Tennessee Bankruptcy FAQs
This information is for those who want to research on their own. If you prefer, all of these questions and more will be answered by one of our Nashville TN bankruptcy lawyers during your no cost, no obligation, consultation.
Common Questions about Bankruptcy
Bankruptcy is a Federal statutory and constitutional scheme to provide relief to persons and companies who are struggling or unable to pay their debt. Through the bankruptcy process, debtors obtain relief from the obligation to pay all or some of their debt.
While there are technically four types of bankruptcy an individual can file, there are two primary types of bankruptcy applicable to consumer debtors. The bankruptcy code is divided into chapters and the names of the types of bankruptcy relate to the chapter in which they are found. The two primary types are Chapter 7 and Chapter 13. General information on each follows below.
Chapter 7 is the most common form of bankruptcy and is typically filed when an individual or business faces a great deal of debt and is unable to pay it.
A person must prove eligibility to file Chapter 7 bankruptcy. In general, a person’s income minus allowable expenses must be less than the states median income. This analysis is referred to as the “means test.” While the 2005 changes to the bankruptcy code made it more difficult to qualify for a Chapter 7 bankruptcy, most consumer filers still qualify.
At the conclusion of a Chapter 7, the filer will receive a “discharge.” This means that the filer’s unsecured debts are eliminated and the creditor can no longer seek to have that debt repaid. Examples of unsecured debt include credit card debt, medical bills, payday loans, personal loans, and utility bills.
In a Chapter 7, the debtor’s assets not subject to exemption are sold and are used to pay unsecured creditors’ claims. Often all of a filer’s assets are covered by exemptions and nothing is given up by the debtor.
Chapter 13, unlike Chapter 7, does not require the liquidation of the filer’s non-exempt assets. The filer prepares a budget that outlines what is reasonable for that filer to repay over time. The payments the filer makes into the plan are used to pay secured creditors, unsecured creditors, and administrative fees and costs. Often only a small fraction of the unsecured creditors’ claims are required to be repaid. It is also possible to modify the terms of some secured claims under a Chapter 13.
Chapter 13 is often the suitable solution when the filer owns real property or an automobile and wants to keep these assets. Chapter 13 is an option where a homeowner is facing foreclosure and could keep the house if only the arrearages could be eliminated.
Chapter 13 bankruptcy gives some income-receiving debtors the ability to stop foreclosure, stop harassing creditors, get on a budget they can live with, reduce or eliminate interest and late fees, and receive a discharge on a portion of their unsecured debt.
A Chapter 13 plan usually lasts 3-5 years. At the beginning a court appointed Trustee is assigned to the case. This trustee becomes the intermediary between the filer and his creditors. The trustee receives a set monthly payment from the debtor and uses these funds to pay creditors as specified in the court approved plan.
At the completion of the plan, debts are usually discharged, or legally forgiven. There are some debts which are not usually discharged in bankruptcy and include criminal fines, criminal restitution, alimony, child support, student loans, and some taxes.
The choice between Chapter 7 and Chapter 13 is very much dependent on your specific circumstances. The type of bankruptcy that is right for one filer is not for the next. Only after a review of your situation can we advise on the pros and cons of each and make a recommendation on the best type in your situation.
In general, Chapter 7 is for filers who have mostly unsecured debt and who meet the Chapter 7 means test. Chapter 7 is also more suitable for filers who don’t have much property such as houses and cars. Chapter 7 may also be the option if you don’t have a steady source of income. There is a higher initial cost to the filer in Chapter 7 and this might be an impediment that tips the scales towards a Chapter 13.
Chapter 13 is for filers who have a steady source of income. It is particularly suitable for filers who own a home and have a fair amount of equity built up, or homeowners who are behind on their mortgage and facing foreclosure. If you are facing foreclosure because of past due payments, Chapter 13 can provide a way to keep your home and allow you time to catch up. Chapter 13 also often provides relief from high interest rates and fees and penalties that so frequently keep debtors behind. As noted above, a Chapter 13 has a lower initial cost since the fees and costs associated with filing are often paid through payments over time.
