Category: Bankruptcy

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As more and more consumers file for bankruptcy, it is important to understand what the contributing cause might be. According to Los Angeles based bankruptcy law firm Recovery Law Group apart from credit card bills, the other major contributing factor to personal bankruptcy is huge medical bills. One can easily blame the rising cost of healthcare for financially ruining any person. Accumulation of medical bills has become one of the major reasons for an increased bankruptcy filing. In case a person loses their job and the medical bills keep on piling, the financial issues could be financially devastating for most people. Despite the presence of health insurance, disability insurance, and other government programs, many times the debt is overwhelming that bankruptcy is the only way to get out of the financial mess.

Can bankruptcy help cope with huge medical debts?

Many times, people can bounce back after a severe illness and recover from the financial problems they were facing. However, there are many who are unable to get back to work after an accident or illness and end up in heavy debt. With rising medical and credit card bills, harassment from creditors in the form of threatening phone calls and letters can be a big issue, as this can impact your health, job, and relationships. Bankruptcy is one of the best ways to not only stop collection actions by creditors but also getting rid of all unsecured debts like medical bills. Bankruptcy gives you a fresh start to rebuild your finances while getting rid of your debts.

In the case of Chapter 7 bankruptcy, medical debts are treated as unsecured non priority debts, i.e. in case the debtor is unable to pay for them using non-exempt property, the debt will be discharged. You will be surprised to know that there isn’t any limit to the medical debt which can be discharged. However, if you wish to have a successful discharge of your debts, you need to trust experienced bankruptcy lawyers as the procedure is quite complicated. The lawyers are well versed with rules and know-how and when the debts can be discharged. In case you are overwhelmed by medical debts and are looking for bankruptcy as a way to get rid of them, you can call 888-297-6023to schedule an appointment with experienced bankruptcy lawyers.

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Many people are worried that filing for bankruptcy will shut all doors of getting credit for them. However, this is not true at all. Though bankruptcy appears on your credit report, it does not mean that you won’t be able to buy a home after getting your bankruptcy discharge. On the contrary say Dallas based bankruptcy law firm Recovery Law Group lawyers, since all your bad debts are written off in bankruptcy, you are considered a good person to give credit to. In fact, applying for a credit card is the best way to rebuild your credit after bankruptcy. however, it is important to know that any debt you take after bankruptcy discharge is generally available at a higher interest rate and is monitored closely.

Effect of bankruptcy on credit rating

Bankruptcy is one of the best ways to get rid of a huge amount of debt that has been holding your credit score down, making it difficult for you to manage things. Since most of your unsecured nonpriority debt like credit card and medical bills are discharged, you can begin your financial life again. However, the drawback is that bankruptcy is mentioned on your credit report for as long as 7-10 years depending on which chapter of bankruptcy was filed. This serves as a warning for prospective lenders and may temporarily affect your credit. To ease the risk, many lenders charge a higher interest rate for a loan to people who have just come out of bankruptcy. But there is a silver lining; with time and continuous efforts, the credit card score improves. With timely payments on the loans, the effect of bankruptcy wears off.

Rebuild your credit using these methods

Rebuilding credit is extremely essential for you, especially after a bankruptcy. once you have rebuilt your credit, you will be able to procure home loan at reasonable interest. Here are some tips for rebuilding credit history:

• Opt for secured credit card and keep your payments limited. Alternately, you could opt for unsecured credit cards that offer credit at low interest.
• Make a habit of paying your bills on time so that you don’t end up in debt again. Additionally, timely payments are reflected on your credit report.
• Ensure that you keep track of your credit report; any debts that have been repaid should be reported as paid in a credit report. in case of any errors, report to the credit reporting bureau and get the change rectified.

Getting a mortgage is easy

Bankruptcy is not the best assurance for mortgage companies. They would like some reassurance that their money is safe. These are some criteria for mortgage companies before giving home loans:

• A down payment,
• A steady source of income,
• The 2-year stretch of on-time payments.

People might even get a loan before the 2-year period is over if responsibility is seen over bill payments (car loan or secured credit card). However, all of this is possible only after you get a bankruptcy discharge. Your bankruptcy lawyer can give you advice regarding life after bankruptcy. to speak with experienced bankruptcy attorneys, you can call 888-297-6023.

