Filing Bankruptcy: A Legal Means to Reach Your Financial Goals

Filing for BankruptcyEveryone who has ever had a financial goal or dream never started with a plan to file for bankruptcy. But, unfortunate things happen – loss of a job, an illness in the family or divorce. All of these things can affect and impede your financial goals. The solution is to find the courage to face these problems and make a long-term plan on how you will recover from these unfortunate incidents.

Setting and Changing Goals

When a negative life event occurs, you cannot sit back and let it consume you and your resources. You must make a change to your financial plan, and sometimes that means you will not be able to pay off your credit card debt as you planned or pay off your student loans on time. You will find that you may need to reset your financial goals, which involves changing your priorities. This could mean paying your mortgage and your vehicle first before paying credit cards or student loans because you will need a place to live and transportation to get to and from your employment. This doesn’t mean failure. It means change: change to ensure you are paying for you and your family’s most immediate needs first. Resetting your financial goals and priorities is necessary and will continue to improve your financial future.

Consequences of Changing Goals

As a result of having to reprioritize your finances and set new goals due to events beyond your control, there will likely be repercussions – deciding between paying your credit card payments or your mortgage and vehicle payments may result in late payments on your credit report, collection calls, and ultimately, lawsuits and judgments against you. These are the consequences that must be dealt with, and one way to handle all of these is to file bankruptcy.

How Will Filing Bankruptcy Help

Filing bankruptcy can be a solution to the negative consequences of resetting your financial priorities. It can help you reorganize your debt to pay it off over a longer period of time or eliminate your unsecured debt entirely. It can help stop negative reporting on your credit report, stop collection calls and harassment, and end pending lawsuits or judgment enforcements. Bankruptcy is a financial tool that should be considered only when you are faced with limited options. Yes, it is an extreme resolution that in and of itself has negative consequences, but for many, it will allow them to get back on track to meet their financial goals and dreams, however they decide those will look.

If you are considering filing for bankruptcy, do not hesitate to contact our professional bankruptcy department with over 40 years of experience today.

BUDGETING 101

Budgeting 101 Bankruptcy LawAfter 18 years practicing bankruptcy law, I am still amazed that clients often do not understand the importance of monthly budgeting. For individuals facing bankruptcy, a solid, realistic monthly budget will usually be the difference between success and failure. The purpose of budgeting allows you as an individual, or family, to prioritize and control spending. This allows you to focus on the expenses that matter most: housing, transportation, food, clothing, insurance, taxes, etc. Below are some helpful tips to get you started even if you are not facing bankruptcy!

Write it down:

This point simply cannot be emphasized enough. If you are not writing it down (or using an app or spreadsheet, stone tablet, whatever), you are not holding yourself accountable.

Example:

  • Rent $1,250
  • Car Payment $475
  • Food $400
  • Gas $125
  • Tolls $25
  • Insurance $85

Track your spending:

You do not have to list or write down every penny you spend. In fact, trying to accomplish this goal usually ends in frustration and giving up (I speak from personal experience!). Instead of tracking spending, try putting aside a certain amount of funds for other items that are not a fixed cost. For example, $100 a month for “Shopping.” Try the cash envelope method and put aside $100 cash marked “Shopping,” when that cash is gone, so is spending for shopping.

Prioritize:

Try the 50/30/20 Plan as recommended by Senator Elizabeth Warren* where 50% of your income goes to necessities; 30% lifestyle choices, and 20% to savings. Although this may seem like a daunting task, it is doable.

If you find yourself unable to meet all your financial requirements despite setting up a budget and adhering to it, maybe filing bankruptcy is necessary. In a Chapter 13, you will be required to pay certain creditors but how much depends on your income, type of creditor, and amounts owed. Let us work for you to review your budget, evaluate if a bankruptcy is what you need and get you back on track to financial stability.