Chapter 13 also provides an opportunity to address bad automobile and other secured loans. Depending on the age of the loan, the principal amount owed may be reduced to the value of the collateral. As an example, if you owe $25,000 on your automobile, but it is only worth $12,000, you may be able to pay only the $12,000 amount to the lender and own the car. Chapter 13 also provides the opportunity to adjust high interest rate loans to a more manageable interest rate and adjust the length of time you have to pay off the loan. All of these adjustments often result in a payment in Chapter 13 that is LESS than you are currently paying on just your car (and house) yet that Chapter 13 payment takes care of all debt.
The best way to determine the appropriate type of bankruptcy is to set up an appointment for a no cost, no obligation evaluation of your situation with one of our bankruptcy attorneys. At the conclusion of this consultation you can expect to understand your options for both forms of bankruptcy and receive a recommendation as to what is most suitable for you. Contact us today to set up your no cost evaluation.
While you may have only heard about how bankruptcy can hurt, or buy into the shame of filing bankruptcy, the TRUTH is that bankruptcy has helped millions of people.
Personal bankruptcy may eliminate or reduce debt, stop foreclosure or repossession, stop creditor harassment, stop wage garnishment, and give you the breathing room you need to get back on track.
Many people have been able to eliminate their bills by filing Chapter 7 bankruptcy, while others have been able to stop foreclosure and save their homes by filing Chapter 13.
Bankruptcy often provides the breathing room people need to start over and become financially responsible. If you’re looking for financial relief and want to learn more about filing bankruptcy, call and set up a no cost, no obligation initial consultation and evaluation with one of our bankruptcy lawyers in Nashville.
You may have heard about many of the negative aspects of filing bankruptcy. Much of what you have heard may not be the entire truth. For example, the notion that you will never be able to buy a house or car after filing bankruptcy is just not true. You should explore the TRUTH of the impact on your credit in the section Bankruptcy and Credit Questions later in this FAQ.
Bankruptcy is not the right solution for everyone. Our bankruptcy attorneys can help evaluate your situation and determine if bankruptcy is right for you. Call today for a no cost, no obligation initial consultation.
Creditors can be persistent and annoying. They often send numerous notices, call frequently, contact you at work, and pressure you non-stop. Their job is to collect money for their employer. Often the “solution” they attempt to get you to agree to leaves you with even more debt and less money. Bankruptcy gives you the power to silence the creditors and debt collectors!
Should you decide to file bankruptcy, a court order called the automatic stay is issued immediately. This court order prevents your creditors from attempting in any way to collect the debt. This means the phone calls stops, mail from creditors stops, contact with you at work stops, garnishment of your wages stops. If your creditor continues to contact you or attempts to collect, the creditor is in contempt of the court’s order and the court will stop them.
The time it takes to complete a bankruptcy case varies depending on circumstances but mostly depends on which type of bankruptcy you file.
Generally a Chapter 7 bankruptcy will last 3-4 months before the filer receives a discharge. A Chapter 13 repayment plan will last 3-5 years; however you should understand that in a couple of months all the uncertainty is over, the plan is established, and for the remainder of the 3-5 years, you are paying into the plan as scheduled.
While bankruptcy offers long-lasting debt relief for many filers, some individuals find themselves in need of bankruptcy protection more than once. In a strict sense, there is no limit on the number of times you can file bankruptcy. There are, however, time limits between bankruptcy filings which affect your ability to receive a discharge in a subsequent bankruptcy which is usually what you are after. Each case is unique. Talk to one our bankruptcy lawyers about any possible restrictions you may have if you’re considering filing again.
Limits on Filing Multiple Bankruptcies
The time limit for receiving a discharge between filing bankruptcy depends on the type of bankruptcy filed in the past and the type of bankruptcy filed in the subsequent bankruptcy.
Prior Chapter 7 and want to file a new Chapter 7: The prior chapter 7 must have been filed over 8 years ago. There is an absolute bar from receiving a discharge in a new chapter 7 if a previous chapter 7 was filed within 8 years of current filing.
Prior Chapter 7 and want to file a new Chapter 13: If a prior chapter 7, that was discharged, was filed within 4 years of current filing the debtor will NOT receive a discharge but can still file a chapter 13. If the prior chapter 7 was filed over 4 years ago the debtor will be eligible to receive a discharge in new chapter 13.