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If you are worried about huge amounts of debts, then bankruptcy is an excellent way to get rid of them. Almost all debts are eliminated in bankruptcy, except a few say Los Angeles based bankruptcy law firm Recovery Law Group lawyers. You can regain your financial independence by opting for bankruptcy. Most unsecured debts can be wiped off in bankruptcy. the debts you can eliminate include credit card debts, medical bills, business debts, negligence claims, gasoline and store charge cards, unpaid rent, lawsuit judgements, promissory notes, utility bills, debts due to car accidents, mortgages, personal loans (payday loans), tax debts (in some cases), lease and contract obligations, auto loans and leases.

Some debts have specific rules for discharge including when and how it can occur. These include federal taxes and court judgments. Consulting an experienced bankruptcy attorney is important if you wish to understand how bankruptcy works and which debts can be eliminated through it. You can call 888-297-6023 to seek consultation with qualified lawyers. Consulting them will enlighten you regarding which debts cannot be eliminated in bankruptcy. These include:

• Student loan debts
• Child support
• Alimony payments
• Recent taxes
• Any debt incurred after filing for bankruptcy
• Court fines and criminal restitution
• Any payment for personal injuries caused due to driving under the influence

Despite bankruptcy giving a fresh start, there are certain things which even bankruptcy cannot help you with. This includes keeping your assets and property. Federal laws are quite specific regarding which properties can be protected and which assets can be liquidated to pay off your creditors. Another factor contributing to this is the chapter of bankruptcy you have filed for. You can opt for either federal or state exemptions to protect your property.

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Filing for bankruptcy might be a challenging thing to do. Although it solves your financial problems, it does create others. Some of those problems can be really serious too. Filing for bankruptcy will affect every financial aspect of your life. Thus, it’s important to consult a proficient legal firm like The Recovery Law Group, regarding the short and long term effects of bankruptcy before filing for it. You can reach them at Recovery Law Group or 888-297-6203.

Chapter 7 and Chapter 13 are the highly sought-after forms of bankruptcy. In Chapter 7 bankruptcy, you get rid of your debts by losing some of your precious assets, while in Chapter 13 bankruptcy you repay the debts by adhering to a court-ordered monthly repayment plan that is affordable for you. Both of these bankruptcy cause a decline in your three-digit FICO credit score, the amount of which depends on your credit score before the bankruptcy (expected decline is of around 150 or more points).

Most of the financial aspects of your life depend on your credit scores. Thus, a decline in the credit score poses a lot of problems. Some of these problems are:

• Borrowing money will either be impossible for you or you’ll get it with a high rate of interest.
• In case you lose your house in foreclosure, you’ll face problems in renting another one. Most landlords will ask for higher security deposits. Some might completely refuse to rent it to you.
• Getting a new car will be difficult unless you’re buying it with cash. You will either get a loan with a higher interest rate or won’t get it at all.
• Even getting a new mobile plan will become arduous, as the service providers might get worried whether you’ll be able to pay your bills every month or not.
• You’ll have to live as a cash consumer for a year or two, as getting things on credit will become difficult for you.

Apart from a decline in the credit score, there are a few more adverse impacts of filing for bankruptcy.

• Bankruptcies won’t disappear from your credit report easily. A Chapter 7 filing will remain on it for 10 years, while a Chapter 13 filing will be there for 7 years. If you’ll pay your bills on time and won’t be under any new debts, the negative impact of these filings on your credit report will decrease.
• Filing for bankruptcy will cause a decrease in your credit-based insurance score which will, in turn, increase your vehicle insurance payment. Insurers charge such motorists with higher rates of interest as such people tend to file maximum claims.
• Even Fannie Mae and Freddie Mac won’t be able to approve your mortgage loan for the first 2 years of your bankruptcy. The Federal Housing Administration (FHA loans) won’t let you apply for a mortgage before the completion of one year of your bankruptcy.
• Filing for bankruptcy can even keep you off getting a new job, as the employer might ask for an employment screening, which is an overview of your credit report. It lists Chapter 10 and Chapter 13 bankruptcies, which are less than 10 and 7 years old, respectively. However, the employer can’t run the screening without your written permission. But still, the presence of bankruptcy might stop your employment, especially if it’s in a financial sector or law enforcement.

