Borrowing after Bankruptcy
Valued cars
Many people mistakenly believe that they will never be able to borrow money again after filing for personal bankruptcy. On the contrary, lenders are more than eager to lend money to those who have just discharged a bankruptcy—at an inflated interest rate! The situation is a win-win for lenders typically, as they will require some collateral upfront, charge a higher than market rate, and they also are secure in the knowledge that the debtor cannot file bankruptcy again for at least seven years.
Most often, people file for bankruptcy due to reasons beyond their control: loss of a job or significant portion of their income, or extremely high medical bills due to a serious illness or accident. Rebuilding and getting back on track as soon as possible will save untold thousands of dollars in interest over their lifetime.
First Things First
The first step should be to establish a budget, in order to avoid potential future financial problems. A new credit card or car loan can go a long way toward boosting credit scores back to respectable levels, but only if they are always paid on time. People who file bankruptcy are given a clean slate and should use new credit cautiously!
Knowing what is affordable is key to staying out of trouble. A budg
Private Student Loans in Bankruptcy: Dischargeable?
My question of the week comes from a client who wanted to know if private student loans he owed on were discharged in a bankruptcy case he filed in 2002.
For bankruptcy cases filed PRIOR TO October 17, 2005, if the PROGRAM under which a student loan was issued, insured, administered was a FOR-profit, PRIVATE (non-government) entity, the loan/debt may have been discharged. However, if the program itself, such as LAL, GSL, etc. received nonprofit funding by participation of nonprofit entities, the loan is not dischargeable in bankruptcy.
To see a ninth circuit case which examines the private vs. government distinction on student loans in bankruptcy, see In re Pilcher
For bankruptcy cases filed after October 17, 2005, the only way a student loan is dischargeable is if the debtor can prove “undue hardship” as that term is interpreted by the courts in whatever district the case is filed in. It
How Bankruptcy Can Help With Foreclosure
Foreclosure document
You can avoid foreclosure completely, or at least delay the process by seeking the protection of the bankruptcy courts. But it shouldn’t be the first thing you do!
Forbearance
You should first attempt to work out an alternative payment plan with your lender before seeking further assistance, but if they will not work with you and you can’t get them to agree to a different plan of action, filing bankruptcy may help. Once you are behind on your house payments, your lender can take the necessary steps to enforce the terms of your loan by selling the house at a sheriff’s sale and recouping some or all of its money from the proceeds of the auction price.
Many people think that missing one payment will cause the lender to foreclose. This is not all the case. Most lenders will try and get you caught up and in fact won’t typically foreclose until the loan is at least 90 days in arrears. When you realize you will have difficulty making your payments, the first thing you should do is call your lender and see if they will help you work something out short of foreclosing on the home. Forbearance agreements at this stage are fairly common, and they generally mean that the lender will stop any accelerated action on the property as long as the terms of the renegotiated contract are met. Perhaps they will allow you to pay your arrearages a little each month, or add the missed payments to the end of your loan.
Short Sale or Deed in Lieu
In more advanced situations, a short sale or deeds in lieu of foreclosure are a couple of alternatives that can be tried. A short sale is selling the house for less than what is owed on the loan, and the lender must approve the sale at the lower price. Though the lend
From time to time in my Indiana bankruptcy blog, I answer reader questions that I think will be of interest to my Indiana bankruptcy clients and to other blog readers. Last week, a reader asked whether Chapter 13 bankruptcy rules will be changing in 2010.
The answer – yes and no.
Chapter 13 bankruptcy in Indiana will mostly be same-old, same-old going into next year. By way of explaining the general way Chapter 13 works, here are some basic factors which will remain “business as usual” in 2010:
- Chapter 13 begins by filing a simple form with the Indiana bankruptcy court, and when a “docket number” is assigned by the court to identify the case.
- The Automatic Stay then goes into effect, and creditors are prevented from making any collection efforts: they can’t call or write to the debtor, repossess assets, or garnish wages.
- A list of all creditors, with name and address of each, plus paperwork showing all the debtor’s assets, liabilities, income, expenses, financial history, and a plan for repaying debt is turned in to the court. (A very big and important part of the work I and the Columbus bankruptcy lawyers who work in my offices there, plus the work done by the professionals in the Indianapolis, Bloomington, and Anderson bankruptcy law offices of Mark Zuckerberg consists of preparing and filing this paperwork.)
- The Creditors’ Meeting is held, presided over by the bankruptcy court trustee. (This is us
Editors note: In this compelling guest post, Charleston bankruptcy lawyer Russ DeMott describes what he calls “financial repression” – the tendency of honest, hardworking men and women to delay or forego bankruptcy protection because of the administrative and expense burdens added to the bankruptcy filing process by the 2005 BAPCPA changes to the bankruptcy laws.
When you meet with your bankruptcy lawyer, you’ll be given a lot of information. You’ll also be given many tasks to complete before you file your bankruptcy case.
Our new bankruptcy law, BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act), created a tremendous amount of busy work for debtors. You must complete a credit counseling session prior to filing your case, you must provide the trustee with the last tax return you filed, and you must give your bankruptcy lawyer six months’ worth of pay stubs, just to get started. There’s lots of work to be done.
Debtors are already stressed out when they come to their lawyer’s office. The law is often confusing. There are many new terms thrown around: CMI, DMI, discharge, First Meeting of Creditors, 341, 362, median income, means test, trustee, and on and on. Even if they have a lawyer who explains things well, there’s a large amount of new information to absorb.
