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Chapter 7

How is My Credit Score Affected After a Bankruptcy Filing?

Many people who file for bankruptcy already have a low credit score and/or are unable to obtain credit cards or a mortgage. With unpaid bills piling up and possible lawsuits from creditors,  a person’s credit score continues to go down as time goes on.

After filing for bankruptcy, your credit score will lower at first

It is important to know that this is not in any way a permanent situation, and your bankruptcy attorney will advise you on how best to rebuild your credit and increase your score.  Ultimately for the majority of people in a tough financial predicament, filing for bankruptcy will be the better choice than ignoring bills and missing more payments.  

A Chapter 7 bankruptcy filing will remain on your credit report for 10 years. A Chapter 13 bankruptcy filing will remain on your credit report for 7 years.

Given the fact that a credit score can go up quickly once the proper steps are taken, you can begin to rebuild and repair your credit immediately.  

Some ways to quickly and positively impact your credit (once you have filed bankruptcy) include:

  • continuing to make monthly mortgage payments on time (if a Chapter 13 was filed),
  • continuing to make all car payments on time (if you are keeping your car), and
  • paying off any credit cards in full every month (for credit cards obtained after your bankruptcy filing). 

Many credit card companies will offer credit cards to people with a bankruptcy filing because you have either reorganized your debt (Chapter 13) or had your debt discharged (Chapter 7). Therefore, you have less debt than many credit card holders. These credit card companies are more willing to take a risk on you because you have shown that you will be able to make your monthly payments.  

If you file for bankruptcy and then rebuild your credit, you will ultimately have better credit in the long term versus continuing down the path of unpaid bills and getting deeper into debt.  Mortgage lenders and credit card companies are much more willing to approve someone for a loan or a credit card if you have taken positive steps toward improving your situation in a proactive manner.

IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

  • November 8, 2019
  • Bankruptcy,Chapter 13,Chapter 7
  • Comments : Comments Off on IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

Make sure you have all the bankruptcy information

As a debtor filing for bankruptcy, you are entitled by law to a court-ordered rule of protection known as the automatic stay. This applies in a Chapter 7 and in a Chapter 13 filing. There are several creditor activities that the automatic stay protects and/or prohibits. One of the prohibited acts involves any creditor continuing a foreclosure sale that has begun prior to the bankruptcy filing, or starting a foreclosure proceeding during the length of the bankruptcy case. If you want to file for bankruptcy and keep your home, there are certain requirements that must be met. A qualified attorney will look at your situation in detail to determine whether you meet the requirements.

See Chapter 7 vs Chapter 13

In a Chapter 7 filing, a debtor can buy some time for him/herself with the automatic stay by preventing immediate foreclosure on a debt secured by real estate. If there is a scheduled foreclosure sale, this sale gets cancelled. It is very important to note: the debt that is allowed to be wiped out in a Chapter 7 does not include missed mortgage payments. Once the debtor in a Chapter 7 receives a discharge at the resolution of his/her case, then the automatic stay is lifted. At this time, the creditor can resume or begin foreclosure proceedings against a debtor who has missed mortgage payments prior to filing the Chapter 7. The creditor can also seek relief from the automatic stay prior to your Chapter 7 discharge. Chapter 7 bankruptcy does not allow a debtor to “catch up” overdue mortgage payments within his/her case. Additionally, there is no requirement for the bankruptcy court to work out any repayment plan with the lender. Lenders are not required to modify a mortgage if you file a Chapter 7.

One important thing to consider regarding Chapter 7 is that money may be freed up for you once all allowable debts are consolidated into a Chapter 7 plan. This can, in some circumstances, allow a debtor to pay the lender all of the missed payments owed. Then the debtor must continue to keep the mortgage current and pay the monthly mortgage, both during the Chapter 7 proceeding and after the discharge.

Usually, the better option if you want to keep your home is to file a Chapter 13 bankruptcy. This is a reorganization of your debts, which is a 3-5 year repayment plan on debt owed. Missed mortgage payments do qualify to be part of this repayment plan. This means that you can “catch up” on all overdue mortgage payments, and also not have to pay them all at once. Through a Chapter 13 plan, monthly payments are made to a Chapter 13 Trustee who oversees the case. The debtor must continue to make all ongoing mortgage payments during the entirety of the Chapter 13 case. At the end of the Chapter 13 case (the 3-5 year period), the debtor receives a discharge on all debts that were part of this plan. The debtor keeps his/her home and continues to pay the monthly mortgage payment.

Top Reasons Why You Should Consider Bankruptcy

Whether you’re upside down in debt because of being unemployed, too much spending, medical bills, college tuition or anything else, you should know that you’re not alone!

Last year, almost 773,000 individuals found themselves in the same situation.

You at one point or another might have considered filing for bankruptcy.  Bankruptcy can help those in financial distress get a fresh start and start over again.

