and have them corrected. While you’re at it, check for other mistakes on your credit report. You are entitled to one free credit report from each of the big three credit rating agencies each year—Equifax, Experian and TransUnion. If there is an error, dispute it online via the particular credit agency’s website.

Use Secured Credit Cards and Installment Loans
The fastest way to start rebuilding your credit score after a bankruptcy is to prove to creditors and other lenders that you can be trusted to pay back the money you owe them. You can do this two ways: secured credit cards and installment loans.

A secured credit card gives you credit limited to the amount you have on deposit with the issuing bank. So, if you have $20 to $500 to place in an account with the issuing bank, then the bank will limit your credit each month to the amount of that deposit.

An installment loan is simply one where you make installment payments each month. It can be a personal loan, car loan or student loan. If you get an installment loan, then you only need to do one thing: make your monthly payments on time.

More Tips to Remember While Building Credit

• Use only a small portion of your credit. Don’t max out your credit cards and don’t apply for too much credit at one time.
• Move slowly and build up your credit with on-time or even early payments. When possible, pay back more than the monthly minimum.
• Pay all your bills on time and save money.
• Stay at the same job for a good length of time.
• Remove any outstanding tax liens.

Wait at Least Two Years
Here’s where you will need patience: You should wait at least 24 months after your bankruptcy is discharged to apply for a mortgage. You may be able to get a mortgage sooner but the terms, like interest rates, won’t be as attractive as they would be if you waited two years. Since you might be paying that mortgage interest for up to 30 years, you will save money if you wait long enough after the discharge to get a good interest rate.

Finally Applying For a Mortgage
After the two-year period, make sure you are fully prepared to apply for a loan. Your lender will want you to meet certain criteria before agreeing to lend you money: A good debt-to-income ratio, stability and time on the job. Money in the bank and no bounced checks help tremendously, of course. Any retirement plans or 401(k) assets makes your credit look good as well.
And remember, a big down payment carries a lot of weight. Keep that in mind during the two-year waiting period and save as much as you can.

Realtor.com

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Medical Bankruptcy: A Growing Phenomenon

The problem of medical expenses in the U.S. economy has been gradually (and sometimes not so gradually) increasing over the past 50 years.
In recent years, that growth has accelerated to the point that in 2003, medical costs made up more than 15% of the U.S. Gross Domestic Product (GDP). If we continue as expected, that percentage could grow to approximately 33% by 2040.

Medical Bills Are Often a Key Cause of Bankruptcy

People who've experienced an illness or injury and found themselves buried in bills (even if they have health insurance) may consider >filing bankruptcy as a way to get out of debt.
Although people tend to have a lot of questions about filing bankruptcy, bankruptcy was created to help people resolve overwhelming bills so they can move forward.

There are two main types of personal bankruptcy: Chapter 7 bankruptcy (debt discharge) and Chapter 13 bankruptcy (debt repayment plan).

Chapter 7 bankruptcy involves the debt discharge, which eliminates unsecured debts, which are debts not tied to property, such as medical bills, credit cards, utility bills and some personal loans.
A Chapter 13 bankruptcy filing is a little different, because it involves setting up the filer on an interest-free debt repayment plan. This is generally best for people who have unsecured debt and secured debt, which is debt tied to property, such as a mortgage, that they want to keep. Chapter 13 bankruptcy has helped millions stop foreclosure, repay their debts and stay in their homes.
When you or a loved one is injured or ill, what's important is focusing on getting better--not worrying about excessive medical bills.

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What Does It Mean to Have Judgment Filed Against You?

Are judgments considered secured debt? Or, are they only considered secured to the point of being a lien above and beyond any exemptions? Isn’t a judgment simply a finding by the court that you owe a debt? I am particularly interested in how judgments are dealt with in a chapter 13. I’m trying to avoid filing a 13 while I wait to see what happens with my income (up or down), and I could feasibly live through a few months of wage garnishments if necessary. However, if judgments themselves create a problem, maybe I should just file?

A judgment refers to a decision by a court that has been entered into the public record. Before a judgment can be issued, a lawsuit must be filed against you. If you do not file an answer to the lawsuit within the time period required by law (usually 20 to 30 days after service of the lawsuit on you), the plaintiff can ask the judge to issue a “default judgment.”