On top of all this, they must provide their lawyer with numerous documents. Some of these are easily accessible; some are not.
In my Charleston, South Carolina bankruptcy practice, I have noticed that many clients seem worn down by this process. We regularly check on open files to notify the clients of the information we need to file their cases. Sometimes they respond, but sometimes they don’t. It’s as if they believe that if they ignore the financial mess they are in, the problems will magically disappear. They won’t, of course. In fact, they’ll continue to get worse.
I call this financial repression. Like any other repression, it delays a resolution. Whatever the problem is, it doesn’t get solved.
I know financial problems are stressful. And I also know clients feel overwhelmed and beaten down. To be honest, I hate asking my clients for many of the documents I have to request. Much of the information is, as my high school history teacher would say, merely academic. I need the information to fill in a spot on a form, even though it’s really not relevant to their financial situation.
But I didn’t make these rules. And your bankruptcy lawyer didn’t, either. Think of the process as just a bunch of hoops you must jump through. The Credit Industrial Complex, as one of my colleagues calls it, wrote much of our bankruptcy law. The goal of the new law—or at least one of its primary consequences— was to make the process expensive and miserably labor-intensive. But if you allow yourself to repress your financial problems, you will be letting your creditors win.
Roll up your sleeves, start digging for those documents, and give your lawyer what he or she asks for. The sooner you do that, the closer you are to getting the fresh start you need and deserve.
About Russ DeMott: Russell A. DeMott is a bankruptcy lawyer representing clients in Chapt
Can I Keep Two Houses If I File Chapter 13 Bankruptcy?
Can you keep two houses if you file for Chapter 13 Bankruptcy?
Like so many questions in bankruptcy, the answer is: It depends.
When most people file a Chapter 13 bankruptcy they are generally doing so to either save a house from foreclosure, or because the person is an “over means” debtor which requires them to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy.
When you file a Chapter 13 bankruptcy your creditors cannot get less toward what they are owed than if your non-exempt assets were liquidated in a Chapter 7 bankruptcy. Generally speaking, a second house is going to be a non- exempt asset.
As a result, when a Chapter 13 bankruptcy is filed it is necessary that a Chapter 7 liquidation analysis be performed.
So how does this affect whether you can keep two houses in a Chapter 13 bankruptcy?
The answer is that if keeping the second house will mean that you are paying an unsecured creditor less than they would have received in a Chapter 7 bankruptcy if the second house was sold (liquidated), then the bankruptcy trustee is likely to either sell the second house, or the trustee will require you to pay an additional amount to the unsecured creditors to account for the liquidation value of the second house.
If you are considering filing for bankruptcy and are dealing with multiple pieces of real estate, you should consult with an experienced bankruptcy attorney to determine the right bankruptcy for you.
Is Debt Relief Legal through Bankruptcy
–> Is Debt Relief Legal through Bankruptcy? If you are deciding about declaring bankruptcy, then probably you are suffering from major financial problems due to unforeseen circumstances. Usually, we do not incur debt that we feel certain we will not pay. We incur debt with the purpose of making repayment. While abuse of the system is of concern and there are those who use bankruptcy to wipe their slate clean just to fill it up again, this is not what your average bankruptcy filer does.
Bankruptcy is a legal vehicle that gives relief to individuals and businesses in serious financial crisis and protects their creditors to the extent possible. Generally, the bankruptcy process assesses the debtor’s assets and liabilities and provides a structure within which the debtor is permitted to keep some, and in most cases, all property and ordered to satisfy as many qualified debts as possible, according to an order of priority established by law. Remaining debts are discharged, except those of certain types, like domestic support orders, debt obtained by fraud and most tax debt. Read more…
Filing bankruptcy reshapes America.
This chart from the EconomicCrisisBlog.com graphically illustrates what many of us in the Atlanta area already know – Georgia has one of the nation’s highest rates of bankruptcy filings.
Why is this and why has it been this way for years – long before the current recession? From my perch as an Atlanta debtor’s attorney, I believe that the following factors contribute to our state’s high filing rate:
- most people in Atlanta are not from Atlanta. As such, they do not have close family nearby who can help out with a loan or with a place to stay
- the economy in Atlanta is and has been primarily a service economy, with an emphasis on communications, IT infrastructure, and transportation. These industries tend to move through boom and bust cycles more quickly than the economy in general, making jobs in these areas less stable
- Atlanta is a young, somewhat flashy city that encourages conspicuous consumption. As
Social Security Offset Can Contribute To Bankruptcy
Of all the clients who turn to me for Indiana bankruptcy information and those who turn to me as a debt consolidation lawyer, the older ones typically have one good thing going for them, namely their Social Security benefits.
That’s because Federal law makes Social Security benefits exempt from creditors’ claims. That law includes retirement benefits from Social Security as well as disability benefits. What that means is, with the exception of the IRS, even creditors who have legal judgments against a debtor cannot 
intercept Social Security payments or take that money away from a recipient after it’s been paid.
Typically, when older clients file bankruptcy Chapter 7 in Indiana, I find it’s due to just one or two primary factors. There might be medical costs beyond what is covered by Medicare and supplementary insurance, and that might be the reason older folks seek Indiana bankruptcy help. Parents sometimes have exhausted their own savings helping adult children who have lost jobs or themselves been hit by medical emergencies. Someti