Please Select a Question Below |
||
|---|---|---|
Why do I hear on TV and Radio that Bankruptcy Ruins my Credit? |
Why not consolidate or use debt counseling rather than file for bankruptcy? |
|
Will my friends, relatives and neighbors know I filed for bankruptcy? |
||
Why does a credit score go up after bankruptcy rather than go down? |
||
Who can I work with to correct any credit report problems if they occur after filing bankruptcy? |
Have a question that's not on the List? Give LEE ABT a call at 856.914.5100. |
|
Why do I hear on TV and radio that bankruptcy ruins my credit?
Because often the companies advertising this information are going to benefit by talking you out of filing for bankruptcy. They want to put you in repayment plans that only pay either all or a large portion of your debt back, while taking part of your payments for their company’s profits.
Many of these so called “consolidation companies” are linked to and/or funded by the credit industry. Notice most claim to be non-profit, but one must ask, ”Where do they get the money to pay for their advertising that bashes bankruptcy and that promises to lower my credit card payments?” Where do they get the money to pay for all those employees? Non-profit? Think about it.
Why not consolidate or use debt counseling rather than file for bankruptcy?
Consolidation from these companies that advertise on TV and radio are basically offering repayment plans that are doomed not to succeed because they keep you in huge debt. They often shade the truth about how much of your debt they are really paying back. You may actually end up paying more in the end than what you originally owed and you may receive law suits from some of the creditors that were supposedly being paid off. They will have you in 5-year repayment plans that can easily damage your credit because you will still owe creditors. Be cautious if you are considering using a credit counselor. Also read about the problems of unscrupulous companies in the credit counseling industry and the action the IRS has taken against “non-profit” credit counseling groups following widespread abuse.
If filing a Chapter 7 instead of being scammed in a consolidation plan from a “non-profit” consolidator, Chapter 7 discharges debts like credit cards, medical bills, gym memberships, parking tickets, high utility bills, some IRS debts and most lawsuits [even those who are sued from a a previous car accident] and unsecured loans.
If filing a Chapter 13, in many cases, depending on your assets and income, all unsecured debts are discharged. In some 13’s, if your income is above the means test or you have too much equity in your home, a percentage of the unsecured debt is paid through the plan and the remainder of the unsecured debt is wiped out by the 13 discharge.
In consolidation plans from these “non-profit” companies, you will often still owe at the end of your 5-year ordeal and your credit will be damaged.
Since each individual has different circumstances, we urge you to call us to discuss your options for bankruptcy.
Can I keep my home and car?
It is extremely rare to lose any property, vehicles, furniture or possessions when filing for bankruptcy unless you choose to surrender a particular piece of property. There are parts of the law called “exemptions” that protect your home, cars, pensions, clothing, jewelry and other personal belongings.
The only way you would lose your home or car is if you stopped paying for it. Even in this great country we live in, we have to pay for our car and home or we do not keep them. If one has too much equity in their home, instead of losing their home, they would file a Chapter 13, still protecting their home, but paying a percentage of their unsecured debt in a 3, 4 or 5 year plan.This percentage is often very small, but it varies because of each person’s individual situation. Please call us at 856-914-5100 to discuss your situation and options.
What are the advantages of bankruptcy?
People who file for bankruptcy are getting rid of debts and then easily obtain new credit after discharge. While in Chapter 13, many cleints often receice credit card offers while their case us still open. Our clients restore their credit beautifully after Chapter 7 discharge and also while in their Chapter 13 plans. They usually also have money in the bank and new credit to use. Plenty of offers will arrive in your mailbox from creditors offering you new credit cards. This is proof that you did not scare anyone by filing for bankruptcy and do not appear as a credit risk. Many of our clients laugh at the amount of offers they receive and some tell me they are offers from some of the same companies they listed in their bankruptcy! Please be careful to use credit carefully and responsibly.
What are the disadvantages of bankruptcy?
You may have to pay a slightly higher interest rate for the purchase of a car purchased immediately after filing for bankruptcy. This is only because banks are able to do so. They want to charge a higher interest rate in case you are a credit risk in your future.
As you make payments on time, you may qualify to refinance your car loan into a lower interest rate. As time goes on and you responsibly rebuild your credit, you will soon not have to pay any additional interest on car loans in the future.
You may also have to wait about six months to two years after a bankruptcy discharge to purchase a home. This is because mortgage lenders want to see how well you do with your new credit after bankruptcy.
We have seen that these are small prices to pay for the tremendous benefits of wiping out your debts.
How do the new laws affect Bankruptcy?