You can also negotiate a “consent judgment” with the plaintiff – in a collection case, a consent judgment usually includes payment terms. You can also file an Answer to the lawsuit and go to trial. The decision by the judge or jury – whether favorable or unfavorable – will be set out in a judgment.
If a judgment has been issued against you in a collection case, your creditor becomes a secured creditor instead of an unsecured creditor. Secured creditors have more rights than unsecured creditors. In most States, a judgment creditor can satisfy its judgment by garnishment against your bank account or your wages, although in some States (such as California), the judgment creditor must take additional steps to have the right to take your property away from you.  A judgment creditor can also place a lien against any real estate that you own in the public record. This lien will encumber your property and will need to be paid before you can sell your real property.

Every State has its own rules about how much a judgment creditor can seize from you at any one time and about the judgment creditor’s rights against real and personal property. In Georgia, where I practice, the process by which a judgment creditor can move against a judgment debtor is relatively fast and not particularly burdensome. In other States, the judgment creditor must expend time and money to secure its judgment. California bankruptcy lawyer Cathy Moran writes that judgment creditors must file additional court paperwork before it can excercise their rights against California judgment debtors.

In a Chapter 13 bankruptcy, a judgment creditor has the right to file a secured claim. Typically, secured claims are paid in full in a Chapter 13 and they are paid before unsecured creditors.
In some jurisdictions, debtors routinely file a motion in bankruptcy court to avoid the lien. This procedure varies depending on where you live.

A judgment will also appear on your credit report and can negatively affect your credit score.
I think it is dangerous to have one or more outstanding judgments pending against you. While bankruptcy is not always the best option, I think it would be wise to at least discuss your bankruptcy options and the potential dangers inherent in judgment collection with a qualified bankruptcy lawyer.
by Jonathan Ginsberg

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When Can I File Bankruptcy Again?

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There is no limit on the number of bankruptcy cases that one may file. In fact, there is no limit in between time frames to file bankruptcy. Nevertheless, if sufficient time between filings does not take place, you may be not be eligible for “discharge.”


So if a bankruptcy case is filed too soon, even though it will not be dismissed, a discharge may not take place. Why would anyone do this? Well there are several reasons to name a few.
If enough time has not taken place, but a debtor wants to eliminate their debt in a subsequent chapter 7 and has sufficient assets to do so, filing another case may be a good idea. Suppose a debtor has a messy asset(lawsuit, insurance claim, etc) but wants to use that to pay creditors. By filing another chapter 7, the trustee can liquidate that asset to pay the debts. Although the debtor may not be getting top value for the asset since the trustee only cares about getting enough money to pay the creditors, it may be worth the peace of mind for the debtor in not dealing with the asset and having the trustee in charge of converting it to dollars.

Or, maybe a debtor recently filed a chapter 7 and has remaining non-dischargeable student loans or taxes. The debtor could then file a subsequent chapter 13 and be protected for the next 5 years without any worries of lawsuits, levies, or wage garnishments, even though at the end of 5 years no discharge is entered. Then, maybe at that date, the debtor might also be eligible to eliminate the debt in another chapter 7 or 13.

In a nutshell, the time frames between discharge eligibility are as follows:

8 years between 7s. -727(a)(8)
2 years between 13s. -1328(f)(2)
4 years between a 7 and 13 -1328(f)(1)
6 years between a 13 and 7(if under 70% plan). -727(a)(9)

The time is counted from filing to filing — not from first discharge to second filing.
So don’t immediately give up on bankruptcy relief just because not enough time has passed. With a little pre-bankruptcy planing and creative filing techniques, you and your attorney can probably get you the relief you need!

Written by Michael G. Doan

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How to get student loans forgiven

Conventional wisdom has it that student loans, whether federal or private, are impossible to walk away from. However, recent research shows that's not the case. Jason Iuliano, a Princeton political science Ph.D. student who also has a degree from Harvard Law School, did a comprehensive search of bankruptcy cases in which borrowers sought to discharge student loans; he found that in four out of 10 cases, judges erased all or part of the debt. Here's the rub: Only 0.1 percent of student loan borrowers who declared bankruptcy actually tried to get their loans forgiven!

If you or a family member are struggling under financial pressures and have student loan debts that you can't pay, you should first pursue a break from payments, known as deferment or forbearance, or an income-linked repayment plan such as Pay as You Earn, which I discussed in a previous column. However, here's what you need to know about taking the last resort to get rid of your debts.



