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Long-term Personal Bankruptcy Implications

Declaring personal bankruptcy is one of the top stresses a family or individual can face. It is avoided at all costs and only considered as a means of last resort. In this troubled economy massive lay-offs have pushed many to financial ruin and so there has been a dramatic increase in personal bankruptcies.

Short-Term Relief

Once a bankruptcy attorney is hired bill collectors by law must stop calling you requesting payment. Each collector must be informed of the impending bankruptcy and provided with the name of the attorney. Once this information is verified the constant phone calls will end. While this brings immediate relief there are still long-term implications that will persist.

A Part of Your History

Personal bankruptcy will stay on a credit report for ten years. Even though bad credit can be re-built, the bankruptcy will remain part of your credit history. Depending on what type of debt was owed, it could take some time to rebuild bad credit.

Big Purchases

Bankruptcy attorneys inform their clients about the inability to make big purchases such as a house. New Jersey for example, is a state in which it usually takes two years to rebuild a credit history to the point that will qualify a home-buyer to purchase a house.

The ability to rebuild personal credit is a slow process that usually begins with securing a credit card. If you do not qualify for a regular credit card, it is advised that a secured credit card be attained. As you prove your financial worthiness, it will become easier to receive a regular credit card. A credit score will slowly raise if the credit card is used wisely and the amount due is paid off in full. Carrying a small balance is tolerable and will not adversely affect your overall credit score, if it stays below a certain percentage of your credit limit.

Receive Annual Credit Reports

Since the credit history of anyone who files personal bankruptcy will be adversely affected, receiving annual credit reports will be beneficial. All three companies will provide a history once requested. For a fee, the credit score itself can also be obtained. Working to reach the “good” credit score grouping is most important.

Personal bankruptcy can be claimed every eight years, but once is usually more than enough for most people. It will take at least two years to rebuild your credit, but with determination it can be achieved.

 

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Can Bankruptcy Stop Foreclosure?

Yes, bankruptcy can stop foreclosure–but not without careful planning, and not without consequences. Read on to learn how to make this important decision.

Bankruptcy Stops All Legal Proceedings

Bankruptcy stops all civil legal proceedings, athought the word “stop” is not truly appropriate. The legal term is “stay”–bankruptcy stays all legal proceedings. A bankruptcy stay subsumes all civil legal proceedings against a debtor (including mortgages, loans, helocs, foreclosures, etc.); those legal proceedings become part of the bankruptcy. To learn more about foreclosure read Foreclosure Law | Stop Foreclosure.

Bankruptcy Means Many Things

Of course, bankruptcy has several Chapters within it available to consumers; there is a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. A Chapter 7 bankruptcy is a liquidation event: you give up all your remaining non-exempt property (everything that isn’t protected by law, such as pensions, IRAs, etc.), and in return, all your obligations are wiped out. Chapter 13 is a different type of bankruptcy. A Chapter 13 bankruptcy is a repayment plan reorganization. You must plegle your disposable net income (after some reasonable expenses) for the period of the plan, usually 3 to 5 years. In return, you keep some or all of your property, and you pay at least something toward your debts. Chapter 13 takes 3 to 5 years to complete, depending on the plan.

Keep in mind that with bankruptcy “reform” under the Bush administration (don’t get me started) bankruptcy now includes “means testing,” where an applicant’s ability to pay is considered in whether Chapter 7 will even be allowed. So, one might be forced into Chapter 13 anyway.

A Bankruptcy Court Cannot Adjust Mortgage Rates (Yet)

Presently (Jan. of 2009), bankruptcy courts do not have the power to adjust mortgage rates or to adjust mortgage principal. However, the incoming Obama administration is working to give bankruptcy courts just that power. Keep an eye on this–if it passes, it will make bankruptcy a very attractive option for homeowners struggling with above-market interest rates on mortgages.

Bankruptcy As Leverage

Can a bankruptcy filing be used as leverage by a homeowner to gain some advantage over a bank? There are really two answers: possibly, and “ask your bankruptcy lawyer.” Each case will differ widely. There are two very strong reasons why a bankruptcy might induce a bank to retreat from a foreclosure posture. First, a bankruptcy will stay any foreclosure action; which means a lender has to sit and wait–all the while receiving no mortgage payments–through the bankruptcy proceeds. Second, there is always the risk that the bank might loose some rights within the bankruptcy proceedings. While a bankrtuptcy judge can’t specifically modify a loan, he or she can investigate claims against the lender such as lender fraud.

Every case will differ widely. Bankruptcy is best handled by a lawyer, so you might inquire with him or her if the option is right for you. Good luck.

Portions of this article were contributed by Medical Malpractice Lawyers.

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The Importance of Honesty When Soliciting Bankruptcy Counsel

Coming to a realization that bankruptcy is a very real possibility is a sobering event for most people. Even business owners who believe that bankruptcy protection is the only way to keep the company afloat usually approach the task with a great deal of misgiving. Since locating and securing the right attorney to handle the process of filing for bankruptcy, it is imperative that you be as forthcoming with your counsel as possible. Here are a few specific tips to help with that task.

Set Your Embarrassment Aside

Attorneys who handle bankruptcy cases of all types are well aware that their clients are not proud of having to seek this type of court protection from creditors. These legal professionals have a solid working knowledge of every type of event and combination of events that lead to seeking bankruptcy. Your attorney is not interested in passing judgement on what you should or should not have done in order to avoid the current situation. Swallow your pride, and focus on deciding where to go from here.

One of the byproducts of setting aside your embarrassment and being up front about your situation is that your attorney is in a better position to offer you some food for thought as well as a little comfort. During the process of discussing the possible options, the attorney may offer comments that make it a little easier for you to see filing for bankruptcy as a way to start over. This can give you the motivation to apply some of the lessons you’ve learned the hard way as your finances got out of control, and avoid repeating the same mistakes.

Tell Your Bankruptcy Counsel Everything

Keep in mind that the focus of your attorney is to help you move forward from where you are today. For this reason, it is crucial that you provide full disclosure to your attorney, so he or she can make informed suggestions of the best way to proceed. There are several different forms that the bankruptcy protection can take, depending on the nature of your particular circumstances. Unless the attorney has all the facts, it’s much harder to provide the most effective counsel.

Don’t attempt to filter the information you provide to the attorney. It isn’t your job to decide what data is and is not relevant to your case. By being totally honest and forthcoming with every aspect of your finances, including income sources, the scope of your debt obligations, and assets that can be converted into cash, you are empowering the attorney to provide the best representation possible when your case comes before a judge.

Remember that your bankruptcy counsel is an ally in your quest to move past whatever events led to the financial insolvency and position yourself to move forward. Unless you are willing to provide full and complete disclosure to your attorney, there is only so much he or she can do to help you with that goal. Even if you find it very difficult, provide all the information about your finances and trust in your attorney to know the best way to proceed.

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