Prior Chapter 13 and wants to file a new Chapter 7: If a prior chapter 13 was filed within 6 years of current chapter 7 filing there is no discharge unless:
a) Payments under the prior chapter 13 plan totaled 100% of the allowed general unsecured claims; or
b) Payments under the prior chapter 13 plan totaled at least 70% of the allowed general unsecured claims and the chapter 13 plan was proposed in good faith and was the debtor’s best effort.
Prior Chapter 13 and want to file a new Chapter 13: If a prior chapter 13 was filed and the Debtor received a discharge within 2 years of the current filing, the debtor will not be eligible for a discharge in the current chapter 13. This is seldom if ever a bar to receiving a discharge in a new chapter 13 case.
It is important to note that the discharge date of the previous filing is irrelevant. The date the case was filed is the date that determines whether a debtor will be eligible to file a new case and receive a discharge.
While discharge of the debt is usually the goal, there are circumstances where filing bankruptcy, which is generally not restricted by prior filings, can provide relief and are worth pursuing. To explore the impact of a prior bankruptcy filing, set up a no cost, no obligation, initial consultation with one of our bankruptcy attorneys today.
As a married couple, you have choices in filing bankruptcy. One option is to file one case with both spouses as debtors. Under this option, all debt, whether it belongs to one or both persons, can be addressed. Another option is to for one of the spouses to file bankruptcy and the other not. Under this option, only the debt of the spouse who files bankruptcy will be addressed. If one spouse files and the other doesn’t, and there is no joint debt, the spouse who did not file is usually not affected by the filing.
The choice between these option often boils down to the amount and type of debt each of the spouses has. If there is joint debt, it often is better for both spouses to file. When there is little or no joint debt, and only one of the spouses has significant debt, a better option may be for only one spouse to file.
Bankruptcy and Your Vehicle
Most people who file for bankruptcy and own a car can keep their car during and after their case. This is especially true if the car is used to get back and forth to work or needed by the family.
You may be able to use bankruptcy laws to keep your vehicle from being repossessed if you are behind on car payments.
Both Chapter 7 and Chapter 13 types of personal bankruptcy address cars, car loans, and vehicles you own outright:
- The automatic stay in bankruptcy is designed to stop repossession. In most cases, this goes into effect immediately after you officially file for bankruptcy.
- Chapter 7 Bankruptcy may protect your car from a forced sale.
- Filing for bankruptcy under a Chapter 13 may allow you to repay your car loan at a more affordable interest rate and length of repayment so that you don’t lose your car to collectors.
Chapter 7 bankruptcy is designed to help eliminate unsecured debts such as credit card debt or medical debt, but may provide protection for secured debts such as cars. Your car may be fully protected from seizure or forced sale due to Chapter 7 exemptions if you own your car outright, and owe no debts on it.
One important aspect when filing bankruptcy is whether you have a clear title to your car. If you have pledged your vehicle as security for a debt, or if you are financing or leasing a vehicle, you likely have three options for secured car loans when you file a Chapter 7 bankruptcy.
1. Reaffirm: A reaffirmation agreement is a contract between you and the car creditor where you agree to pay the balance owed on your car note, despite the bankruptcy filing. You continue to make payments and the creditor promises that, as long as payments are made, they will not repossess or take back the property. Reaffirmed debts are not discharged and the debt survives the bankruptcy.
If you do not make your car payments after you reaffirm the car loan, the car lender can repossess the car and sue you for the deficiency balance just as they can if you don’t file bankruptcy. After the finance company repossesses the car, they will sell the car, often at an auto auction. Usually the finance company does not get enough money from the auction to pay off your loan. This shortfall is called a “deficiency” and you would still be legally obligated to pay the creditor the deficiency balance. As you can see, the decision to reaffirm your car loan is a serious financial matter.
Reaffirmation agreements are strictly voluntary. You are not required by the Bankruptcy Code or other state or federal law to reaffirm your car loan. Before entering into such an agreement, you will want to speak to one of our bankruptcy attorneys to make sure that the reaffirmation is in your best interest.
2. Redeem: In Chapter 7, you have the right to purchase or redeem your car from the creditor by making a lump sum payment equal to the car’s fair market value. The U.S. Bankruptcy Code provides that you must pay the creditor the replacement retail cost of the car. The balance of the debt will be discharged.