Student loans aren't dischargeable under normal bankruptcy proceedings. You have to file a separate suit, called an adversary proceeding, that is like a mini-trial within a bankruptcy case.

Most courts use something called the Brunner test to decide if your student debts cause you "undue hardship," which is necessary for getting all or part of the loans written off. The Brunner test requires proving three things in your adversary petition: first, that you cannot maintain a minimal standard of living for yourself and your dependents while making your loan payments; second, that this situation is likely to persist (sometimes called the "certainty of hopelessness"); and third, that you have made a good-faith effort to repay your loans. Typically, the lender, like Sallie Mae, offered the borrower a settlement out of court. He believes that if more people were aware of the adversary proceeding option, there would be far more cases of getting federal loans forgiven.

If you have private (sometimes called "alternative") student loans, Richardson has a final piece of advice. Private lenders are usually pretty unwilling to negotiate. "You have two choices: pay or not pay," he says. And the loans, like federal loans, are not discharged in bankruptcy. However, if you really can't pay, the lender will have to take you to court and get a judgment in order to collect. After a few years, if the bank doesn't take the time to pursue you, the statute of limitations on the unpaid debt will run out. And seven years after you first go into default, the incident should be expunged from your credit report. In no way is this a recommended course of action, but if you truly have no other choice, it's good to know that your life doesn't have to be over because of an ill-considered student loan.

By Anya Kamenetz, Tribune Media Services | The Savings Game

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Credit Repair Scams

Common Credit Repair Scams

Getting a New Social Security Number - Individuals are only permitted to have one Social Security number. It is against the law to use a different Social Security number to create a false identity.

Getting a Federal Employer Identification Number (abbreviated as EIN or FEIN) - Proponents of this "file segregation" scam claim that you can obtain a federal tax ID number, as if you are a business, then get a clean credit record under that tax ID number. It is against the law to use an EIN to set up a false identity. Further, a new credit report under an EIN will not show any credit history. It is unlikely that a creditor would regard a new business with no credit history as a good credit risk.

Challenging Every Negative Entry on a Credit History - As a general rule, it is lawful for credit agencies to keep accurate records of negative entries on your credit history for up to seven years, and to keep records of any bankruptcies for up to ten years. There are certain circumstances where truthful negative information may be reported beyond those time periods. As much as you do not like having negative information on your credit report, your ability to object to inaccurate information is not meant to be a license to harass honest creditors in an effort to remove accurate negative entries.

Common Misrepresentations by Credit Repair Companies

"If you have declared bankruptcy, you can't get credit for ten years" - The truth is you can start building a positive credit history as soon as your bankruptcy is resolved. While creditors will be cautious at first, you can gradually demonstrate your fiscal responsibility, and build a history that can lead lenders to view you as a good credit risk long before the bankruptcy drops from your credit history.

Warning Signs of a Bad Credit Repair Company

Do not use any credit repair company that doesn't follow industry standards or regulations.
Do not use a credit repair company that offers to "wipe out bankruptcies", to remove accurate negative information from your credit history, or to obtain credit for you regardless of your credit history.
Do not use a credit repair company that promises to exploit "secret" or "little known" loopholes in the system to remove information from your credit history.
Do not use a credit repair company unless it provides a written disclosure of your rights in relation to your credit history before asking you to sign a contract. The contract should include all the terms and conditions of payment, a detailed description of the services to be provided, including any guarantees of performance and an estimate of how long it will take to perform the contract. The agreement should also include a right to cancel lasting at least three days, in case you have second thoughts.
Do not use a credit repair company that attempts to charge money before it has performed the credit repair services.
Do not use a credit repair company that discourages you from directly contacting the major credit bureaus.

Removing Inaccurate Information From Your Credit History

Although the process can be slow, it is relatively simple to object to inaccurate information on your credit history.

After you obtain a copy of your credit report, review it for any inaccuracies. If you don't understand some of the entries on the report, ask the credit reporting agency what they mean.
Once you have identified any inaccurate entries, notify the credit bureau about the entries you believe to be in error, providing as much information as you can about the error. For example, if you paid a debt which is reflected on your credit report as delinquent, you may wish to provide a copy of a cancelled check reflecting payment. Once you make the report, the credit agency is responsible to investigate any errors at no expense to you, and to either verify the information in the credit report or to remove any information that is inaccurate or which cannot be verified.
You may also contact creditors directly, to let them know of any errors, and to ask that they correct their records and forward accurate information to the credit reporting agencies.
If you are unable to obtain the removal of information from your credit report, and still object to its inclusion, you may submit a written objection (up to 100 words in length) to the credit reporting agency, explaining your side of the story. The explanation will be included in your credit report, and will be distributed to anybody who obtains a copy of the report.