There has been much doom and gloom written about the new bankruptcy laws to try to prevent individuals from looking into bankruptcy. In fact, many of my clients, when they first call, tell me their friends and family told them they can no longer file bankruptcy. That bankruptcy is no longer available since the laws changed in October 2005. This is not true. It is true that there is more paperwork for the bankruptcy attorney to process and there is a means test now involved. But it is quite lenient. This means test will result in some people having to file a Chapter 13 where they pay a percentage of their debt back, instead of a Chapter 7. But this only affects a small portion of those who call for bankruptcy. We will be happy to explain this in detail to you when you call us for free information about bankruptcy.
Can the court deny my bankruptcy?
Not if you are in the proper bankruptcy that fits with your income, assets and needs, and not if you cooperate with the court. Rarely are cases denied. Some cases may be converted from a 7 to a 13 or vice versa.
For example, if a debtor files a 13 to save their home due to mortgage arrears, then decides to surrender the home and wipe out the mortgage debt, that case may qualify to convert to a Chapter 7. We do not place clients in a bankruptcy that is not right for them, nor do we accept cases that would not qualify. There are certain qualifiers for each type of bankruptcy, and since each individual case is different, please call our office for information.
You can call us at 856-914-5100. We would be happy to give you information that will help you decide what form of bankruptcy best fits your needs and what Chapter is best for you. We will also discuss all fees involved.
Do I have to go to court?
For both Chapter 7 and Chapter 13 cases filed, there is one court appearance necessary for the Debtor or Debtors to appear. It is a simple meeting called “meeting of creditors” although it is rare a creditor shows up. This is the only mandatory meeting and is it quite a simple one. Lee would be there representing you and you would simply appear on a certain date and time preset by the court to meet your Trustee. The Trustee would swear you in and ask you some very simple questions. This is not a deposition and the Trustee is not there to harm your case. Certain documents will be presented which we will have in your file and the trustee will ask some very simple questions. Camden County cases are not held in the Courthouse, but rather a separate building called Bridgeview Building in Camden. There is free parking and it is easy to find with our great directions! The meeting itself only lasts between 5 to 15 minutes. Lee reviews in detail what happens during this meeting and most clients tell us it was so simple, they are mad that they lost sleep worrying about it. You will not meet the Judge assigned to your case at this meeting and rarely do Debtors meet the Judge. The Judges are very nice as well as the Trustees so again, there is nothing to worry about! Plus, you are in good hands with Lee!
Do I have to list all my credit cards in my bankruptcy?
Only if there is a balance on a credit card. If you have a zero balance on any cards, you do not have to list those particular cards in your case. But those lenders may close down that card, even though they were not listed and they did not receive a notice of your bankruptcy. But do not worry, you will get PLENTY of credit card offers in the mail, even while your bankruptcy case is open. These are generally secured cards where you pay a fee for the card and they offer a low cap of approximately $300. They are great to reestablish your credit so don’t throw the offers away! We coach our clients on how to reestablish credit after bankruptcy, which is actually quite easy.
Will my Creditors stop harassing me?
Yes. All collection efforts must stop immediately after your filing. This means all lawsuits, wage garnishment, bank levies and phone calls must stop. The laws that protect you in bankruptcy are Federal Laws which prevent creditors from further collections and harassment. Secured creditors such as your mortgage lender and vehicle lender still should have contact with you as long as you remain current. If you are in a Chapter 13, your secured lenders prefer their attorneys to speak to your attorney if you default on any payments as they become due.
Does my spouse have to file along with me?
Not if your spouse has separate debts from those you wish to wipe out. Many married couples share credit cards and therefore, it is a benefit to file jointly. It is the same price to file jointly as it is to file individually. If you file for bankruptcy, and your spouse does not share any of your debts, your spouse will not be affected by your filing. But if your spouse was an authorized user on a credit card, that lender will expect your spouse to pay off the debt.
Will my friends, relatives and neighbors know I filed for bankruptcy?
Only if you tell them. There is no sign that pops up on your lawn saying that you filed and no scarlet letter to wear on your lapel that tells the world you filed for bankruptcy. In fact, we file for many people that live on the same street or come from the same family or work at the same job and they do not know about each other’s bankruptcy. Your future lenders will know when you apply for a loan and/or your future landlord if you apply to rent an apartment since your bankruptcy will appear on your credit report for approximately 7 years. But they will not be concerned if you have developed new and steady credit after your discharge. Your employer may know in a Chapter 13, since most cases are done with wage orders. This is not a negative garnishment. This is a voluntary wage order to ensure your case has a great chance of success. We would be happy to explain more details about this process when you call us.
Can I be fired for filing bankruptcy?
NO! U.S.C. Section 525 prohibits any employer from discriminating against you because you filed bankruptcy.
Why do my friends and family tell me NOT to file bankruptcy and that I
will be denied credit for 7 - 10 years??