*Rob Berger, 7 Tips for Effective and Stress-Free Budgeting Forbes Online

Bankruptcy Primer

Bankruptcy PrimerMost people understand that “filing for bankruptcy” means that an individual is seeking a way to try and stop paying their debts. What most do not know is that “filing for bankruptcy” doesn’t always mean not paying your debts. In fact, an individual filing a Chapter 13 is highly likely to repay their debts over a period of time, usually 60 months. Only in a Chapter 7 will an individual likely not repay their debts, with certain exceptions of course.

CHAPTER 13
A Chapter 13 is typically referred to as a “wage earner” plan where debtor(s) pay back their debts over a period of time. For most, this includes payments for a mortgage, a vehicle, income taxes, child support arrears and other secured debt that must be repaid in order for the debtor(s) to keep the collateral. A secured debt is one that is secured by property like a vehicle, house or furniture. Often, debtors facing foreclosure will file a Chapter 13 to have the opportunity to pay back the past due arrears, stop the foreclosure and pay the current mortgage payment through the Chapter 13 plan. Debtors facing repossession of a vehicle may also consider Chapter 13 to pay back the arrears owed on the vehicle and may even qualify to pay back the Kelley Blue Book value of the vehicle, known as the “cramdown.”

CHAPTER 7
A Chapter 7 is typically referred as a “straight bankruptcy” where debtor(s) can seek to discharge all unsecured debt and certain income taxes and can surrender secured items without a deficiency balance. Chapter 7 bankruptcy is reserved for those individuals who qualify based on their income and do not have nonexempt assets. However, there is no “cure” or “payback” mechanism so debtors seeking a Chapter 7 remedy should be current on their mortgages and vehicles if they plan on keeping those assets and paying off the debt.

The choice between a Chapter 13 and Chapter 7 must be reviewed by an experienced attorney after careful consideration of all the debtors’ financial data, including asset valuation, income, expenses and amount of debt. Debtors may have different goals and expect different outcomes as a result of filing bankruptcy so it is a decision not to be entered into lightly and without proper guidance. If you are experiencing financial hardship, do not hesitate to contact our firm today to review your options with an experienced attorney and staff.

Credit Reporting and Bankruptcy

Credit Reporting and BankruptcyMany debtors considering a bankruptcy filing are worried the impact on their credit rating and about how long the bankruptcy filing will affect their credit. The Fair Credit Report Action, Section 605, prohibits credit agencies from including a bankruptcy on a person’s credit report more than 10 years after the bankruptcy was filed. If you’re concerned about the impact of a bankruptcy filing on your creditworthiness, this is good news. Remember, though, that a bankruptcy filing is a public record kept in electronic storage format, and is accessible to potential employers or lenders. You still want to disclose a bankruptcy filing, if asked.

Because Chapter 7 and Chapter 13 petitions will both affect your credit score, one is not necessarily better than the other. Potential creditors typically look at other factors as well, and a Chapter 13 reorganization may be interpreted as a good faith effort to repay your debt, even if it was the only option available. Whether you opt for liquidation under Chapter 7 or reorganization under Chapter 13, you will generally be more attractive to a potential lender when you come out of bankruptcy, as your debt load should be lower.

Determining whether a bankruptcy filing is the best option for you and your family is a difficult balancing act. You’ll have the immediate, but short term, benefit of the protection of the automatic stay, which can take a lot of pressure off you and allow you to get your affairs in order. However, there can be some long-term consequences, particularly with respect to your creditworthiness. That’s one of the reasons you want a knowledgeable attorney to guide you through your decision-making process. If you are considering bankruptcy and concerned about post discharge credit options, do not hesitate to contact the office today for your free initial consultation.