By Aaron Larson

Wage Garnishment Must Stop After a Bankruptcy Case is Filed; You Might Even be Able to Get Money Back

Bankruptcy Stops Wage Garnishment

The minute a bankruptcy cases filed,an injunction called the automatic stay is issued, which prohibits creditors from trying to collect on debts that were included in the bankruptcy. The Ninth Circuit Court of Appeals has called the automatic stay “one of the most important protections in bankruptcy law.” The automatic stay is self-executing, effective upon the filing of the bankruptcy case and requires that all collection calls, lawsuits and garnishments must stop immediately. Creditors who continue with collection efforts face stiff fines and penalties from the bankruptcy court. Section 362(k) of the Bankruptcy Code provides:

An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

Reference National Bankruptcy Forum

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How Long Does it Take to File Chapter 7?

Typically, a Chapter 7 bankruptcy case is relatively quick to complete. Your bankruptcy case could be completed and discharged within 3-6 months of filing bankruptcy.

However, there are some important dates that can affect your right to file a case and obtain the relief available. The following filing timeline illustrates the relevant dates in the typical Chapter 7 bankruptcy case. We can help you see what details may affect your case.

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Filing Bankruptcy puts an Immediate Halt to Wage Garnishment

Filing Bankruptcy puts an Immediate Halt to Wage Garnishment

Struggling with debt can often go from manageable to a tailspin in a heartbeat. One of the most common ways this happens is when a creditor wins a judgment and is allowed to start garnishing your wages.

Millions of Americans live paycheck to paycheck, just barely keeping their heads above water. When a creditor begins taking money directly out of that paycheck, it becomes difficult to keep everything afloat.

Luckily, there is a legal option against aggressive creditors. Bankruptcy is designed to stop creditor collection efforts, including wage garnishment. If your paycheck is getting "hacked", talk to us about your legal options!

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Bankruptcy Basics

If you are thinking about filing for Bankruptcy, we understand how frustrating and complicated the process can be. If you are facing foreclosure, wage garnishments, harassing creditor calls, or just overwhelmed with debt. At BankruptcyLawfirms.com, our attorneys can represent you in all phases of your bankruptcy proceeding. They can walk you through every step of the way and keep you informed of everything you need to know about bankruptcy (Chapter 7 bankruptcy and Chapter 13 bankruptcy), as well as other alternatives for managing your debt. If you are filing for bankruptcy for the 1st time, we understand what you are going through, especially if you consider yourself a responsible hard working individual.

We know how the law works, what it can (and can't) do, and whether bankruptcy might be a good option for you. We are here to help you. You will receive a Free Evaluation to find out how bankruptcy works, what it can (and can't) do, and whether it might be a good option for you. You will talk to an attorney directly with specialized knowledge and experience in all areas of bankruptcy law.
We have the largest network of licensed bankruptcy attorneys across the United States. After selecting an attorney, you will receive one-on-one personal attention during the entire process. Let the law work for you and file for bankruptcy protection with someone you can trust.

Types of Bankruptcy

As an individual filing for bankruptcy, you'll most likely choose between two types: Chapter 7 and Chapter 13. Chapter 7 involves the liquidation of assets in order to pay back creditors, while Chapter 13 revolves around debt consolidation. Depending on your financial situation, our attorneys want to help you protect all of your assets. We will work on a custom plan to determine which bankruptcy is right for you.

Once you have made the decision to retain a bankruptcy attorney, going forward, you will no longer need to speak to your creditors. Your attorney, on your behalf, will effectively put an end to those annoying, harassing phone calls and letters. Once your attorney has filed on your behalf, "Automatic Stay" goes into effect. This will halt all actions by creditors to collect debts during the bankruptcy process.

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In the News

ALBUQUERQUE, N.M. (AP) - A federal judge has ruled that employees of the Roman Catholic Diocese of Gallup can continue to be paid and receive benefits during bankruptcy protection proceedings.

