Four Critical Things to Know About Chapter 13 Bankruptcy

Making the decision to file for Chapter 13 bankruptcy is not easy. It will impact your credit, your personal and business reputation, and even your self-image. On the other hand, it can greatly improve your quality of life in the short-term as the persistent letters and calls from debt collectors stop. In Chapter 13 bankruptcy, you make an agreement to pay back your debts in part or full over a period of three to five years. Here are four critical things to know if you’re nearly ready to file.

1. Understanding the Paperwork

Chapter 13 bankruptcy paperwork is complex and can be overwhelming. From the beginning, it’s important to be accurate, honest, and thorough as you complete all of the forms. On average, the paperwork, including the petition, schedules, and repayment plan, can be over 40 pages. You will need to provide detailed information on your assets, debts, expenses, income, and full financial history. If anything is left out, you will encounter problems later on and be required to complete additional paperwork and pay even more fees. More importantly, if you leave out a creditor, you might not get that debt discharged, and your case could be dismissed if you’re not able to make an amendment.

2. Understanding Tax and Domestic Support Debts

Under a Chapter 13 bankruptcy, you will be required to pay any tax debts you have from the previous three years, in addition to all tax debts where the government has filed a lien on your property. You will have the option to distribute those payments over time, and the only way to get tax debts discharged is to request an individual evaluation of your specific situation. As for domestic support obligation debts, which include alimony and child support, you are required to keep those payments current or your plan will be dismissed.

3. Understanding the Importance of Your Budget

In order to succeed, you must create and stick to a realistic budget. If your budget can’t consistently support your repayment plan, then you need to contemplate other non-bankruptcy options. To calculate your budget, remember that your ability to make payments is based on the amount of your disposable income. That disposable income is what you’ll be required to repay into your plan each month. If you stay committed to your budget over the next three to five years, then you can expect to succeed.

4. Understanding the Consequences of Missed Payments

Finally, it’s important to know that if for reasons of hardship you are unable to finish your repayment plan and you fall behind on payments, the trustee of your bankruptcy can make modifications to your plan, or the judge could allow you to discharge all of your debts based on your hardship. Examples of what qualifies as a hardship are losing your job due to circumstances outside of your control or suffering from an illness.

Armed with these important tips, your Chapter 13 bankruptcy should proceed smoothly.

Waiting Is the Hardest Part: Chapter 7 Lawyers Explain Waiting Periods After Bankruptcy

With your credit in tatters, you’ll have to be patient for a little bit longer before you acquire many of the things you’ve wanted for so long. You took the right steps when you hired Chapter 7 lawyers to regain control of your finances. Unfortunately, there are a few things you’ll have to wait on after bankruptcy.

1. Seeing bankruptcy disappear from your credit report

Bankruptcy can remain on your credit report for ten years, negatively impacting your score and making lenders take a long, hard look at you before they’re willing to give you even a basic loan. After those ten years, however, you’ll be free and clear because the bankruptcy will no longer be visible.

2. Repairing your credit

There’s no perfect rule of thumb for how long it will take to repair your credit after a Chapter 7 bankruptcy, though by that ten-year mark mentioned above, it should be bright and new again. Instead, credit repair is based on a series of different factors. How well you pay current debts, including your house payment (if you’ve managed to hang onto the house), is at the top of the list and should be a priority in your new budget.

3. Applying for an unsecured credit card

Immediately after you file for bankruptcy with your Chapter 7 lawyers, you’ll probably see plenty of credit card offers claiming to be interested in helping you rebuild your credit. It sounds perfect, right? Unfortunately, these credit card “offers” come with substantial strings attached. They know that you can’t file for Chapter 7 bankruptcy again for eight years, and as such, you’ll have to find a way to make payments on these high-interest cards. Worse, you’ll incur high fees, low limits, and take a hit to your credit if you cancel the card. Instead, wait until you’ve raised your credit score to around 700 before applying for a new card. While trying to build your credit, try options like secured credit cards; you deposit the money in a specific account at the bank, and the bank offers you a “loan” of 50-100% of that amount. Using this card each month will help rebuild your credit faster.

4. Buying a house

It seems like the perfect time to go house hunting, doesn’t it? With no debts hanging over your head after a Chapter 7 discharge, it feels as though you have more of each paycheck to devote to things like a new house. Unfortunately, you can’t jump in just yet. If you’re using a VA loan, it will need to wait two years from the time you filed for bankruptcy before you try to buy a home. A more traditional loan will require a four-year waiting period. Don’t despair, though. In the meantime, you can start building up your down payment. Take the amount that you’d like to devote to a house payment every month and put it into an account devoted to buying a house. In four years, you’ll have a substantial down payment that will make it much easier for you to get the loan you want.

5. Jumping back into your old lifestyle

You have more money available now that you’ve reduced or eliminated your debts, but that doesn’t mean that you should dive straight back into your old lifestyle. Remember, those overspending habits are what led to your bankruptcy in the first place. Take the time to develop good spending habits and wait for a change in your employment status and your income before you try to live up to those standards again.

Filing for bankruptcy after retaining Chapter 7 lawyers is a scary time in your life. Rebuilding when it’s over can be even harder. For more tips and tricks on managing your finances after bankruptcy, contact us today.

Enjoy Debt Relief With Help From A Bankruptcy Attorney

Financial hardships can force you to declare bankruptcy as an easier way of working around them. However, it is a process that can be very complicated and you will need the assistance of a bankruptcy lawyer to file and do everything right. Generally there are commercial bankruptcy attorneys that help with filing for business and consumer bankruptcy attorneys who file for individuals. In a commercial setting, your business gets protection from creditors whereas in the consumer setting you or your spouse gets protection from creditors and dealing with clearing the debt or setting payment plans.

When to get an attorney

One of the best steps you can make when you are facing financial hardships is accepting that there is a problem and actually taking the right step in dealing with it. Inability to pay bills, bounced checks, lack of flow cash, constant creditor and debt collector calls, debt that keeps piling up and being unsure how to handle the situation are some of the signs that you need to get yourself or your business a bankruptcy attorney.

As a struggling business, your lawyer will be able to help you get time to restructure the business and reorganize debts or in worse situations close the business. On a personal level, the lawyer will get you a fresh financial start by sacrificing some of your assets or you can reorganize debts and negotiate payments plans with your creditors if you want to repay the debts.

What to expect from the attorney

1. A bankruptcy attorney will offer you competent legal advice. They will not only advise whether declaring bankruptcy is the best way to go, but also help you with filling in the right category and advice on the best ways to use bankruptcy to achieve the financial goals that you have. As part of the advice, your lawyer will also prepare you for the process, make it as easy as possible and even share risks or possible difficulties.

2. The attorney will have the ability to handle your bankruptcy. Familiarity with federal laws on bankruptcy, local court procedures and rules and even bankruptcy trustees within your area will make the process easy for your lawyer. To enjoy this you however must ensure that you choose a lawyer who has the necessary skills and experience to handle your type of case.

3. Handling of all bankruptcy paperwork. Lengthy form packets are inevitable in a bankruptcy case, but fortunately the filing is something your attorney will do for you. The attorneys have specialized software that makes it easy for them to prepare, file required paperwork with the courts. All you will need to do is provide your attorney with all information needed to fill the forms like assets, debts, income and expenses.

4. Representation at the hearings. Bankruptcy cases can have a number of hearings. Whereas you may be required to attend the meeting of creditors hearing, your attorney can represent you in any additional hearings. This representation saves you the anguish that comes with the cases.