Personal Bankruptcy

Rebuilding credit after chapter 7 or chapter 13 bankruptcy discharge

by Alejandro Uria |September 30, 2017 |0 Comments | Business Bankruptcy, Personal Bankruptcy

There comes a time for many people when they’re facing bankruptcy and wondering what it will do to their credit report. 

Even if you have responsibly managed your money things can happen such as a divorce or an accident that puts you out of the workforce. Do not let people make you feel bad about this.

Maybe your medical bills were just way higher than you could’ve anticipated. Maybe someone stole your identity and fixing it has become too much of a problem. 

Whatever the reason is don’t fear because the bankruptcy system was set up to help you reset if you get into one of these extremely difficult situations. It is not really designed to wipe you out but to give you a second chance.

How Will Chapter 7 or Chapter 13 Bankruptcy Affect My Credit Report?

Most people will file for either Chapter 7 or Chapter 13 bankruptcy.

In brief Chapter 7 is the kind of bankruptcy that discharges almost all your debts. Chapter 13 is more of a reorganization of debt with a plan to pay creditors back over 3 to 5 years.

Both of these types of bankruptcy will show on your credit report and public records for up to 10 years but they will have less and less impact on your credit score as years go by. 

Of course this is only true if you make moves to help improve your credit after bankruptcy. Things like paying all of your bills on time, getting secured credit cards, and keeping balances below 25% of your credit limit per card can help you get a better score within 3 to 5 years.

Credit Worthiness Versus Credit Reports In Bankruptcy 

While we hear about credit reports all the time they are not the same as our credit worthiness. You can pay your credit cards faithfully but still have a worse credit rating than someone who doesn’t if your income to debt ratio is too high. 

Creditors might consider you a risk because you don’t seem to be able to pay off the amount of credit you already have. For many people discharging the debt can actually raise their credit rating because you cannot declare bankruptcy again for eight years between Chapter 7 bankruptcy claims. For others it will hurt their credit rating. Sometimes the amount of debt discharged during bankruptcy can affect your credit worthiness for certain creditors.

Declaring bankruptcy or even beginning the process and stopping before discharge will all be reported on your credit report. If you do declare bankruptcy you should see on your credit report the words discharged by bankruptcy or debt included in bankruptcy and a zero balance next to the charges.

If you do not see a zero balance you should contact the credit reporting agency and dispute the claim. You are entitled to see your report every year from all three companies and you can dispute the charges without hiring a company.

Talk To A Lawyer About Declaring Bankruptcy And Which Option Is Best For Your Particular Credit Reports.

If you are considering bankruptcy it is helpful to consult with a bankruptcy lawyer to determine what your best option is and how much impact this will have on your credit report.

Bankruptcy doesn’t have to ruin your life but the more information you armed with at the start the more successful you can be at starting over.

About the Author: Alejandro Uria is a guest blogger in Lista Legal, an online attorney directory. The information on this article is for educational purposes only and under no circumstances it should be taken as legal advise.

Bankruptcy And Divorce in California 

by Alejandro Uria |September 30, 2017 |0 Comments | Personal Bankruptcy | , , ,

Unfortunately bankruptcy and divorce often go hand in hand. It is rare that the income from one household can sustain two households.

When you find yourself getting divorced with one or both of you also facing bankruptcy, you or your affected spouse may feel like everything is falling apart. That may be true. However you will find yourself on the other side of this eventually and you want to give yourself the best chance to recover emotionally and financially.

The goal of the courts in California is to have each person leave with roughly half the debt and half the assets.  However the courts do not want to do this for you. You will not see a judge anytime soon and they will probably recommend mediation.

I answered calls in a bankruptcy law office in California for years and unfortunately I also got divorced so I understand that when you get divorced you are mad.

I’m not saying you should get less then what you deserve but when you are fighting over things try to consider whether or not you really want to keep fighting. You can choose to compromise and end this mess and get on with your life or you can dig in.

This is especially important to consider when you have kids. You are going to be dealing with this person for at least 18 years unless they go completely deadbeat mom or dad. 

