Bankruptcy

In 2005, U.S. Bankruptcy law changed making to harder to file for bankruptcy. This was due to the large upsurge in bankruptcy filings. Here are some facts and changes that might make you reconsider filing for bankruptcy.

Depending on your income, you may not be eligible to file for Chapter 7 bankruptcy. If you can afford to payback 25% of your unsecured debt you may not be allowed to file for Chapter 7 bankruptcy. If your income is above your state’s median income level you may have to consider filing Chapter 13 bankruptcy.

The courts will determine how much you can repay if you are eligible to file bankruptcy. The courts will use the living standards set by the IRS to decide what is reasonable for you to pay for rent, food and other expenses. This will determine how much of your debt you can pay off.

If you have a credit card, any new debt such as cash advances or new purchases within 70 days of filing for bankruptcy will not be discharged.

Your home may not be sheltered from bankruptcy. The law puts a national cap of $125,000 if you bought your home less than three years and four months before filing. Creditors can force the sale of your home allowing you to keep up to $125,000 in equity and giving your creditors the rest.

Before you can file bankruptcy you will be required to attend and pay for Money Management Classes. This credit counseling is used to help you determine if you must file bankruptcy and to help you see the error of your ways.

Before you decide to file bankruptcy, you may want to do some things that could help you both financially and to prepare in case you do file bankruptcy.

First, reduce your spending. Look into a smaller home and a less expensive automobile. If you can slash your spending, you will be shocked at how much money is left over to reduce your debt.

Next, talk with your creditors. Creditors are often willing to work out a payment schedule so that you don’t have to file bankruptcy. This helps them as much as it helps you. Don’t be afraid to open up about your situation before the collectors start calling.

Talk with an approved non-profit counseling agency about your credit situation. An EOUST approved agency can often help you to find a plan on handling all of your debts. This might also help you learn what you have been doing wrong and how to correct your problem. If it can help you avoid filing bankruptcy, then it was worth the talk.

Finally, look into debt consolidation. There are many ways to consolidate so take the time to investigate them all. You might be able to borrow against your retirement, stocks or other securities that you may own. The cash value of your life insurance policy might also be used to cover your debt. Remember that these options might have some serious implications. Review and talk with a professional about what the potential risks and consequences might be very thoroughly.

Bankruptcy is an option to investigate but remember it should only be used as an option of last resort.

If you have taken the plunge and filed bankruptcy now you have to learn to live with that decision. It may not be as dark and dreary as you might have thought. You can live with bankruptcy but you will have to learn to change your spending habits and work to restore your credit. Beginning immediately after a bankruptcy is a good place to start. Instead of considering bankruptcy as a big negative, use it as a chance to start fresh and learn new habits that will better your financial situation.

To start with, get a copy of your credit report after the bankruptcy. Don’t panic about your credit score as it will have taken a dramatic turn for the worse after you have filed bankruptcy. It will take some time to repair but it will be worth it in the long run. Take the time now to focus your attention on your current financial situation and how you got there. Don’t make the same mistakes again because you will not want to make a repeat performance of filing bankruptcy.

After reviewing your credit report find any mistakes or errors that are being reported. It is important to dispute them so that they are reporting accurately. Talk with your attorney if you have any questions about what can or can not be reported after filing bankruptcy. Once you have your credit report accurate it is time to begin with your new life style. This will be the most important step in living with your bankruptcy.

You must take a good hard look at your spending habits. How did they contribute to your need of filing bankruptcy? Did you spend all of your money eating out and not paying your credit card bill? Did you spend all your money at the local coffee shop at over $5 per drink all week? You will find that this is usually the beginning of where the problem falls on consumers. They spend their money on things that have a much less expensive alternative. Building a budget and living with that budget will help you get on a better financial situation.

Try and open a line of credit, but only one. A secured credit card might be the only option available but usually after six to nine months of good payment history, you will find that most lenders will convert that from a secured card to a unsecured card. This will help you start getting some positive information reported to your credit report. Use this new card but remember what will help your credit the most. Keep the balance of the card to 30-50% of the card limit and always pay on time and in full. This will help get your credit back on track.