Your friends and family mean well, but if they give this advice, they know nothing about bankruptcy. They may even have filed a case in their past and had a bad experience. Maybe they entered into a 13 and did not make payments, their case was dismissed, and possibly lost their home because they could not afford to pay for it. They may not have been advised properly to file a Chapter 7 after this to clean up their credit since they would have a “dismissed” 13 on their report, a foreclosure and nothing showing after that to get rid of these debts. By their case not succeeding, by not filing a follow-up Chapter 7, or by not re-establishing any good credit, they may be suffering a bad credit score.
After going through this experience, that friend or relative may then say to you “Don’t file a bankruptcy…it ruined our credit.” The bankruptcy did not ruin their credit. Their defaults ruined their credit. Frequently it is the case that they simply needed to rebuild their credit by filing a 7 if they could not afford to pay for their home in another Chapter 13.
Getting their bankruptcy discharge would help them re-establish a responsible credit rating and help them quickly move on to great credit score. Or, your friends and family may be listening to their friends who believe the false accusations about bankruptcy being spouted by “consolidators”. Again, our family and our friends mean well, but many are misinformed about bankruptcy.
Why does a credit score go up after bankruptcy rather than go down?
Most people that call us say this makes no sense to them and that credit score worries are the main reason they put off looking into filing bankruptcy. They have heard bad advice from TV ads, misinformed individuals and even the internet.
This is how it works: because your credit score is based on your debt versus your income, once you unload your debt, your score will naturally go up. Many banks don’t care whether you paid your debts or wiped them out in a bankruptcy. Lenders usually only care that your debts are either gone or at a manageable level.
Banks look at the bottom line. When you are approaching a bank for a future loan, their bottom line question is “Can this applicant afford to pay their loan”? Is there enough income? Is their debt level low enough to make this loan a good risk?
Yes, the bankruptcy will show up on your credit report for 7 to 10 years, but that is a good thing. Your credit report is a credit history, not a report card like high school. By law, your debts must remain on your credit report for 7 to 10 years. Once you file for bankruptcy and receive your discharge, the words “discharged in bankruptcy” [or something similar] will remain below or next to each debt showing on your credit report. These words to a bank mean your debts are gone. In a good way, you are now a juicy pork chop sitting in front of that hungry lender. Following a bankruptcy discharge, banks know you are at a lower risk to default since you are not writing checks each month to your credit card bills…the ones that were previously chasing you around your home each month. Bills that caused you to lose sleep and worry needlessly.
How do I increase my credit score after bankruptcy?
If you already have a home or car loan in your name, every time you make a payment on time, you are improving your score. The key here is not to default after bankruptcy. Also, you will be inundated with secured credit card offers after discharge and even while your case is open. DO NOT THROW THEM AWAY! We understand you are sick of credit cards, but keep in mind that you may need to use them this time. Just don’t let them use you. We often advise our clients to open up one secured card, use it at the gas pump each week, put the money in your checking account, and make sure you pay the bill off completely each month when it comes in. Once you get comfortable with one card, open a second card. Alternate their usage. This is a great way to rack up your credit score without racking up any debt since secured cards must be paid in full each month.
Now, be careful. These banks are slick. And the games they play creep up on us and blindside many of us. They will turn your cards into unsecured cards and try to lure you into using them more and more by raising your credit limit. Buyer beware!!! Don’t stray and use these cards for anything else or they may get ahead of you. The key is never to have a balance left unpaid at the end of the month. If so, they will begin to raise your interest and the game will change. They will begin to use you. Remember, you will need to do this because this rounds out your credit score, but do not ever let your guard down. Bank rates and fees are relentless. Banks often do not have your best interests at heart and that is an unfortunate fact.
Never co-sign a loan or credit card for a friend, loved one or acquaintance in the future. If they default, even unintentionally, your score will go down with their ship. If they have a car repossessed or surrendered that you co-signed for, you will be liable and this may well destroy your credit.
Can I work with someone to correct any credit report problems
if they occur after filing bankruptcy?
Yes. There are companies that will work with you after bankruptcy to increase your score and get your report looking perfect. Don’t surrender to the bad advice you may have been given or have heard on TV or radio. Know that many of our clients responsibly buy homes, cars, boats, motorcycles and anything you can think of after bankruptcy. We do advise to go slow, because we certainly do not want our clients to develop a lot of new debt after bankruptcy. However, some wise use of credit is necessary to rehab your credit. Some of our clients often increase their scores by 100 points or more within one year after their discharge. From there, the sky is the limit!
Lee Abt is an Experienced Bankruptcy Lawyer in New Jersey - Call Today!
Call Now (856) 914-5100