The Albuquerque Journal reports that a Bankruptcy Court judge issued the order Friday during a hearing on the diocese's filing last week for Chapter 11 reorganization.
The diocese had announced in September that it planned to file in bankruptcy court because of mounting claims of clergy sex abuse.

The diocese includes parishes in six counties in New Mexico, three counties in Arizona and seven American Indian reservations.

Diocese attorney Susan Boswell says 105 people have been identified who may file claims in the case. Claimants attorney James Stang says fairness, justice and healing are issues in the case along with money.

Read more: http://www.myfoxphoenix.com/story/23997256/pay-continues-for-employees-during-bankruptcy-case#ixzz2l7Gz9Ald

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You've declared bankruptcy. Now what?

Life after bankruptcy

• Adopt a no-frills lifestyle.
• Rebuild good credit.
• Pay all bills on time.
• Build up a savings account.
• Get a credit card and pay off every month.
• Focus on the end result: free of debt.

You have a fresh start, and some new challenges. Your credit rating, which probably wasn't all that great already, has taken a hit. The bankruptcy will stay on your credit report for 10 years. Lenders see you as a bad risk because you've legally written off at least some of your past debts. For a period of time you may not be able to get a loan or credit card. Once you do, the interest rates and fees attached will be punishing.

"The purpose of filing is a safety valve," says Roger M. Whelan, resident scholar of the American Bankruptcy Institute, a nonprofit professional organization. "Thank God, the day in which it was like wearing a blazing star on your forehead is over."

Slimmed-down lifestyle

If you've filed a Chapter 13, it means you're paying off some of your debts in what's known as reorganization. For three to five years, the court allows you a set amount to live on and a court-appointed trustee divides the rest among your creditors each month.
That means a very no-frills lifestyle. Sometimes it means changing the basics in your life, like how much you pay for shelter and groceries every month. And you can't take on new debt like a credit card or car loan without the court's permission. At the end of reorganization, your obligations are gone and your money is yours again. But the fact that you've declared bankruptcy, even though you paid back at least some of your debt, will stay with you for 10 years from the date you filed your case.

If you filed a Chapter 7, you walked away from most of the debt. Your salary is yours, if you have one, but the bankruptcy stays on your credit reports for 10 years. You have to start living on cash, rather than counting on any form of credit, and building an emergency fund is key.

It's the double-edged sword of post-bankruptcy life: mismanaging credit may have gotten you into trouble (or just magnified other problems), but you have to get credit to rebuild your financial life. After your bankruptcy has been discharged, you need to re-establish good credit, right away for a Chapter 7 or after reorganization for a Chapter 13. The rule of thumb: there are no rules. How fast you build back your credit will depend on a lot of factors that vary widely.

It also depends on what resources you have. Obviously, if you have a high-dollar income, you have an edge. If you managed to hang on to your house, paying your mortgage on time will improve your credit report, so long as you reaffirmed the loan while your bankruptcy case was active. If you did not reaffirm the loan, the lender will not report future payments to the credit bureaus.

Ironically, people who file a Chapter 7 may have an easier time re-establishing credit.

Courtesy Bank Rate

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What exactly is bankruptcy? Will it wipe out all my debts?

What exactly is bankruptcy? Will it wipe out all my debts? Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as "liquidation" (Chapter 7) or "reorganization" (Chapter 13). Under a Chapter 7 bankruptcy, you ask the bankruptcy court to wipe out (discharge) the debts you owe. Under a Chapter 13 bankruptcy, you file a plan with the bankruptcy court proposing how you will repay your creditors. You must repay some debts in full; others may be repaid only partially or not at all, depending on what you can afford.
When you file either kind of bankruptcy, a court order called an "automatic stay" goes into effect. The automatic stay prohibits most creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections.

Certain debts cannot be discharged in bankruptcy; you will continue to owe them just as if you had never filed for bankruptcy. These debts include back child support, alimony, and certain kinds of tax debts. Student loans will not be discharged unless you can show that repaying the debt would be an undue burden, which is a very tough standard to meet. And other types of debts might not be discharged if a creditor convinces the court that the debt should survive your bankruptcy.

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Advice on Bankruptcy & Foreclosure

Foreclosure and bankruptcy can be two of the most formidable problems a homeowner can face. If you’re close to either one of these possibilities, it probably means you’re in serious financial difficulty. The concepts are daunting, but understanding the process of both concepts–and knowing to whom you should turn in this crisis–could make all the difference in emerging from both without losing everything.