Using a credit repair company such as Ovation Credit could help your situation as well. They can often help you get on the fast track for better credit. Remember there is life after bankruptcy but you will have change your habits and work towards a better financial situation. You have a second chance to get things right, take advantage of it.

If you think that your only option is to file bankruptcy then you should seriously think about and review all of your options. You should have a conversation with a professional regarding your situation and what alternatives might be available to you.

Most lenders will listen to you and if they feel that you can honestly live up to a new payment plan will try and work with you. They don’t want to see you file bankruptcy, especially chapter seven, since they might not see any of their money.

Bankruptcy is a big step and sometimes a very costly one. When you file bankruptcy you may lose your larger investments such as a home or automobile. The lenders may not feel that you can reaffirm on those items and therefore would take back those items. Then they could put them back on the market hopefully to get the majority of their investment back.

Additionally, you might find that the majority of your debt won’t be discharged in the bankruptcy. Things like student loans, credit card debt are items that might not qualify for bankruptcy. You would still have to pay those items back and that might not help your financial situation.

Finally, if you have large medical debt, you should talk with those people as they generally will work with you. They will generally even accept very small payments as they want you to continue to use their facilities.

Honestly talking with your creditors can have a large impact on your financial situation. If you can commit and keep up with your commitment most creditors will start reporting the positive information and eventually you will see improvements in your credit report. The rebuilding of your financial situation will help you and bankruptcy can be reported on your credit report for up to 10 years. This will hurt you more than trying to work with your creditors for even the next 5 years.

Don’t think that bankruptcy is your only alternative. It is not the only decision and should only be used as a last resort. Take the time to investigate and speak with your creditors. Maybe you can avoid damaging your credit worse than it already is and resolve your financial problems.

For consumers that have gathered a very large debt and may not be able to meet their obligations, bankruptcy might be one of the alternatives to investigate.  There are a few reasons that might make it sensible to move forward and decide to file bankruptcy.  Choosing to file either a Chapter 7 bankruptcy or Chapter 13 bankruptcy could be an option, but this decision is not without the possibility of damage.

The decision to file bankruptcy might be a good option if you have already tried to negotiate your debt. Speaking with your creditors regarding your issue and trying to work out a repayment plan is where to begin. But if they won’t work with you and are demanding payment in full (and you can’t pay them in full), your only option might be bankruptcy.

If the size of your debt outweighs your income then bankruptcy may be your only option. Let’s say you have approximately $500,000 in debt and your monthly payment is around $3500. Now you only have about $100,000 in assets (equity in your home, savings, etc…) and your income was reduced to $2000 a month, your only option may be to consider bankruptcy.

But filing for bankruptcy has to be weighed since there will be damage done to certain aspects of your life. They can include the following:

Some people have a mental and/or a personal impact to their lives. They feel that they have failed and may never have hope of getting their finances straightened out. Each person who is considering bankruptcy needs to decide if this is going to be an issue. Some people have dropped into depression over this and have not ever recovered.

Borrowing money (especially in the immediate future) may be difficult. Many people will not make getting credit easy especially since our society lives on their credit cards. You will need to decide if you can learn to live with out using plastic on a day to day basis.

Your credit report will be severely damaged. The Fair Credit Reporting Act allows for your bankruptcy to be on your credit report for up to 10 years. Additionally, everything included in the may be reported for up to 7 years. This will affect your ability to get new loans and may even affect your ability to get a job. More and more creditors are conducting background checks that include a credit report for the hiring of an employee.

Be sure that if you do decide to file bankruptcy that you obtain and maintain your credit report. Any inaccuracies can affect you negatively, so you will want to make sure that everything that is on your report is accurate. Hiring a company like Ovation Credit can help make sure that your information gets disputed if inaccurate and they can assist you in maintaining that information.