Dos and Don’ts Before Filing Bankruptcy

Filing BankruptcyYou may be contemplating the need to file bankruptcy and if you are, get to an experienced attorney’s office FAST! However, if you are not quite sure you want to take that first big step, please consider the following while you are thinking it over:

DO:
1) Review your total outstanding debt. Take a look at your credit report, gather all your creditor notices, medical bills, any paperwork from a court case or lawsuit you may have received, and put them all together for easy review. Go back a minimum of 10 years if possible.
2) Review all your income and expenses. Make a budget to determine your monthly surplus or shortage. Do not include payments on any debts that are not secured (e.g. house, car, furniture, etc.).
3) Review your assets. Figure out how much equity you have in your home, vehicle, etc. Do you own property other than homestead property? Do you have any financial accounts like stocks, bonds, or money market accounts? Make a comprehensive list for yourself and your attorney.
4) Review your secured debts. You will have to decide if you can afford to keep the vehicle you currently have or if you need to get into a less expensive car. This is just one example of your options before filing bankruptcy.
5) Gather your financial documents. Paycheck stubs, tax returns, bank statements, etc., will all be important if you decide to file bankruptcy.

DON’T:
1) Sell or transfer any property. If you own any land, financial assets, business interests or other types of valuable property, do not sell or transfer anything to a third party prior to discussing your bankruptcy options with an attorney.
2) Incur additional debt. Do not use your credit cards or incur additional credit if you are on the brink of insolvency. It may be considered fraud and may not dischargeable in a bankruptcy proceeding.
3) Ignore lawsuits or judgments. These will not disappear and if you wait to long to deal with them, you may find yourself on the receiving end of a notice from your bank that your accounts have been frozen pursuant to a court order.
4) Take funds from your retirement account. Most of these accounts are protected in bankruptcy from your creditors and the court will allow you to keep them.

These are just a few examples of things to consider if you are contemplating filing for bankruptcy. Come see us today to get the answers to all your questions and keep from taking any missteps that may affect your ability to file that bankruptcy case you and your family may need to file.

Does lighting strike twice? – Timelines for filing a new bankruptcy case.

Bankruptcy LawIf you have filed bankruptcy in the past and you find yourself in a position where you need to file again, you need expert legal advice to make sure you get it right. Job loss, divorce, medical emergencies, business closing, or other unexpected situations can all come together in a perfect storm to necessitate a new bankruptcy filing. Are you able to file bankruptcy again? The answer is usually “Yes” but you have to be careful to get the timing of your case right if your goal is to receive a new discharge on your outstanding debt. Below is a brief outline of the filing time periods between cases filed to receive a discharge in the subsequent bankruptcy filing:

PREVIOUS CASEDISCHARGE*NEW CASEREQUIREMENTS
Chapter 7DischargeChapter 78 Years
Chapter 7DischargeChapter 134 Years
Chapter 13DischargeChapter 132 Years
Chapter 13DischargeChapter 76 Years – Unless you paid all your unsecured creditors in full in the Ch. 13 or you paid at least 70% of the claims filed in your case and you proposed your case in good faith and it was your best effort

*If your case has been dismissed and not discharged, then the filing time requirements do not apply; However, you may still be subject to additional filing requirements.

Even if you filed a previous case and received a discharge, either a Chapter 7 or a 13, you may still want to file a new Chapter 13 to protect you from foreclosure, vehicle repossession or tax garnishment if you find yourself in any of these circumstances. You may not receive a discharge but you can protect your property and pay back these debts on your own terms. Remember, your choice in attorney matters and you need an experienced bankruptcy attorney to review your case. Contact our office today for a free consultation to see if a new case is right for you.

BUDGETING 101

Budgeting 101 Bankruptcy LawAfter 18 years practicing bankruptcy law, I am still amazed that clients often do not understand the importance of monthly budgeting. For individuals facing bankruptcy, a solid, realistic monthly budget will usually be the difference between success and failure. The purpose of budgeting allows you as an individual, or family, to prioritize and control spending. This allows you to focus on the expenses that matter most: housing, transportation, food, clothing, insurance, taxes, etc. Below are some helpful tips to get you started even if you are not facing bankruptcy!

Write it down:

This point simply cannot be emphasized enough. If you are not writing it down (or using an app or spreadsheet, stone tablet, whatever), you are not holding yourself accountable.