Talk to the Bank

The Federal Trade Commission recommends talking to your lender as much as possible when you fall behind on your mortgage payments. Your lender will likely ask questions such as why you fell behind on your payments and whether your problem is short term or long term. Keep notes from the conversation, follow up on any requests your lender makes and meet any deadlines your lender gives you. The more you talk to your lender, the more time you may have to save your home or delay the process of either foreclosure or bankruptcy.

Know Your Options

The FTC outlines several options that don’t involve traditional foreclosure or bankruptcy in order to keep your home. You can negotiate a repayment plan with your lender. You can file for a forbearance, which suspends mortgage payments for a time while you save the money to catch up. You can apply for loan modification, either through your lender or through government programs designed for mortgage relief. There are also ways to avoid both foreclosure and bankruptcy, but they involve giving up the property through a traditional sale, a short sale–where you sell and your lender forgives the shortfall–or a deed in lieu of foreclosure, where you sign the home over to the bank.

A Serious Choice

If you have fallen behind at least 90 days on your home payments, you have a decision to make, which may involve either declaring bankruptcy or having the bank foreclose on your home. At the 90-day point, your bank can begin the foreclosure process. Neither choice is a great option, according to John W. Schoen, a senior producer for MSNBC. Of the two, bankruptcy is likely to stay on your credit longer, up to 10 years. Foreclosure stays on your credit report for seven years. Schoen quotes a Dallas-area financial counselor as saying that banks look at foreclosure with greater wariness than bankruptcy when determining loan eligibility after the fact. Most experts advise avoiding either scenario, if possible.

If You File, When To File

Once the foreclosure process begins, there isn’t much you can do to stop it, aside from making the loan right. But one way to delay it is to file bankruptcy, because it comes with an automatic stay. Once you file for bankruptcy, your creditors cannot continue to pursue actions against you to reclaim your debt until your case is resolved. This action probably won’t save your home if you file for a Chapter 7 bankruptcy, which liquidates all non-exempt assets, but it can delay the foreclosure process for up to three months. But you must file before your home is sold in a foreclosure auction, or the bankruptcy will do you no good.

Bankruptcy Basics: When should you throw in the towel?

Bankruptcy is a scary proposition. The word "bankruptcy" itself sounds so ominous. The media bombards us with nightmare tales of seemingly solid business giants going from bedrock to bankrupt. The list of the bankrupt runs the spectrum from personal to corporate bringing together the likes of Donald Trump with Enron.

And gossip columns never tire of dishing on the latest celebrity inches from bankruptcy whether it's Gary Coleman or Mike Tyson having to part with his pet tigers. You might even fear that you're a few steps from going under. After all, we live in an economy in which credit card offers clutter our mailboxes. And living in debt is an accepted norm. But, just how can you tell when it's time to throw in the towel and declare bankruptcy?

Here are a few questions to help you assess your financial danger zone:

• Do you only make minimum payments on your credit cards?
• Are bill collectors calling you?
• Does the thought of sorting out your finances make you feel scared or out of control?
• Do you use credit cards to pay for necessities?
• Are you considering debt consolidation?
• Are you unsure how much you actually owe?

Assess Your Situation
If you answered yes to two or more of those questions, you at least want to give your financial situation a little more thought. Simply put, bankruptcy is when you owe more than you can afford to pay.

To determine where you are financially, inventory all of your liquid assets. Don't forget to include retirement funds, stocks, bonds, real estate, vehicles, college savings accounts, and other non-bank account funds. Add up a rough estimate for each item.

Then, collect and add up your bills and credit statements. If the value of your assets is less than the amount of debt you owe, declaring bankruptcy may be one way out of a sticky financial situation. However, bankruptcy shouldn't be approached casually. After all, it's not a simple, easy cure-all for out-of-control debt.

Courtesy Legal Zoom

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Debt Collectors Calling?

Bankruptcy's Automatic Stay

When a person files for bankruptcy, they usually receive immediate protection from creditors through a special court order known as the bankruptcy automatic stay.
This means creditors must stop collection efforts.

The Stay is Designed to STOP Debt Collectors

The automatic stay in bankruptcy was designed to:

• HALT foreclosure
• STOP repossession
• SILENCE creditors
• STOP many lawsuits & wage garnishments

Sound like the kind of help you need? Ask a bankruptcy lawyer if filing bankruptcy and could help you.