If you are a private person then you may not want to consider bankruptcy since they are a part of public record. Anyone can request a copy of the filing and review that information. This is not normal but you should be aware of the possibility of your private bankruptcy becoming public information.

Obtaining a loan for a car, house and other unsecured debt could cost you more money. Many lenders will want to charge a higher interest rate or expect a bigger down payment to reduce their risk. This cost you quite a bit of money depending on your loan agreement.

It also costs money to file a bankruptcy and if you hire an attorney (and I suggest you do) it could cost you even more. You have the right to file a bankruptcy on your own but getting past all the hurdles that your credits could throw your way, it would be wise to have a professional dealing with those issues. An attorney (experienced) can be a wealth of knowledge and information and compared to the cost of one mistake it could be well worth your money to hire an attorney.

Before you make any decisions it would be wise to try everything and speak with everyone. Consumer Credit Counseling Service might be a good place to start. Then speak with an attorney to discuss your individual situation. Remember what might be right for someone may not be right for you.

Bankruptcy may not be the best alternative that you have when you get into financial trouble. There are several other options, all of which should be looked at prior to filing bankruptcy. When looking into these alternatives, a debtor wants to make sure that they know who they are dealing with and that they do not do anything that could place them into a worse situation. Some of these alternatives may have an affect on any bankruptcy filing at a later date.

Alternatives could include but not be limited to Out-of-Court settlement with creditors, debt counseling services and debt consolidation loans.

Out-of-Court Settlement
Instead of filing bankruptcy, you could consider settling your unsecured debt at a reduced amount. It is possible to do this on your own, but usually an individual will contact a company to help negotiate with your creditors. It is very important that you seek professional help because you want to make sure that they are handled properly. There also could be a negative effect on one’s credit rating.

Debt Counseling Service
If you have difficulties in dealing with your finances, a Debt Counseling Service might be for you. They can consolidate your monthly payments and often get your interest or payment amounts reduced on unsecured debts. If you are in serious financial trouble, then you may not qualify for these programs. This option could also have a significant negative impact on your credit rating.

Debt Consolidation Loans
If you own a home, you might be able to borrow against your home’s equity to help you consolidate and pay down your debt. This could put you into a worse financial situation so review the terms carefully. Not being able to repay this type of loan could put your home in danger. This would be worse than not being able to pay your credit card debts.

Bankruptcy is not always the best solution and should only be considered as a final option. These alternatives may hurt your credit score but a bankruptcy may do more damage. Review your options and speak with a professional about what would best serve you.

Depending on the situation, not everyone qualifies for a Chapter 7 Bankruptcy. If you are making over $100,000 and living in a $400,000 home, you should speak with an attorney before deciding to file bankruptcy. In most states, your income will need to fall below a certain threshold before your will qualify for a Chapter 7 Bankruptcy. If your income exceeds that median then your case might not be eligible for a Chapter 7 Bankruptcy.

You then would have to consider filing a Chapter 13 (repayment plan) Bankruptcy. A Bankruptcy Trustee would expect you to trim your lifestyle considerably so that you could free up sufficient disposable income to payback all of your creditors. That repayment plan could take anywhere from 3 to 5 years before it is completed. A Chapter 13 Bankruptcy is not very flexible and works for those who situation may not change. But if you work for yourself or are working on commission for your income, this may not be good for you. If your commission income went down, you would still be required to pay on the agreed amount from the Chapter 13 Bankruptcy filing.

So check with an attorney to determine which course you can take. In many cases, it might be better to maintain your lifestyle and continue to pay your bills on time or walk away from that lifestyle. If you choose to walk away you will have to reduce your lifestyle and plan on giving every penny of disposable income to a 3 or 5 year payment plan.

There are many surveys out there that show we lie to ourselves and our love ones about our financial status. These lies range from little white lies to from the new bowling ball we just bought to the filing of a bankruptcy to our new fiancé.