Thus, it is advisable to find better options than bankruptcy. Bankruptcy should be your ultimate last option.

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To go bankrupt means to run out of enough money to pay your debts or to have liabilities more than the assets. In bankruptcy, an individual files for a specific chapter bankruptcy depending on his or her situation. The two most common bankruptcies are Chapter 7 and Chapter 13 bankruptcy. Although filing for bankruptcy helps you in discharging your debts, it is an avoidable serious decision.

Inability to get new loans because of low credit scores (Chapter 7 filing has more adverse effects than Chapter 13 filing), surrendering the personal property, the uncertain dischargeable status of the debts, different filing fee for each Chapter bankruptcy and costly legal help are some of the negative aspects of filing for bankruptcy. Thus, it’s important to completely understand the pros and cons of bankruptcy and the possibility of other options before you decide to file for it.

Given below are a few ways that might help you to save or earn some extra money to clear your debts faster and to avoid bankruptcy.

• Get rid of unnecessary expenses like streaming services, magazine subscriptions, extra data plans, eating out, gym memberships, etc.
• Take a part-time job like working at a coffee shop, baby-sitting, walking your neighbor’s dog, etc. You can also have a room-mate if you have a spare room. You can even use your car to sign up as a driver for Uber or similar services.
• Being a cash consumer can be a major lifesaver. Plan a weekly budget of necessary expenses and use cash to make purchases. Dwindling cash will stop you from going over-budget every week. Sometimes, a check can be used for making larger payments for necessary stuff.
• You can sell your unwanted belongings like branded sneakers, purses, sunglasses, extra furniture, books, and collection of movies, collectibles, or other fashion items, on online selling portals or by having a yard sale.
• You can refinance your house to get cash out of it. In refinancing, your mortgage, which is your secured debt (it has a low rate of interest than credit cards) can be used to repay unsecured debts with a high rate of interest. This way you won’t have to make high-interest payments in the future.
• You can try to negotiate a lower rate of interest or a repayment plan with your creditor, as most of them wouldn’t want to lose the lent money and would be glad to settle the situation with you.
• Last but not least, you can borrow money from your friends and family. But make sure that you’re clear about how you are going to repay them and discuss those terms with them, to avoid any stress and confusion in the future.

If even after following the above mentioned austere living conditions don’t fetch you sufficient money to repay your creditors, you might want to go for bankruptcy. Filing for bankruptcy is a serious decision, but it will give you the required relief when you won’t have any other options. You can consult experienced bankruptcy attorneys of Los Angeles & Dallas, TX, regarding all your possibilities at https://www.staging.recoverylawgroup.com/ or 888-297-6203.

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Once you’re certain about filing bankruptcy, you must determine the bankruptcy that suits your situation – Chapter 7 or Chapter 13. Given below is an overview of the two types of bankruptcy (Chapters 7 & 13), to help you make the right decision.

Chapter 7 Bankruptcy

It involves liquidation of the debtor’s secured assets (a house or a car) and discharge of unsecured debts (unpaid medical bills, credit card bills, etc.). Its paperwork contains a list of all the properties of the debtor and the possible state or federal ‘exemptions’ for each of them. ‘Exemptions’ work as following:

• An item, not covered by an exemption, can be sold by the trustee to repay your unsecured debts.
• You can keep the items covered by the exemption.
• If the exemption is less than the item’s worth, you’ll get the difference.
• You might be allowed to keep non-covered exemption properties by purchasing them, provided you don’t use the salary, earned post-filing bankruptcy, or a loan from friends and family.

Federal exemptions include real estate, personal property, motor vehicle, jewelry, household items such as appliances, clothes and furnishings, tools, machinery, computer equipment, life insurance policy, retirement accounts and wildcard exemption. You can discuss them in detail with the best bankruptcy lawyers of Los Angeles & Dalla, TX, by visiting www.staging.recoverylawgroup.com or calling 888-297-6203.