Example:

  • Rent $1,250
  • Car Payment $475
  • Food $400
  • Gas $125
  • Tolls $25
  • Insurance $85

Track your spending:

You do not have to list or write down every penny you spend. In fact, trying to accomplish this goal usually ends in frustration and giving up (I speak from personal experience!). Instead of tracking spending, try putting aside a certain amount of funds for other items that are not a fixed cost. For example, $100 a month for “Shopping.” Try the cash envelope method and put aside $100 cash marked “Shopping,” when that cash is gone, so is spending for shopping.

Prioritize:

Try the 50/30/20 Plan as recommended by Senator Elizabeth Warren* where 50% of your income goes to necessities; 30% lifestyle choices, and 20% to savings. Although this may seem like a daunting task, it is doable.

If you find yourself unable to meet all your financial requirements despite setting up a budget and adhering to it, maybe filing bankruptcy is necessary. In a Chapter 13, you will be required to pay certain creditors but how much depends on your income, type of creditor, and amounts owed. Let us work for you to review your budget, evaluate if a bankruptcy is what you need and get you back on track to financial stability.

*Rob Berger, 7 Tips for Effective and Stress-Free Budgeting Forbes Online

How Do I Know When It’s Time to File for Bankruptcy?

Filing for BankruptcyFiling bankruptcy is scary, difficult and not fun. But when it’s time to file, it’s time to file. Ask yourself a few simple questions. First, do you feel out of control regarding your finances? Is this causing you stress and discomfort, or affecting your family, relationships, or work? If the answer is yes, you may need to file bankruptcy. Next, ask yourself if your debt is steadily increasing, rather than decreasing, each month. Are you making minimum payments on your credit cards, because your income is stretched to its limit, but not seeing any significant reduction in balances owed? If so, then you may need to file bankruptcy. Also, ask yourself if creditors are calling you at home or work? Are you being sued for debts you simply cannot pay? If so, then you may need to file bankruptcy.

Bankruptcy means different things to different people: failure, hopelessness, and even a sense of “wrongness”. However, it also can be an OPPORTUNITY to turn your life around and prepare a better financial future for you and your family. Answering these additional questions also may help you decide if now is the time to file for bankruptcy:
1) Will you resolve all your outstanding short-term debt (not a mortgage or student loans) in the next five years?
2) Do you owe more than you are worth? To determine your worth, add up the value of all your property, including your home equity, vehicle equity, financial accounts, savings, and any other valuable property.
3) Are you prepared to live without credit for a short time (usually 2-3 years)?
4) Are you just D-O-N-E with the merry-go-round of credit cards, collections, and debt and want to take control of your situation?
5) Is your income declining, or have you experienced a drop in income over the last few years?

If you answered “No” to the first question and “Yes” to the last four questions, at least take time to learn what filing for bankruptcy really means, and how it can change your life and provide a better and more secure financial future for you and your family. The consultation is always free, and it doesn’t hurt to think about whether it’s time to file for bankruptcy.

Leticia “Letty” Martinez Evans,
Managing Bankruptcy Attorney, Bailey & Galyen

Suspended License Due to Judgement

Suspended drivers licenseIf your license has been suspended due to a civil judgment for a car accident and you were responsible for as an uninsured motorist, you may be able to discharge the debt by filing Chapter 7 Bankruptcy and get your license reinstated. Driving with a suspended driver’s license could lead to criminal charges and additional fees and costs. Under Texas law, if you have a judgment entered against you as a result of a vehicular accident and you did not have any insurance, your license can be suspended until you provide proof that you have paid or are paying the civil judgment. However, if you qualify for Chapter 7 Bankruptcy, then the judgment is a civil judgment and an unsecured debt that may be dischargeable along with your other general unsecured debt. This is true so long as it not a malicious injury and you were under the influence of any drugs or alcohol.

If the debt arose from a malicious injury or there is a finding that you were under the influence of alcohol or drugs, then the debt must be paid in full through a Chapter 13 Bankruptcy plan to reinstate your license while your bankruptcy is active. The reinstatement occurs as soon as the bankruptcy is filed, you have met all other criteria regarding the payment of all state license reinstatement fees, and a copy of an SR-22 (Financial Responsibility Certificate) has been provided.