Some of these lies are really destructive to our relationships and others just to ourselves but the lies do affect us negatively. Because we know the truth and don’t want to live up to the truth we often tell ourselves these lies to make us feel better. But whatever the reason, these lies are not helping an already destructive behavior to our financial well-being.

The first is the “I deserve it” lie. This lie begins us on the road to financial ruin. But it is addictive and dangerous as we use it to justify our bad behavior. You are setting yourself up to major problems if you let this lie determine your spending habits. From the smallest pleasure to the big splurges this lie will hurt if everything you buy comes from your being rewarded to purchase it.

Next is the “I really want it” lie. The good feeling that the purchase feeds this lie is also dangerous since you can never have complete satisfaction from material things. It just keeps getting bigger and bigger.

After that lie is the “I have plenty of credit on my credit cards”. This lie will hurt you quickly because you need the credit to help your credit report but it will hurt you if you over use or put yourself into a situation where you can only make the minimum payments. Because after that comes the problem that you won’t have any emergency credit if you need it and then you have gone over limit on the credit cards and that is very difficult to overcome.

The next lie is the “Bank thinks that I am a good credit risk, just look at my mortgage” lie. This lie is similar to the “I have plenty of credit on my credit card” lie but just taken one step further. You are the only one able to determine if your mortgage payment is able to fit within your budget. Getting in over your head does not help your financial stability. It is like getting candy at Halloween, eating it all at one time is not good for you. But eating it a little at a time is very nice.

What about the “It was on sale so it was ok!” lie. How many times have you bought something and justified it by saying that “I got a great deal, how could I pass that up?” More than once has this lie got us into financial trouble.

“I will figure out how to pay for it later” lie is one that will come up and bite us. It never fails that later always comes too soon for most people and then you don’t have anyway to cover your expenses.

Next is the “I can make my minimum payment” lie. Sure you can make your minimum payments but what if you lose your job or have an unexpected expense. This lie hurts you in the short term as well as the long term because if you are only making your minimum payment then you probably have maxed out the credit card and now are hurting your credit score. That will take a long time to fix so don’t give into the lie.

“I can always file for bankruptcy” lie is just simply not true anymore. There are certain things that just can’t be discharged such as tax liens, child support, student loans. Additionally, even though it can only appear on your bankruptcy for 10 years, most job applications will ask if you have “ever” filed for bankruptcy. Failing to answer that question is like lying about it on the application. The company will have recourse if you don’t file your application truthfully.

The old “If I don’t see the bill, then it does not exist” lie is a good one, if you can truly get out of paying the bill. But since most people end up having to pay the bill, then this lie simply does not work.

Finally, “It all works out in the end” lie. This may or may not be true but luck won’t solve your financial problems. Only you can fix them and winning the lottery or getting your tax refund can’t be counted on to help. Magic won’t help your financial situation and if you are using this lie, you may already be in serious trouble. You should sit down and face the issues you have and what goals you want to set for yourself. It could be wise to get the help you need from someone with special training such as an attorney, credit counselor or tax specialist.

Stop lying to yourself and get back on track. Remember that paying your bills on time and in full is good advice. Keeping your credit card balances around 30-50% is helpful and living within your means will keep you on the straight and narrow. Lying about your finances is like cheating in your relationships.

If you are planning on filing bankruptcy you should talk with your attorney regarding your income tax. The refund that might be eligible to you could be taken by the government. The tax refund will have to be claimed as an asset when filing your bankruptcy.

But income tax refunds can be protected by applying for an exemption. There are several states that have this law so review that with your attorney. This will help you decide if you should file your return, obtain your refund and use your refund without causing yourself new problems.

Also you should look into your withholding numbers if you are getting a large refund. Basically, you are giving the government a free interest loan rather than you taking the money each pay period and putting that into an interest bearing account. Some bankruptcy courts will take the position that you are using this as a savings account and the Bankruptcy Trustee could object that you have “disposable income”.  Some courts will also direct the IRS to send any tax refunds to the trustee so that it can be used.

Remember, you should plan your tax refund carefully if you are planning on filing bankruptcy.