If you think you would take 5 or more years to repay your debts, have limited assets or your debts’ amount is more than 40% of your annual income, then it might be appropriate for you to file Chapter 7 bankruptcy.

Eligibility

It is for those who can’t repay the debts due to insufficient disposable income and thus, need their debts to be pardoned. A higher disposable income will lessen the possibility to file this bankruptcy. The candidature is decided based on results of the statements of the debtor’s monthly income (it should be below the median of the debtor’s state) and the means test calculation.

Steps to File Chapter 7 Bankruptcy

1. Complete the necessary credit counseling, 180 days prior to filing (agencies given on the United States Courts website).
2. Finish the paperwork to prove you’ve passed the means test.
3. Lodge a petition at your local bankruptcy court and confirm the necessary paperwork to be brought. An automatic stay will start that’ll stop the creditors from enforcing the collection of debts from you.
4. Meet the trustee and the creditors and answer their questions about your finances.
5. The trustee will determine your eligibility. In case the trustee declares you ineligible for Chapter 7, you can apply for Chapter 13.
6. Discuss the handling of your non-exempt property and secured debts with the trustee.
7. Under your trustee’s guidance, find an approved agency on the United States Courts website, complete the financial management course and submit your certificate of completion.
8. Get your discharge.

Chapter 13 Bankruptcy

It involves creating a repayment plan for a set period of time (usually 3-5 years) that allows the debtor to repay a decided amount as monthly installments, without liquidation. It has both ‘exempt’ (home, cars, personal or household items) and ‘non-exempt’ (luxuries like a boat, extravagant collection, etc.) properties. Every state has its own rules of ‘exemption’. However, ‘non-exempt’ assets can either be paid for or can be sold.

Your disposable income (calculated by a means test) determines the amount of debt you owe to credit card companies (unsecured debt). Your secured debts (your home, car, etc.) will be put up as collateral which the creditor could take back in case you fail to stick to the repayment plan. Once the agreed-upon amount of debt is paid, your unsecured debts might get discharged.

If you don’t wish to lose any of your assets (including non-exempt items) and think that you’ll be able to repay your debts on time over a period of 3-5 years, then in Chapter 13 might be the right choice for you.

Eligibility

You must provide evidence of your regular income. You should have less than $1,257,850 in secured debt and less than $419,275 in unsecured debt (These amounts are as of April 2019 and are adjusted after every 3 years for inflation).

Steps to File Chapter 13 Bankruptcy

1. Complete the necessary credit counseling, 180 days prior to filing.
2. Complete all the paperwork including tax return, income verification, the amount owed to creditors, your monthly living expenses and list of all your property, accounts and leases.
3. Lodge a petition which will, in turn, start an automatic stay.
4. Create and submit a repayment plan within 14 days of lodging petition.
5. Even if your papers not yet approved, start following the plan within the first 30 days of filing.
6. Meet the trustee and the creditors and answer their questions about your finances and the proposed plan.
7. The judge will declare the approval of the plan in a court hearing. If not approved, you might be asked to make changes in the plan.
8. Follow the plan diligently for the next 3-5 years.
9. Find an approved agency and complete the financial management course.
10. Get your discharge.

In case your creditors are harassing you even after the onset of the automatic stay, you can inform the bankruptcy court which will decide the next action.

Things to Do After Filing Bankruptcy

• In addition to following the approved plans and court orders, work on rebuilding your credit scores.
• Make sure none of your accounts is shown as ‘outstanding’ or ‘delinquent’ and are shown as ‘discharged’ or ‘included in bankruptcy’ on your credit report.
• Apply for a low limit credit card.
• Reinforce responsible and smart habits of paying your bills on time and budgeting.

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A bankruptcy filing is a legal process that frees an individual or businesses from the financial obligation of repaying the debts they owe. In some cases, it’s an ideal opportunity for creditors to claw back some of the debts that are due to them. This process has its own pros and cons. So, it’s better to make every possible effort like doing a part-time job, making only necessary expenses, etc. to supervise your debt obligations before going ahead with bankruptcy. It’ll be better to consult a competent bankruptcy law firm like The Recovery Law Group (https://www.staging.recoverylawgroup.com/ or call 888-297-6203), before starting with the filing process.

