Filing for Bankruptcy is the very last resort for people overburdened by debts and unable to clear them. The decision to file bankruptcy is a grave one and it is recommended not to make such a decision in haste.
If you've found yourself facing severe financial problems, you might be considering filing for bankruptcy as a way to take care of your debt.
The average American knows very little about Bankruptcy. Most people probably are aware of bankruptcy’s ability to dissolve debt and give the debtor a fresh start. Some of the information you might have heard is correct, but some is not. The purpose of this article is to dispel some of the most common bankruptcy myths.
Bankruptcy’s not an easy topic to talk about. Chances are, if you’re looking into bankruptcy, something has already gone seriously wrong, and you’re all out of options. Bankruptcy exists for a reason, though, and if it’s something you need to do, realize that there is a light at the end of the tunnel. This is the first in a series of posts intended to show you what bankruptcy is, who is eligible for it, what different types exist, and what the consequences of bankruptcy are.
If you are worried about rebuilding Credit after Bankruptcy, this article will help you with some general advice about how to find your way back to the top.
What filing bankruptcy is all about
Bankruptcy is a process whereby a person in debt can crawl out from under it and start again. The idea is to help out those who are in dire financial straits, and are in debt over their heads. The result is that you do not have to pay back most of your debts, you are debt free and can move on. The drawback is that it leaves a nasty stain on your credit report for the next ten years, making it hard to reestablish yourself and recover.Do I really have to wait another ten years before I can get a loan again?
No. As a matter of fact it is possible to get credit again. However, it will be a bit more difficult. One possibility is to get a protected or pre-paid Credit Card which can be used by depositing money into it, like a bank debit card. This can help you rebuild your credit again, and establish yourself. After a while it can help you start to get loans and credit again before the ten years is up.
What about my debts?
One good thing about filing is that it gets rid of the creditors once and for all. They won't be bothering you anymore. Once all the paperwork is in and processed, it is illegal for them to keep harassing you. You have the law on your side!
Will everybody know that I filed?
No. Very few will actually know about it. However, since the file is accessible to the public it will be visible on your credit rating, and will be kept on file for ten years.
What are the changes I've been hearing about?
The original laws were passed in 1978, and were revised in 2005. The general idea of the new legislation is to make people who CAN pay some of their debts pay. The laws were being abused by those who could have paid. Here are the major changes that went into effect last year:
- You have to meet certain requirements in order to be able to file bankruptcy. Your family income will be checked to ensure that it is below the state average. They also want to make sure that your family is able to make the regular payments.
- You are required to submit your last year's tax return, in addition to all the other paperwork.
- They also require that you have lived in the state in which you file for at least two years. The reason for this is that some states have more or less lenient laws.
- Child support and alimony and are the debts that have to be paid first.
Next Step
With the new Bankruptcy law in effect as of October 17, 2005, there is a lot of confusion with regard to the new "means test" requirement. The means test will be used by the courts to determine eligibility for Chapter 7 or Chapter 13 Bankruptcy.
The purpose of this article is to explain in plain language how the means test works, so that consumers can get a better idea of how they will be affected under the new rules.
In the last post, we talked about how bankruptcy works, in general terms. In this post, we’re going to talk about who can file, why you would want to file, and what types of bankruptcy (chapters) are available.Technically, anyone can file for bankruptcy, but most people who file have far more debt than they can possibly pay. Filing for bankruptcy is not free, and if bankruptcy is not granted by the court, those fees essentially become wasted money. You may be able to find free consultations with bankruptcy lawyers in your area—make use of this service to see if a lawyer thinks you actually have a chance of success in bankruptcy court.
Though it may seem impossible, refinancing your home loan after going through Bankruptcy is feasible as long as you can meet certain requirements. Finding the right lender is however, a challenging task.
Refinancing After Bankruptcy is Possible
Refinancing a home mortgage is probably one of the few financial transactions that someone who has gone through bankruptcy can achieve within a small period of time after the bankruptcy has been discharged. Since a mortgage loan is secured by an Asset, the usually extremely low Credit score bared by someone with a bankruptcy in his credit report isn’t that detrimental.
Raising your Credit Score
Moreover, refinancing a home loan is an excellent opportunity to raise your credit score and improve Credit History. The monthly payments you make will be recorded into your credit report and this will contribute to a continuous increment on your credit rank. However, since you won’t be able to apply for a refinance home loan till six months after your bankruptcy has been discharged. You need to work hard during this period in order to build a good credit history so as to make sure you get approved for your refinance home loan.
Getting Ready for Applying
In order to do so, you need to make all your payments on time including your current home loan installments. This is essential since any late payments or missed payments may be an obstacle between you and your refinance home loan. If you haven’t done so yet, open a bank account, either a checking or savings account and get a Credit Card. If you can’t get approved for an Unsecured Credit card, don’t hesitate, apply for a Secured Credit card and start using it and making regular payments. All this will help you build a healthy credit history and will ensure you get approved for a refinance loan.
Search for a Lender and ask for Loan Quotes
The search for a suitable lender is the main task you need to complete. You can refinance with the same lender that is currently handling your home loan, but don’t stick to the first offer you receive. Request loan quotes with every lender you run into and even request online quotes as you’ll be able to get much better deals this way.