For example, assume you own a car worth $5000.00, but owe the finance company $10,000.00. In this circumstance, you could redeem the vehicle by paying the creditor $5000.00 and the remaining balance will be discharged in your bankruptcy. Our Nashville bankruptcy attorneys can advise you on the benefits of redeeming your financed car and identifying lenders that will provide the funds for your vehicle redemption.
3. Surrender: If you cannot afford the monthly payments on your car loan, you determine that you owe more than the car is worth, or the car is damaged or not functioning and too expensive to repair, you can unload the car and the debt in your Chapter 7 bankruptcy by surrendering the vehicle to the creditor.
If you are leasing your car when you file Chapter 7 bankruptcy, you can choose to either continue making the monthly lease payments or surrender the car back to the creditor.
If you surrender the leased car, any obligation to repay debt will be eliminated in your Chapter 7 bankruptcy case.
Chapter 13 bankruptcy is a powerful tool to protect your car from repossession. If you have fallen behind on your car payments, you may be able to file a Chapter 13 bankruptcy to stop the repossession of your vehicle. Even if your car has been repossessed, so long as the lender has not completed the sale of the car, you can force the return of the vehicle to you. The amount you have to pay for your car depends upon when you bought your car and the value of the car. If you own your car outright, and owe no debts on it, then your car should be fully protected in Chapter 13.
If you bought your vehicle within 910 days (2-1/2 years) of filing your bankruptcy case, you must repay the entire car loan. The good news is that the interest rate you pay on your car loan may be significantly reduced and the amount of time required to repay the loan modified to match the length of your bankruptcy plan. This reduction in interest and changing of the length of time you have to repay often results in a dramatically reduced payment.
As an example of this modification of your loan, if you financed a $10,000 car at 20% interest for 36 months, your payment would be $371.64 per month. Under a Chapter 13 repayment plan, your payment could be reduced in interest and stretched in time to 60 months. This results in a payment of $180.80 per month; a monthly savings of $190.94 per month!
If you bought your car more than 910 days before you file bankruptcy, you will only have to repay an amount equal to the present value of the car.
For example, if you owed $5000 on a car that is worth only $2500, upon filing Chapter 13 you would be required to repay the finance company only $2500 over the three-to-five year term of your Chapter 13 repayment plan at a modest interest rate. The remaining $2500 will be treated as unsecured debt with you required to repay only a portion of that debt at no interest
You may be able to pay your car lease through the Chapter 13 bankruptcy repayment plan that you prepare with your bankruptcy attorney. You can “assume” the lease and continue making the monthly payments. You can also “reject” the lease and return the car to the creditor.
The creditor will sell the leased vehicle, apply the sale proceeds to your lease balance and then file a claim in your Chapter 13 bankruptcy case for the lease deficiency. This deficiency is an unsecured, non-priority claim, which means you will likely only pay that creditor pennies on the dollar.
Call and set up an appointment to meet with one of our bankruptcy attorneys today if you have questions about how your car will be affected if you file bankruptcy. Don’t wait until the repo man comes to your door or the foreclosure notices start piling up. Learn how bankruptcy can stop repossession and foreclosure and silence creditors!
Chapter 7 Bankruptcy Questions
Chapter 7 bankruptcy is known as the liquidation chapter of bankruptcy. It is a legal process by which the person filing bankruptcy is relieved of the obligation to pay most of their unsecured debts in exchange for giving up any assets they own that are not exempt under the available exemption laws. The assets given up are liquidated, or sold, by the trustee and the proceeds are used to pay as much as possible of the unsecured debt. What is not paid is discharged, or forgiven.
Most people who file Chapter 7 bankruptcy have no assets they are unable to exempt, so they keep all of their property, there is no liquidation, and unsecured debts are simply discharged. There are, however, certain unsecured debts such as student loans, many taxes, and domestic support obligations, that are not discharged in Chapter 7 bankruptcy.
While any individual can file for Chapter 7 bankruptcy, in order to avoid a challenge to your discharge, you must qualify under the Chapter 7 means test. The means test is simply a way of determining if you have the ability to pay something on your debts.
The means test has two steps. In the first step, your gross income over the last six complete months is averaged to determine a current monthly income (CMI). If your CMI is less than the median income for an equivalent sized household in your state, you can file for Chapter 7 without a means test challenge.
If your CMI is greater than the median income for an equivalent sized household in your state, you must proceed to step two. In step two, deductions from your CMI are made based on standard living costs, you unique secured debt payment amounts, insurance costs, and other factors. If after making these deductions you do not have sufficient remaining income to make meaningful payment toward your unsecured debts, you can file for Chapter 7 without a means test challenge.
The vast majority of clients wishing to file Chapter 7 bankruptcy can qualify. Contact one of our bankruptcy lawyers today to explore your alternatives.
Chapter 7 bankruptcy may eliminate debt under the U.S. Bankruptcy Code. Chapter 7 bankruptcy may be a good option for people that have few assets and who are facing lots of unsecured debt, such as medical bills or credit card debt.
Among other benefits, filing Chapter 7 bankruptcy may:
- Eliminate most or all of your unsecured debt, allowing you to rebuild your credit
- Silence your creditors through an automatic stay order
- Keep you from losing your exempt assets such as your car or home
For more information on Chapter 7 bankruptcy, set up a no cost, no obligation appointment to speak with one of our bankruptcy attorneys in Nashville today.
The first time you meet with one of our bankruptcy attorneys, you should bring a list of creditors and debts, information on your income, and information on your cars and housing. As you and your attorney continue to work together, you’ll need to provide some documentation about your finances in order to complete the necessary paperwork when filing bankruptcy.
Along with your bankruptcy petition, your bankruptcy attorney must file several schedules that list your assets, income and debts. The documents listed on this page provide an overview of the type of information an attorney will need. However, each case is unique. Be sure to ask your lawyer what specific documents he or she would like you to bring.
There are some differences between the documents required for a Chapter 7 bankruptcy petition and those required for a Chapter 13 bankruptcy. If you aren’t sure which type of bankruptcy might be right for you, one of our attorneys can help you decide which might work best under your particular circumstances.
A bankruptcy lawyer can help you determine which of this property can be included on the schedule of claimed exemptions and protected from liquidation.
- A list of real property, including your interest in the property, the current value and the amount of any secured claim.
- A list of your creditors, the amount that you owe them and any security on those accounts
One of our bankruptcy attorneys can help you determine which debts belong on the secured schedule, the priority schedule, or the non-priority schedule.
- A list of any current contracts or unexpired leases, whether the debtor is the lessor or the lessee of the property
- A list of the names and addresses of any co-debtors on any accounts, along with the names and addresses of the creditors on those accounts
Co-debtors can be affected by your filing. The impact on a co-debtor is different depending upon whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. A bankruptcy lawyer can explain how each one affects any joint account holders or co-signers on your accounts.
- The name and address of your employer, along with your occupation and the length of your employment
- Documentation of your income from employment, including payroll deductions
- Income from other sources, including alimony or maintenance
- In some cases, a list of current monthly expenses
- A list of any payments made to creditors during the past 90 days
- A list of all payments made during the past year to creditors who are ‘insiders’. (Creditors with whom the debtor has another relationship, like family members)
One of our bankruptcy lawyers can provide you with the exact legal definition of ‘insider’ and help you determine whether or not you have made any payments that fall within this classification. Again, you likely won’t need to provide much of this information on your first meeting with one of our attorneys, and some of the documents listed may not apply to you at all. One of our bankruptcy lawyers will review the information you will need to gather during your initial consultation.
Chapter 13 Bankruptcy Questions
Chapter 13 bankruptcy is a way to restructure your debt and allow you to make full or partial repayment of your debt while under the protection of the bankruptcy court. The debtor prepares a plan for how to repay his debts over a period of time. This repayment may be substantially less than the total amount owed. Under the plan, the person send regular payments to the bankruptcy trustee. The trustee pays creditors according to the plan the person prepared.
The repayment period may be as short as three years or as long as five years. At the end of the repayment period, the portion of the unsecured debt the person could not afford to pay is forgiven, or discharged.
The initial cost to file a Chapter 13 is often much smaller than a Chapter 7 with initial payments as small as $63.00. Chapter 13 is often a better choice for dealing with car loans and mortgage payments. One of our bankruptcy attorneys can help you understand how a chapter 13 bankruptcy would work in your situation.