Steps to File Bankruptcy

Here’s an outline of the entire process to help you file for bankruptcy successfully.

1. Compile all your financial records like debts, assets, income, and expenses to properly understand your situation. It will also keep you prepared for anything that the court will ask for.
2. Hire an experienced attorney to guide you through the entire process.
3. Complete the mandatory pre-bankruptcy credit counseling within 180 days before filing bankruptcy. The United States Courts website lists the agencies that are eligible to conduct the counseling and will also provide you with a completion certificate which will be required for your filing.
4. Take help from your lawyer to help you with all the required paperwork for the proceeding. As soon as it’s done, an automatic stay will stop your creditors from suing you or seizing your wages.
5. Once the petition will be accepted, you and your creditors will be called for a meeting by a bankruptcy trustee to ask you questions regarding your case.
6. Your eligibility to file for bankruptcy will be determined after a review of your paperwork by the trustee.
7. In the case of Chapter 7 filing, the trustee will determine the need to sell your non-exempt property (jewelry, appliances, cars or home, exceeding the exemption limit) to repay creditors.
8. Any secured debt will be returned to the creditors now, or you may also be allowed to redeem the collateral by paying its worth.
9. You must take a debtor education course from an eligible credit counseling agency, before discharging your case.
10. Your debts will be pardoned and no repayment will be required after 3-6 months of filing. Then, your case is closed.

Different Types of Bankruptcy

Chapter 7

It uses liquidation (selling of assets exempting some personal property) to repay the existing debts. The debtor can be an individual, a corporation, a partnership or any other business entity. You can consult The Recovery Law Group to know more about the federal and state exemption rules.

In order to be eligible for Chapter 7 bankruptcy, you need to have your income less than the median level income for your state. If not, you’ll have to pass the ‘means test’, which will determine your capability to repay the debt while managing your necessary expenses. If you have enough to repay the debt, you’ll have to file Chapter 13 bankruptcy.

Chapter 11

This bankruptcy usually involves a corporation or a partnership. It helps in the reorganization of business affairs, assets and debts by proposing a plan of action to repay the debt while keeping the business alive.

Chapter 13

This bankruptcy allows the debtor to repay the debt to the creditor in monthly installments over a period of 3-5 years. There is no liquidation of assets involved in it. The debtor can either be self-employed or unincorporated and should have unsecured and secured debts below $394,725 and $1,184,400, respectively.

The other rarely-used types of bankruptcies like Chapter 12 and Chapter 15 are for ‘family farmers or fishermen’ and cross-border cases, respectively.

Pros and Cons of Filing a Bankruptcy

Pros

• It eliminates the tension of repayment to an extent by helping the debtors to clear some of their debts. Washing away the debts relieves the debtors of their financial burden.
• The creditors and collection agencies stop pestering the debtors with constant phone calls or letters.

Cons

• It is a costly process as it involves filing and attorney fees.
• It has a negative impact on the credit report. Chapter 7 bankruptcy stays on the report for up to 10 years and Chapter 13 for 7 years, and that adversely affects the credit score.
• Low credit score makes it difficult to apply for loans, get low rates of interest, get a new job, low vehicle insurance premium, start a new business or even get a new home.

Life Post Bankruptcy

Below are a few steps that might help you to improve your financial condition after bankruptcy and maintain your solvency.

• Monitor your expenses – Implement a 50/30/20 budget, in which 50% is spent on basic needs (rent, food, etc.), 30% on wants (entertainment) and rest 20% goes into savings. Categorize your income and expenses as needs, wants and savings for a better understanding of the budget.
• Emergency Fund – Set aside an emergency fund, to be used only under pre-decided circumstances. It can also aid in avoiding the usage of credit cards in emergencies.
• Rebuild your Credit – Repay new or carry over debts (alimony, student loans, child support, tax claims, and other governmental debts) on time. Apply for new lines of credit, but not too many at once. Request a co-signer, with excellent credit, to apply for loans with you to get beneficial rates and terms. Use secured credit cards that use collateral to safeguard their financial interest.