Does Bankruptcy Really Work and is it the Right Fit for You?  Here is what you need to know

When is a Good Time to Consider Bankruptcy?

Anytime your income is insufficient to pay your debt while also maintaining your household expenses, bankruptcy is an option worth looking into. Matthew C. Cherney, a bankruptcy attorney, says that a good rule of thumb is to take a good look at the total amount of debt that you owe.  If the monthly expenses associated with servicing the debt comes close to, or exceeds your monthly income, then you may be an ideal candidate for filing for bankruptcy.

Some debts such as child support, income taxes and student loans cannot be discharged in bankruptcy, so one should really consider monthly figure as an expense, rather than a debt.

In Georgia and other states, the bankruptcy laws require many different forms and schedules to be filed with a bankruptcy .  These forms also depend on the chapter of bankruptcy.  Some of these forms are Chapter 7 and Chapter 13.  Let’s explore these in detail.

Chapter 7 Bankruptcy

Chapter 7 is commonly referred to as a “liquidation” bankruptcy.  Chapter 7 is oftentimes associated with what people think of when they think of bankruptcy.  A business bankruptcy would be a Chapter 11.

After your bankruptcy attorney files your paperwork, the judge will appoint a “trustee.”  The trustee’s job  is to investigate your financial affairs search for any assets, and, if appropriate, sell, or liquidate these assets, and pay any monies to your creditors.

You are allowed certain exemptions to protect your property, and this situation only becomes relevant when the value of your assets exceed your exemptions.  If that is the case, you may want to consider a chapter 13 bankruptcy in order to protect your assets.

Did you know?

Abraham Lincoln filed for bankruptcy in 1838.  Prior to the Civil War, Abraham Lincoln had considerable debt associated with the purchase of several general stores.

Chapter 13 Bankruptcy

If you do not qualify for chapter 7, or are attempting to protect your assets and have regular income, chapter 13 may be a better solution for you.  In chapter 13 one can propose a plan to pay back their debt (or a portion thereof) over three to five years.

Another benefit is that Chapter 13 can treat certain debts that are not dischargeable in chapter 7.

What is the Immediate Benefit of Bankruptcy?

The one thing that ALL forms of bankruptcy have in common is the wonderful feature known as the “Automatic Stay.”

Immediately upon filing bankruptcy,  the automatic stay prevents most creditors from collecting any outstanding debts.

This means:

  • No more lawsuits;
  • No more harassing phone calls;
  • No more “Final Demand” letters sent to your home;

Instantly all of these things that keep you up at night, as well as any outstanding debt- are all washed away, or “discharged,” in legal terms.

Read more about Automatic Stay

What is the Negative Impact of Filing for Bankruptcy?

After filing, your credit score will be impacted.  However, if your credit score is already rather low, the impact will be nominal.  Bankruptcy will remain on your credit report for a period of years (depending on the chapter); however, this time frame may pale in comparison to the length of time necessary to pay back your debt.  You will also be surprised at the amount of credit card offers you’ll receive after your bankruptcy is discharged.  When used responsibly, a credit card is an excellent way of building your credit back up.

So is Filing For Bankruptcy a Good Thing?

The thought of bankruptcy may be unpleasant, but you will not believe the relief you feel after filing.  Filing with a trusting attorney should make it a pleasant experience.  Nobody ever wants to end up filing bankruptcy, but it can be a better alternative to harassing phone calls, intrusive letters, lawsuits and garnishments.

If you or someone you know is going through hardships due to outstanding debt, give our office a call today and speak with attorney Matthew Cherney of Cherney Law Firm, LLC.

Do I Qualify for Bankruptcy? Which Chapter?

The first question for many people considering bankruptcy is “do I qualify?” In order to determine whether you qualify for bankruptcy, you should consult with a Marietta bankruptcy attorney. As a general rule, almost everyone qualifies for bankruptcy. Find out more about qualifying for bankruptcy here. The real question is, “What Bankruptcy is Right for Me?” Continue Reading

Roswell Bankruptcy: Discharging Debt in Chapter 7

The federal bankruptcy laws allow certain debts to be discharged. If you receive a discharge, you will no longer be legally obligated to pay back that debt. Certain debts cannot be discharged. These include child support, spousal support and most income taxes. Generally speaking, debts that can be discharged are unsecured debts, such as medical bills, credit card bills and personal loans. Continue Reading

The Differences Between Chapter 13 and Chapter 7

Through years of practice, I have lost track of how many times I am asked the question, “What is the difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy, and what is the best option for me?” Every time that I am asked that question, I give the same response. Chapter 13 bankruptcy is a repayment plan, while Chapter 7 is a liquidation bankruptcy. Interestingly enough, every client knows that such a simple answer must carry with it certain complexities. They are right! It is not always that simple. Continue Reading