Chapter 13 is available to individuals and couples who have regular income. There is no means test qualification for Chapter 13 so in a way it is easier to qualify for than Chapter 7. For some people who can not qualify for Chapter 7, it is the only reasonable choice.
However, Chapter 13 bankruptcy requires a regular income that will allow you to create a budget and make predictable and reliable payments to the trustee. This income does not necessarily mean wage income from a regular job. It could be regular retirement or disability income or even a regular contribution from family or friends.
A Chapter 13 bankruptcy can stop mortgage foreclosure and other repossessions. Chapter 13 bankruptcy is often a good option for people who have regular income, own a home with equity, are behind on their mortgage, or have a financed vehicle with a high interest rate loan. There are many other complex situations where Chapter 13 may be preferred and only an experienced bankruptcy attorney in Nashville TN can help you understand your options.
Chapter 13 can give a person a chance to get back on top of their mortgage, afford to keep and pay off a high interest rate car loan, and address all the unsecured debts they may have. For more information, schedule a no cost, no obligation initial consultation with one of our bankruptcy lawyers today.
Bankruptcy and Credit Questions
Many people who file Bankruptcy are baffled when they learn that filing can help improve their credit. Bankruptcy can do this by stopping the ongoing reporting of negative information.
Filing bankruptcy itself does drop your credit score; however, shortly after filing, the credit score starts to rebound. All of the old collection accounts and past due accounts are no longer being reported. As more and more time goes by, the persons credit score improves.
Keep in mind that how your credit will be affected will depend on a number of factors, such as where your credit level is today and which type of bankruptcy you file. Be sure and discuss this aspect of bankruptcy with one of our Nashville bankruptcy lawyers during your initial consultation.
Credit is an integral part of today’s economy. If you hope to be approved for a car loan, a home loan, or other credit sources, you have to demonstrate you’re a good risk for the lender. But credit scores impact your life whether you’re applying for credit or not. For instance, many rental agencies check credit reports before approving an application for an apartment. Your employment options may be impacted by your credit history, and your automobile insurance rates will typically be higher if your credit score is low.
You can significantly improve your credit score after filing for bankruptcy with many having a higher credit score within a year than they had prior to filing. Making that improvement requires careful planning, and the first step is understanding and monitoring your credit report.
Your credit score is a three-digit number generally relied upon by lenders to determine how good (or bad) a credit risk you are. Traditional credit scores range from 300 to 850. Each of the three major credit bureaus, Experian, Equifax and TransUnion, calculates these scores a little differently, so the score that you receive from one credit bureau may not match one requested by a lender from another bureau.
To further complicate the understanding of credit scores, the three major credit bureaus recently joined forces to develop a new scoring system. The new score is calculated on an entirely different scale, with the highest potential score being 999.
This variation may make it difficult to know what a score means; when you talk with a lender, make sure you know which credit score the lender will be looking at.
Although the exact numbers will differ from agency to agency, and even the scale may differ if the new system is used, the factors that determine your credit score are fairly consistent and predictable.
Again, the exact formula varies. However, the aspects of your credit history that weigh most heavily include:
- The percentage of available credit that you’re using: lower is better
- Late payment history: even one late payment in the past six months can significantly impact your score
- Age of accounts: those with long-standing accounts tend to have higher credit scores
- Accounts in collection status dramatically reduce your score
Other factors impact your credit score as well. For instance, every time you apply for credit and a lender requests your credit report, your credit score drops slightly. Therefore, it’s important to plan your credit applications carefully, rather than submitting several applications in hopes that one will work out.
Your credit score can be affected by items you might never think to consider, as well, like unpaid parking tickets. Many municipalities are now using private collection agencies to follow up on parking tickets, dog licensing fees, even unpaid library fines, and those items may show up as collection accounts on your credit report. If they do, it won’t matter how small they are, and it won’t help much to pay them off, so be diligent about keeping these obligations up to date.
Having a mix of credit in your history generally helps your credit score, so if you’re working your way back from bankruptcy you’ll want to establish yourself with different types of credit over time: a credit card, a bank loan, perhaps ultimately a car loan. Of course, it’s important to make good choices about your lenders. Otherwise, unexpected fees and punitive interest rates could land you right back in a cycle of minimum payments (or even late payments), doing your credit score more harm than good.