Pay attention to Interest Rates and other fees
You need to pay special attention not only to the interest rate and fees charged by the lender that will refinance your home loan, but also to any punitive fees that your current mortgage loan lender may charge for pre-cancellation of your loan. These fees and costs may turn refinance too onerous to even consider the possibility. You may have to pay a slightly higher interest rate since you’ve got a bankruptcy on your credit report, however, don’t let lenders take advantage of this situation. This kind of loan is secured by Collateral so there is no reason to charge high interest rates, no matter how low your credit score is.
The average American knows very little about Bankruptcy. Most people probably are aware of bankruptcy’s ability to dissolve debt and give the debtor a fresh start.
Some of the information you might have heard is correct, but some is not. The purpose of this article is to dispel some of the most common bankruptcy myths.
Filing for Bankruptcy is the very last resort for people overburdened by debts and unable to clear them. The decision to file bankruptcy is a grave one and it is recommended not to make such a decision in haste. Many people choose this option without finding out the available alternatives to bankruptcy.
Some of the alternatives to bankruptcy are:
1. Settle your debts: If there is the smallest possibility that the debt you owe is manageable and will not be absolutely detrimental to your finances, it is advisable to make a full settlement or meet your creditors and discuss alternate payment arrangements. Another way to meet your debts is to borrow money to pay it off. But, even though this may even seem like a viable option at the time, it would be best to consider this option last, because if you are finding it difficult to pay off debts now, a new loan will only add to your problems. 2. Debt consolidation: A debt Consolidation Loan might be a good solution. How good it is, will depend on your situation. More often than not, debt consolidation loans are made using your home as Collateral by placing a second mortgage on your house. Again, there is a considerable amount of risk involved here. You must consider whether you will be able to pay your bills in a timely manner and be able to subsist on a monthly basis. If, and only if, this is possible, should you opt for a debt consolidation loan. It is also pertinent that you do your homework and choose a good loan consolidation company that provides loans at manageable interest rates. 3. Ignore your creditors: Although this is an option and a deferral tactic, it isn't the smartest decision to make. It does not matter how big or small your debt is, the creditor will not stop till he gets his money. Often, in business, people ignore debts until they pile up to the point that it is very difficult for them to pay them off. If you ignore your creditors long enough, you may even end up with a Lien on your home. So, it is best to try and solve the problem to begin with instead of ignoring it, which will only make matters worse. 4. Credit counseling: This is a much safer and a less mentally taxing option. Credit-counseling agencies can contact you creditors on a direct basis and can make new payment arrangements to suit your situation. They may also be able to get your interest rate lowered or have your interest payments ceased completely. Credit counseling is often the best solution for avoiding bankruptcy, as many families have found out. It will also give you the chance to sort out your finances in peace as your creditors will stop hounding you for payments. Always do your research before selecting a credit-counseling agency. It is recommended by experts to go with a non-profit credit-counseling agency rather than a for profit credit-counseling agency. Finally, if none of the above mentioned options are viable for you and you have used up all your resources, you may choose to file for bankruptcy as the only way out.
Next Step
About The Author Jon Arnold is an author and computer engineer who maintains various web sites to provide tips and information on a variety of topics. More info on this topic can be found at his Bankruptcy site at http://bankruptcy-data.com/.
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If you are worried about rebuilding Credit after Bankruptcy, this article will help you with some general advice about how to find your way back to the top. What filing bankruptcy is all about Bankruptcy is a process whereby a person in debt can crawl out from under it and start again.
Watch these this video to get a better understanding of what you can expect. After you have filed bankruptcy you will then need to have your credit rebuilt.
Steps to take:
1 - Talk to a attorney
They will explain the options to you so that you will know which type you will be able to qualifiy into Chapter 7, Chapter 13 or Chapter 11.
Crappy credit is our specialty! You say the word and we can help you turn your financial outlook around! At Praxis Credit Consulting we help our clients put those ugly credit mistakes in their past and move forward to a positive financial future. It is time to take control of your finances and never get another pestering collection call again!
Dry your tears! Praxis Credit Consulting has the solution. Don’t go day to day worrying about the next time you have to explain away your ugly credit. We can help you clear up your credit history and set you on your path to rebuilding a positive credit rating that will have you smiling your way to low interest rates and simple qualifications.
It may be easier now to hide your head in the sand and try to forget those ugly blemishes on your credit report, but it won’t fix the problem. As a matter of fact it is probably making them exponentially worse. It is time to start digging yourself out of that credit nightmare before it becomes hopeless.
Bankruptcy isn’t the final nail in the credit coffin.It is nearly impossible to live without credit or at least an established credit history. Whether you like it or not it, credit will be needed in the future for one thing or another. Those who have filed either a chapter 7 or 13 bankruptcy are faced with the difficult task of reestablishing credit after the discharge of their old debt which is certainly more difficult than establishing credit the first time. Both types of bankruptcy will remain on the individual’s credit report for up to ten years and will serve as a huge impairment on anyone’s credit. Before new credit is established out of bankruptcy, people face suspicions by new lenders that they are permanently unable to effectively manage debt and therefore shouldn’t be able to acquire new lines of credit.Of course this is absolutely untrue.
In recent posts, we’ve talked about what bankruptcy is, who can file, what kinds of bankruptcy exist, and how one gets started. Now let’s talk about what happens after a bankruptcy. First, the order of the court is executed, whether that involves withholding of pay, liquidation of assets, or some other action. Next, your credit score is impacted.
This impact is likely to be very severe. People who successfully file for bankruptcy will find that a number of things that used to be easy are well beyond their reach: applying for home and car loans, some employment opportunities, and lines of credit with low interest rates or no fees. This can make getting back on your feet something of a challenge. Here are some tips: