In Chapter 13 bankruptcy, you propose a repayment plan to your creditors, and it generally lasts three to five years. It offers to pay all or part of your debt from any future income you earn. You can use Chapter 13 to make up missed car payments, pay back taxes you owe, prevent a bank from foreclosing on your house, keep non-exempt property that you deem valuable, stop interest from gaining on your tax debt, and much more. When you follow the terms of your agreement to repay your debts, all of your remaining dischargeable debts would be released at the end of the repayment period. The monetary amount assigned to creditors under a Chapter 13 bankruptcy must be equal to the amount they would have received if a Chapter 7 bankruptcy had been filed. To file Chapter 13 bankruptcy, you must have a “regular source of income” and disposable income to apply towards your repayments.

Normally, a chapter 13 bankruptcy is used when you want to keep secured assets, such as a car or house, where you have more equity in the secured assets that you can protect by using your bankruptcy exemptions. It’s a reorganization of the debts you owe your creditors that are not non-dischargeable debts.

A Chapter 13 bankruptcy allows you to make up your overdue payments over time and to reinstate your original repayment agreement. It may also be a better option when you have a valuable non-exempt property that you wish to keep. To keep a non-exempt property, you must pay the creditor for the value of the property.

An exemption limit would apply to any equity you have in the property. Equity is simply a difference between the value of the property and what you owe on it. For example, if you have a truck valued at $10,000 with a loan of $8,500, the truck only contains equity of $1,500. When you have a property that is held by a loan, the equity you own in that property is covered by your exemptions. That is if you are up-to-date on your payments. Also, if you choose to keep making your normal payments on the loan, you can keep the property throughout and after your bankruptcy term is complete. If the equity is not covered by your exemptions, your creditor may choose to sell off that asset and then distribute the money resulting from the sale. In this case, you would be entitled to the value of your exemption in the sold-off asset as a cash payment. Current bankruptcy laws allow a married couple filing together to each claim a full set of exemptions, meaning more property can be protected.

The non-dischargeable debts you cannot erase in bankruptcy include debts for personal injury/death caused by DWI/DUI, back child support, alimony, debts related to family support, student loans, income tax debts within the last three years as well as any other tax debts, penalties for traffic tickets, criminal restitution, and any debts you forget to list in your bankruptcy papers, unless you inform the creditor of your bankruptcy case. Other than those non-dischargeable debts, everything else included in your bankruptcy case will be discharged at the end of your agreed upon bankruptcy period.

Most people don’t pay much attention to their credit score, which is easy to do when you’ve always been able to pay your bills on time and haven’t acquired much debt. But even the most responsible consumers can be hit with unforeseen circumstances such as a job loss or medical bills. Credit cards may be able to float the expenses for a while, but eventually the debt can mount up to a point where payments are no longer manageable. Missed or late payments can lower your credit score, but you may avoid bankruptcy, hoping to stop any further damage. However, sometimes bankruptcy is the correct choice, and there are things you can do to rebuild your credit score after filing.

Your Credit Report

If you have a pattern of late payments, filing bankruptcy can discharge many of your unsecured debts and put an end to those late payments. A bankruptcy will lower your credit score, but after you file, you’ll be given a “Discharge of Debtor” document that shows your debt has been forgiven. At this point, negative credit events stop, and you can begin establishing a positive credit history. First, you’ll need to request credit reports from the three credit reporting agencies: Equifax, Experian, and Trans Union. Review all of the information listed on your report to ensure accuracy, particularly that any debts included in your bankruptcy show a zero balance. You can correct any errors by contacting the credit agency.

Rebuilding

After ensuring you have a clean credit report, you can begin the work of adding positive elements. You will most likely receive credit card offers as soon as your case is resolved, but be sure you review the terms carefully before accepting. You may need to start with a secured credit card with high interest rates and steep fees. While this is not ideal, it’s a place to start, and you can avoid paying any interest by making only small purchases and paying them off completely, on time each month. You might even want to use the credit card for a small monthly bill and set up an automatic payment, essentially ignoring the fact that you have access to credit to avoid the temptation to overspend. As time goes by, you’ll receive better offers for new credit cards or may be able to renegotiate the terms of your current card. Soon, your credit score will improve and you’ll qualify for better and better options.

Moving Forward

Just like most negative events in life, ignoring your credit will not result in improved circumstances. It’s best to be fully informed about your financial situation and take direct action to make changes. If you’re in debt that you feel you’ll never be able to pay off, the first step is to determine if you can revise your budget to get back on track. If this isn’t possible, let me help you explore your bankruptcy options. After making this bold move, the opportunities to rebuild your credit will present themselves, and you’ll get back on your feet.

Bankruptcy can offer a new lease on life by discharging unsecured debts and making monthly living expenses more affordable. But bankruptcy is nothing to enter into lightly or to choose without first considering the long-term consequences of filing. For many people, the lowered credit score is a small price to pay for being debt-free, especially when they’re well-informed about how to move forward and rebuild their credit after bankruptcy.

Starting Over

Most people who file bankruptcy have credit card debt, so the thought of having a credit card again can be scary. It’s of course best to live within your means and save up to make purchases in order to avoid debt. However, your credit score is important, and it won’t improve unless you take steps to rebuild your credit. Immediately after you file bankruptcy, your credit report will show the bankruptcy itself, plus any late or missed payments from your past. By making timely, full payments on any bills you have, this positive history will soon overshadow the negatives. It’s wise to apply for a small credit card, even if you have to start with a secured account with a high interest rate. Make small purchases and pay them off completely each month, and you’ll see your credit score improve. Soon, you’ll be able to negotiate a better interest rate, which can make a difference when you use credit for larger purchases in the future.

Future Purchases

If possible, it’s best to wait a while after bankruptcy to finance a car. If this is not an option, (for example, you lost your car in the bankruptcy and do not have enough money saved up to make a purchase with cash) be prepared to pay a high interest rate after making a large down payment. The longer you can wait to do this, while using your small credit card, the lower payments you’ll end up with. Just like taking on any debt, make sure you closely review your budget to ensure that the payments will be easily manageable.

You could be in a position to purchase a home within a few years of filing bankruptcy. The lender will review your credit score and history prior to filing, as well as your current income and situation. Most lenders will require a hefty down payment, and you may need to jump through more approval hoops and paperwork than other purchasers, but home ownership is definitely an option.

Making a Move

Each bankruptcy is different, but sometimes filers also have to deal with eviction or foreclosure as part of their case. Others may choose to move into a more affordable rental to make monthly expenses more manageable or want to upgrade after their debt is discharged. Regardless of the reason for moving, a new rental always includes a credit check. A bankruptcy won’t necessarily disqualify you from renting a home, but this depends on the landlord or rental company. It’s best to tell your potential landlord ahead of time so that they are prepared when they pull your report. Some people even attach a letter explaining their circumstances and proving that they are now able to make their rent payments.

No Need to Delay

It can be disappointing to file bankruptcy, but for many people it’s the best possible choice. Instead of having a credit report that shows staggering debt and late payments, you could have a bankruptcy followed by clean credit. If filing is inevitable, the sooner you file, the sooner you head in a positive direction.

Most people never imagine they’ll need the relief of filing bankruptcy, but sometimes debt builds up unexpectedly. A job loss or medical bill may lead to increased credit card debt, and you may only be able to make minimum payments. Other bills rack up, and before you know it, you’re in over your head. There are many benefits to filing bankruptcy, but it’s also important to weigh the consequences of filing before moving forward.

First Steps

Most people know that bankruptcy can discharge many of their debts, but you’ll need to make some important decisions to get to that point. First, we’ll conduct the Means Test to help us decide which chapter of bankruptcy is best for you. If you pass the Means Test, you’re eligible to file a Chapter 7, which discharges most unsecured debts, including medical bills, credit cards, utility bills, and back rent. If your income is too high or you have assets and property you need to protect, a Chapter 13 is a beneficial option. We’ll propose a repayment plan to the court that will last 3-5 years, and during this time you’ll make reduced payments based on your income. At the end of your repayment period, most remaining unsecured debts are discharged, greatly reducing the total you’ll pay on debts.

When you have debt you can’t pay, you’ll undoubtedly get calls and letters from creditors, which can be extremely stressful. One of the benefits of filing any chapter of bankruptcy is that the automatic stay will go into effect, which means your creditors must stop calling you as soon as you tell them you’ve filed. This gives you some time to focus and get your finances in order.

Things to Consider

While all the positive things about bankruptcy are great, this legal decision is not without consequences. Your credit score will decrease, which can make it more difficult to get credit in the future or even to rent a home. Also, not all debts can be included in bankruptcy. You’ll still be responsible for child support and alimony payments, although you may be able to have the payments modified based on your new situation. Student loans may only be included in bankruptcy under very strict guidelines, but you may be able to work with your lender to find a repayment plan that is a better fit for you. Back taxes also are generally not included in bankruptcy.

If you want to keep your property, such as your car or home, you’ll need to stay up to date on these payments; if you fall behind, your creditor will pursue repossession or foreclosure. It may be to your benefit to give up these items if the payments no longer fit your situation, or you may be able to make these payments more reasonable by discharging other debts through bankruptcy.

Thinking about the benefits of bankruptcy can give you hope for your future, and I can help you make a solid plan to discharge debt while preserving as much of your property as possible. If you aren’t sure how to move forward, please call or email me so we can talk.

The Fastest Ways to Recover from a Bankruptcy

No one expects being in a financial bind (personally or business wise) that makes them have to file for bankruptcy. In the worse case scenario if you have to file for bankruptcy (whether it is chapter 7 or chapter 13) understand that it is not the end of the world. All you have to do is understand that there is a way to rebuild your finances back up to normal and eventually live life stress free again (at least in this situation).

Save, save, save!

The main key to recovering from a bankruptcy is beginning to save your money wisely. After a financial burden such as bankruptcy you will not only have to pay off your debt (which could include interest) in addition to daily living. Once you begin saving your money and budgeting correctly you will be able to pay off your debt while being able to pay current bills and other life necessities.