The first thing you’ll want to do is to order your credit report from each of the three major credit bureaus. You can get your credit report free once a year at the government web site www.annualcreditreport.com, but you’ll have to pay for your credit score.
It is important after bankruptcy to make sure your creditors accurately report your discharge. Our bankruptcy attorneys in Nashville can discuss the advantage in your case of using a post discharge credit review to verify accurate reporting.
Review your credit report to make sure that none of the accounts that were discharged in your bankruptcy are still appearing as open, delinquent, or collection items. It is against the law for creditors to continue to report items that were discharged when filing bankruptcy. Once anything that shouldn’t be on your credit report is cleaned up, you’ll have a fresh starting point.
Co-signers can be protected in certain bankruptcies. If you are concerned about protecting your co-signers, one of our bankruptcy lawyers may be able to help you determine which bankruptcy filing is best for you. In general, if you decide to file Chapter 7 bankruptcy, creditors are still able to proceed with collection efforts against your co-signers even if you were let off the hook for the debt.
However, if you file Chapter 13, a co-signer is protected if the following provisions are met:
- The debt must be a consumer debt
- The debt can’t be incurred in the ordinary course of business
- The co-signer can’t benefit from the proceeds of the debt
- The debtor sticks to the Chapter 13 bankruptcy payment agreement
You should note that if you fail to complete the requirements of your Chapter 13 repayment plan, the creditors have the legal right to pursue your co-signers.
A debt discharge prevents your creditor from ever attempting to collect on that debt. Regardless of the type of bankruptcy filed, most include a discharge of all eligible debt at their conclusion. A discharge means you never have to worry about paying back the debt again. From your perspective, it is simply gone!
Bankruptcy protection is intended to provide a fresh financial start, but it takes work to put that fresh start to work for you, take control of your finances, and build a positive credit rating. A University of Iowa College of Law study explored the reasons that the fresh start offered by bankruptcy fails for some people. While the answer was complex and involved many factors, there was one consistent thread: you can’t get ahead after bankruptcy if your income falls short of your expenses.
Mistake #1: Poor Financial Planning After Bankruptcy
It may seem self-evident that the fresh start in bankruptcy will help only if future income is sufficient to cover future expenses, but many people don’t consciously think about that. Instead, they emerge from bankruptcy expecting that since they’re out of debt their financial problems will simply disappear. Failure to budget after filing bankruptcy to make sure income exceeds expenses is the first and most dangerous mistake most bankruptcy petitioners make.
Mistake #2: Rebuilding Credit with the Wrong Companies
After bankruptcy, you will undoubtedly pay a higher interest rate than would an applicant with a high credit score
It’s good to be realistic, and to accept higher rates in the beginning as the price of re-establishing your credit.
You shouldn’t be carrying high balances on those new credit cards, anyway, so you shouldn’t be paying much (if any) interest. However, there’s a difference between paying somewhat higher rates and being hit with fees, high interest rates, outrageous penalty rates and additional charges, all for the privilege of opening a credit account that will be of little use to you.
Mistake #3: Credit ‘Repair’ Scams
If it seems too good to be true, it probably is. You’ve probably seen advertisements in which companies offer to “erase bad credit” in one quick-fix. You may even be directly targeted by those companies, but there is no quick fix or overnight way to rebuild your credit. In addition, these companies often recommend practices that are fraudulent and can lead to criminal charges. Your bankruptcy will remain on your credit report for up to 10 years, and the way to outweigh that mark is to build a positive credit history.
Mistake #4: Falling into Old “Crisis” Patterns after Bankruptcy
Although most bankruptcies are the result of major life events such as serious medical problems, divorce, job loss, or death in the family, those financial problems were often aggravated by desperation efforts that made the situation worse instead of better. Crisis patterns include living on credit cards, using one source of credit to pay another, or borrowing from payday loan stores or other high-interest, high-fee sources that prey on those in difficult financial circumstances.
You CAN buy a home after filing bankruptcy. A bankruptcy on your record doesn’t mean you can never be a homeowner again.
Bankruptcy is a process. It isn’t an ending. Regardless of your reasons for filing now, it may be possible to get a home loan again in the future. While this may take work on your part to rebuild your credit score, many filers own homes.
Even if you file bankruptcy to stop a foreclosure, you can likely keep your home and even buy a new home after you file.