Bankruptcy: Should I File Bankruptcy? Is Bankruptcy For Me?
Bankruptcy is a federal law that enables a person who are overwhelmed in debts seek relief from the courts to either discharge all of their debts or structure a repayment plan to pay their creditors. Bankruptcy gives those who are in debt and cannot meet their payment obligations a fresh start in life. Bankruptcy is not the end of the world and people that file bankruptcy can get qualified for a residential mortgage loan after a one or two year waiting period. A bankruptcy will plumment your credit scores by 200 or more points. However, the good news is that the drop is a temporary drop and your credit scores will recover over time. The longer your bankruptcy discharge date is, the less of an impact your bankruptcy will have on your credit scores. Immediately after the discharge date of your bankruptcy, you should start re-establishing your credit by getting a few secured credit cards. Secured credit cards are the ultimate weapon and healer in rebuilding your credit after filing bankruptcy. If you get five $500 credit secured credit cards and you use them wisely, your credit scores will surpass the 700 FICO mark a year after your get your secured credit cards. The question you need to ask is whether you should file bankruptcy and why.
Is Bankruptcy For Me?
Is bankruptcy for me? Why are you considering bankruptcy? What do you know about bankruptcy? Bankruptcy attorneys give you free consultations and I strongly advise on you speaking not to just one bankruptcy attorney, but to several bankruptcy attorneys. This is your life and I would not rush into signing a contractural agreement with the first bankruptcy attorney you consult with. You have time and you need to feel comfortable with the bankruptcy attorney you choose. You should also speak to family and friends who have gone through prior bankruptcies and speak with a credit counselor about the pros and cons in filing bankruptcy.
Why Is Bankruptcy For Me?
I speak to dozens of mortgage loan borrowers a day and a large portion of my prospects who are on the verge of filing bankruptcy do not need to file bankruptcy. Perfect example is a potential home buyer who came to me to eventually qualify for a mortgage loan. She told me that she wanted to purchase a home but in two years because she had to file bankruptcy. I told her that I will run her credit and when I got the results, I was surprised that her credit scores were over 700 FICO and I saw no reason in her filing bankruptcy. She did have a few collection accounts and several charge offs but most of her delinquent accounts were over 5 years old and the majority of her collections, charge offs, repossessions will not only expire the statute of limitations but will fall off her credit report in a year or two. I asked her why she wanted to file bankruptcy and she told me that she wanted to qualify for a home loan and could not pay back her older debts. The thing she did not realized is that most of the debt collectors had stopped calling her and most of her debts are nearing or has passed the statute of limitations. A bankruptcy would have been not needed on this particular case.
Do You Have To File Bankruptcy?
In the event if a debtor has a few debts and the debts are recent debts, the creditor will be more than willing to do a repayment plan which is affordable to the debtor and the debtor can avoid bankruptcy. Debts that are older than 2 years old, the chances of the creditor going after the debtor is not likely. I have seen people file bankruptcy for having debts as little as $5,000.
There are two types of bankruptcies: Chapter 7 Bankruptcy which is total liquidation and are geared towards folks with no income or little income. Chapter 13 Bankruptcy is only for those folks who have income and want to protect their assets. Chapter 13 Bankruptcy is also known as restructuring of debts and a bankruptcy trustee is appointed to the petitioner where a percentage of the petitioner’s income is allocated towards paying the creditors over a course of 3 to 5 years. After that period is over, the remaining debts are discharged.
Lawsuits And Judgments: Wage Garnishments And Assets Seizure
Creditors can take you to court and get a judgment against you. Creditors can enforce the judgment against you and can also garnish your wages and seize your bank and investment accounts. If you have pending lawsuits and judgments, the only way to get rid of these will be by filing bankruptcy. Judgments are the worst derogatory items you can have on your credit report and your judgment is good for at least 10 years and can be renewed for another 10 years for a total of 20 years. If you have multiple judgments and the judgment creditor is aggressively pursuing collection activities against you such as garnishing your wages and freezing your assets, a bankruptcy may be your best solution. I am not a bankruptcy attorney nor a bankruptcy expert so you need to contact a bankruptcy attorney to explore these options. By filing bankuptcy, all of your judgments and lawsuits will get expunged. There are certain debts that cannot be discharged through bankruptcy. Government loans such as student loans, government fines, child support, and income tax liens cannot be discharged through bankruptcy.
There are exempt assets when you file bankruptcy. You can still keep your home, car, and other assets and still file bankruptcy.