Re-adjust your lifestyle

This element goes hand in hand with the first step, which is to save your money. Although it may be a bit tough mentally to scale back on your lifestyle, at the end it will be all worth it. Maybe you will not be able to go out and splurge on entertainment events or eat your favorite food every single day. It will take some time to adjust and get back to. Don’t worry… in due time you will be able to get back to your normal lifestyle. When you do, be sure to reward yourself once you are back to where you are financially stable and comfortable.

Apply for a secured credit card when it is time

Once you get back to a place where you can begin rebuilding your credit, it is important to start off small. The time in which you can apply for a secured credit card line will vary depending on your situation. This time frame can be 6 months or 2 years. Just remember to not make the same mistakes you made before.

Keep a positive attitude

Although this is not the best situation to be in and it may be easier said than done, stay positive. In due time, everything will be taken care of and it will only hurt you more (mentally) if you keep reflecting on the negative more than the positives that will happen as you recover from bankruptcy.

If you’ve filed for bankruptcy at some point, you know that it not only affects your finances, but equally does great damages to your credit score. And while it may seem like a daunting task to rebuild your life after bankruptcy – amid working on your credit rating, your finances and emotional wellbeing – there truly is life after all these. Rebuilding credit after bankruptcy is quite possible even eventually attaining a credit score of 700 or 750. How do you make this possible? This article gives you 5 ways to rebuild your credit after a bankruptcy that will undoubtedly help you.

Reviewing your credit report

Your journey to rebuilding credit begins when you know exactly where you stand with your credit and the far you have to go to get to the score you ultimately want. Mark dates to get copies of your credit report from major bureaus. When you know that a credit score above 750 is often considered excellent while one below 400 is considered very poor, you’ll know how drastically you need to restructure your finances to get your desired score.

Creating Realistic Budgets

After a bankruptcy, you’ll need to become extra cautious about your finances. And even if you’ve never created a budget in the past, this is the time you’ll need to do this and be serious about it. Your budget acts as your spending plan that will help you manage your cash flow, in turn, preventing you from getting into unnecessary debts. Budgeting helps to prioritize and leaves room for any debt repayment, savings and bill payment.

Taking care of all your existing bills on time

Make it a priority to take care of all your current bills on time. You can set up automatic bill payments whenever necessary and don’t forget to take care of your rent on time as these payments are often tracked and may play a huge role in your credit score. On-time bill payment is one of the most powerful things that will eventually help restore your credit and finances.

Get a secured credit card

Obtaining a secured credit card is another important strategy for rebuilding your credit score. You can deposit a certain amount on your secured card say $500 and this becomes your credit limit. You’ll gradually be able to rebuild your credit by charging minimal amounts every month and settling your debts on time.

Open a new savings and checking account

Think of opening both a savings and checking account if you don’t have any. Choose a local bank or credit union based on various criteria including talking to friends and family, comparing interest rates and considering the services rendered by each bank.

Many people who could benefit from filing bankruptcy put off doing so because they aren’t sure if it’s a wise choice or they’re eligible. They may wonder if they have too much or not enough debt to make filing worthwhile. A relatively small amount of debt could lead to bankruptcy if you don’t have the income to cover minimum payments, and having a healthy income doesn’t mean that you can’t get into debt over your head. No matter the dollar amount you’re dealing with, if your bills have become unmanageable, it may be a good idea to begin researching bankruptcy.

Chapter 7

When we meet, we’ll discuss the basics of your situation and then we’ll conduct the means test to help us decide which chapter of bankruptcy might be the best fit for you. This calculation looks at your income, living expenses, debt, and assets to come up with your disposable income. If you do not have enough disposable income to pay off your debt, you pass the test and are eligible for a Chapter 7. This type of bankruptcy discharges most types of debts, specifically unsecured debts, and there are no limits on the amount that may be discharged. You may only file a Chapter 7 once every eight years, so before filing, you’ll want to make sure it’s the optimal time for your situation. If you’re drowning in your debt, even if it’s not much, a Chapter 7 might give you the new start you need.

Chapter 13

When people do not pass the Means Test, they may worry that they are stuck with their debt and its consequences forever. Fortunately, there are other options, such as Chapter 13 bankruptcy. Rather than an immediate discharge of unsecured debts, a Chapter 13 consists of a reduced repayment plan that lasts for three to five years. The plan will be based upon your disposable income, and once you’ve made your payments during this time, your remaining debt will be forgiven. This could result in you paying pennies on the dollar of your original debt.

As with a Chapter 7, there is no minimum amount of debt you must have to file a Chapter 13, but there are maximum limits set. You may not have more than $360,000 in unsecured debts or $1,081,000 in secured debt. Even if you owe more than those amounts, there are several other options available, and I’ll work with you to find the right solution.

Don’t Go It Alone

Each decision related to your finances is important, and it can be overwhelming trying to decide what to do on your own. If you’re uncertain about the best way to handle your debt, I can help. You may just need to make some budgeting adjustments and work with your creditors for more manageable payment plans, or it may be time to take advantage of the many benefits of bankruptcy. Either way, now is the time to take control of your finances and make a new start.