Keeping a rigid court ordered child care schedule can be hard on you and your kids particularly as they get older. So I advise you to try to keep calm and unless your ex-husband or ex-wife is violent or dangerous in some other way try to remember that at one point you both thought getting married was a good idea. 

Important Facts About Bankruptcy And Divorce In California.

• There are two types of bankruptcy Chapter 7 and Chapter 13.

• Chapter 7 is what we usually think of when we think of bankruptcy. This will discharge most of your debts except for the things that cannot be discharged such as family support, some student loans and tax debt. 

• Chapter 13 is more of a reorganization of your debt. To file for this you must show that you have steady work and you can pay your monthly bills and pay down the adjusted payments on your debt within 3 to 5 years. The advantage of this is that none of your assets will be seized by creditors.

• You cannot stop someone from declaring bankruptcy. This is their right under federal law.

• Child support, family support and spousal support cannot be discharged under the bankruptcy laws for either Chapter 7 or 13.

• You cannot use bankruptcy as a way to get revenge on a spouse with whom you have community property such as a house. Their interests remain protected to a large degree. 

• If you are the one who wants to declare bankruptcy there are important things to consider if you plan to rent an apartment in the future. Be aware that many rental companies are not accepting applications from people with any bankruptcies on their records.

• If you are both on the mortgage of the house usually the person who spends the most time with the children gets the house or lives in it until it sells. If you both own the house and there are no children then you both have the right to stay in the house. This may be hard to do but unfortunately it is the law.

Divorce And Bankruptcy: Division Of Property In California 

• If there is any debt that you both have your name on and either of you declares bankruptcy the other person will be held responsible for the balance of that debt. This is true for credit cards, houses, bank and car loans. 

• When one of you declares bankruptcy it will stop the sale of any property that you both own such as the house. That property will go into the bankruptcy estate.

• If you are living in that property do not panic. The image of a repo company coming by and ripping all the belongings out of your home is unlikely as “stuff” is judged based on the value it has now, not based on what value it had when you purchased it. This means that most of your household items are not worth the creditors time to sell and you will keep them.

• Your home too will probably be covered under the exemptions. This may not be true if you have a secured loan on your mortgage or car. In Chapter 7 even if the loan gets wiped out the lien against the property still exists. This also may not be true if there is high value in your home as the creditors will want to get anything they can add value out of the house beyond the $75,000 exemption on their half.

• Your ex can’t just choose to cover their other assets. If you share the home you keep an interest in it and your ex would need to get permission from you to put anything but the house as the exemption. 

• Once an exempt property makes it through the bankruptcy process then it can be divided by a family law court.

• If you are someone with only one child and you rely on your tax return to reset your finances be aware that on the years where you don’t claim your child you will not be able to get the earned income tax credit. This is particularly important information if you have a large discrepancy in income. If you need that credit and your lawyer suggests that you alternate claiming the child on tax returns I suggest you find another way to balance things out. 

• If your ex files for chapter 13 they will be required to keep making mortgage payments if they have been contributing all along. If they haven’t been this will continue to fall on you. 

• If your ex is going to get a high value asset (like the house) and your divorce decree would include them paying down debt to make things even, make sure they roll that debt into their name only as creditors do not care about the orders in your divorce decree. If your name is on it you will still owe.

• While your family support payments and spousal support would be safe through Chapter 7 or Chapter 13 anything else that is considered a non-support divorce debt (such as payments on debt that they make to you) can be lumped in with their other debts if they declare Chapter 13 after your divorce. That would mean that any other debts your ex had that were considered higher priority, like taxes, or back support to another ex would get the money first and you would get pennies on the dollar out of what’s left. 

Divorce And Bankruptcy With A Pension

• Pension law is extremely complicated. If you have a pension you absolutely must get the help of a lawyer.

I hope this information helps you feel more at ease by answering some of your preliminary questions. It is wise to consult a bankruptcy lawyer or a family law lawyer during your divorce. You may actually be missing out on things that you should get. Whatever you decide,  remember that this too will pass.

About the Author: Alejandro Uria is a guest blogger in Lista Legal, an online attorney directory. The information on this article is for educational purposes only and under no circumstances it should be taken as legal advise.