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Does Bakruptcy Help?

How Does Bankruptcy Help?

Bankruptcy is designed to provide unique help in a number of ways, but a primary benefit of bankruptcy for many filers is the potential to eliminate their debts.

Filing bankruptcy often acts as a financial cleanser, scrubbing unsightly debts from people's records and allowing them to start fresh with a clean financial slate.

In addition to debt relief, any discussion of how bankruptcy helps people in debt would be incomplete without referring to bankruptcy's ability to stop home foreclosure.

As banks and other lenders force more and more Americans out of their homes, bankruptcy's potential to prevent foreclosure has become increasingly important.

How does Bankruptcy help stop foreclosure?

How Does Bankruptcy Help Stop Foreclosure?

There are two common types of personal bankruptcy, Chapter 7 and Chapter 13. For people trying to stop home foreclosure, Chapter 13 may be the more powerful choice.
In Chapter 13 bankruptcy, a filer works with the bankruptcy court to create an affordable debt repayment plan. Under this repayment plan, filers pay off debts, including mortgage debts, to their creditors over a course of three to five years.
That, in a nutshell, is how Chapter 13 helps eliminate debt. Here's how Chapter 13 could help stop home foreclosure:

• Automatic stay. Immediately after a person files for Chapter 13, the automatic stay kicks into action. This court order usually temporarily halts foreclosure actions that have been initiated against a filer's home.
• Payment plan. Under the Chapter 13 payment plan, a filer can usually stretch out overdue mortgage payments in a more reasonable payment schedule. This may also allow filers to keep their homes.
• Discharged debts. Once mortgage payments are completely current through the repayment plan, some unsecured debts may be discharged at the end of the process, allowing a person to free up money to continue making regular mortgage payments, rather than pay other debts.

As you can see from the information listed above, there are several potential ways that filing bankruptcy could help stop foreclosure.

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What do I have to do first if I am considering bankruptcy?

In April 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act officially amended the U.S. Bankruptcy Code and is now recognized as the uniform federal law that governs all bankruptcy cases. Today, you must take each of the following steps to officially file a bankruptcy claim:

• Choose and file for a specific type of bankruptcy. There are two types of bankruptcy for individuals or personal bankruptcy — Chapter 7, where your assets are sold off to pay creditors, and Chapter 13, where you can develop an interest-free repayment plan. You must apply for one type or the other, and your eligibility for each is based on your reported income when you file.
• Arrange for official credit counseling. New laws require that you must work with a licensed counselor for the bankruptcy filing to be legitimate.
• Attend a meeting of your creditors. In almost all personal bankruptcy cases, this is the only official proceeding you must attend. Informally called a "341 meeting" (named after section 341 of the Bankruptcy Code), it's designed for you to meet directly with your creditors so you can answer specific questions about your overall debts and property. This meeting usually takes place 20 to 40 days after you file the claim.

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Things NOT to Do Before Bankruptcy

Things NOT to Do Before Bankruptcy

When considering the dos and don'ts before bankruptcy, avoiding actions on the "prohibited" is quite important. Why is this so? Because making poor decisions before bankruptcy may prevent you from getting debt relief.

So, here are some decisions to avoid:

• Transferring assets out of your name. This raises a huge red flag in bankruptcy court, especially if the transfer occurs right before bankruptcy. Plus, hasty asset transfers may be financially risky or even illegal.
• Using a credit card for a large cash advance. Some people decide to max out their credit cards before bankruptcy because they fear losing credit later, or because they assume the debt will be swiftly discharged. If someone does this with no intention of paying the money back, it is considered fraud and punishable by law.
• Paying off a "favorite" creditor. While banks and credit card companies can be seen as faceless entities, it's more difficult when you owe money to someone you know and see regularly. Many people going into bankruptcy try to settle debts with friends or family members as a "favor" to that person. But the court no only frowns on this practice, they may make that person give back the money so other creditors get their fair share.
• Making large purchases. Even though you may be able to eliminate debt in bankruptcy, buying expensive items outside your price range could put you in hot water.

Don't assume that bankruptcy will spare you from all foolish purchases. Before filing bankruptcy, make sound financial decisions. Rash purchases, financial sleights-of-hand, and sneaky credit tricks will usually come back to haunt you.

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