If your license has been suspended under these circumstances, do not hesitate to contact our office to review your situation and determine if you qualify for reinstatement. Driving is a privilege, not a right, but all is not lost if you cannot pay the civil judgment against you for a vehicle accident that occurred while you were uninsured and you qualify for Chapter 7 or Chapter 13 Bankruptcy filing.

Happy New Year? Facing Your Financial Future in 2018

BankruptcyAh, the sounds, sights, and scents of the season! Christmas time is the time of year when we over eat, over indulge, and often over spend. We are likely to hear the sounds of bells ringing, Christmas songs playing, and people shouting out “Merry Christmas” to one another but for many, the sounds of the season might also include the constant ringing of the phone by bill collectors harassing you and yours in an effort to squeeze funds from you this holiday season. Maybe a creditor has left a lump of coal in your stocking, a.k.a. served with you a lawsuit! There is no peace on earth with the phone ringing, collection agents leaving unsavory messages on your phone, or you receiving a notice that you are being sued over the holidays.

We sometimes equate a “Happy Holiday” with the purchase of gifts for our family, friends, and loved ones. Often, this can cause more financial stress for families that are already struggling to pay creditors. According to the American Research Group, Inc., American shoppers plan on spending an average of $983.00 for gifts this holiday season. This represents an increase of 6% from last year. The question is, how will these shoppers pay for these gifts? Will they use credit cards and continue to add to mounting debt? Is this a situation you are facing as well?

Ask yourself this important question as you head into the New Year: “Is my financial house in order for 2018?” If the answer is no, maybe it is time to take a serious look at your legal options to resolve your debt issues through a bankruptcy proceeding. Bankruptcy is no longer a four-letter word that will plague you for the rest of your life. It is a controlled, legal process that gathers and forces all your creditors into one proceeding to resolve your outstanding debt.

As we head into the New Year, we all make resolutions to exercise more, eat healthier, and quit smoking. But can one focus on these goals if they are overwhelmed and burdened with a great deal of debt? Financial problems can be overwhelming and take an extreme amount of energy, time, and effort to deal with. Are you ready to focus on your finances so that you can move on with the rest of your year? If yes, then I recommend the following steps to point you in the right direction for 2018:

  1. Gather all your bills together and add them up. Do not stick your head in the sand. Just because you don’t look at them, doesn’t mean they’re not there.
  2. Review your income and expenses. Add all the amounts you pay to creditors and see if you can really afford to continue the monthly payments. If you find yourself short each and every month, consider whether you can really continue to live in that crunch. If you can’t, contact our office to help you with your new financial plan.
  3. Make a new budget for the year. Include all of your debt and how much you will pay on each account. Evaluate how and when you think you can pay off the debt in total. If it’s longer than 3 years, you may want to consider a bankruptcy option.

Bankruptcy is a serious consideration and has serious consequences but for many, it is a life changer and often, a life saver. Let our 25 years of experience help guide you today for a better new year in 2018 and years to come!

Happy Holidays,

Leticia M. Evans, Managing Bankruptcy Attorney Bailey & Galyen

Contact Us

To set up a free bankruptcy consultation, contact us online or call us at 844-402-2992. For your convenience, we answer our phones 24 hours a day, 7 days a week. We will meet with you evenings or weekends upon request. Remember, your choice in attorney matters.

Can I file a new bankruptcy case if I have already filed previously?

BankruptcyThe answer to this question is that it depends. If you have filed bankruptcy in the past and you find yourself in a position where you need to file again, you need expert legal advice to make sure you get it right. Job loss, divorce, medical emergencies, business closing, or other unexpected situations can all come together in a perfect storm to necessitate a new bankruptcy filing. No one wants to have to file another bankruptcy case but bad things happen to good people every day. Are you able to file bankruptcy again? The answer is usually “yes” but you have to be careful to get the timing of your case right if your goal is to receive a new discharge on your outstanding debt. Below is a brief outline of the filing time periods between cases filed to receive a discharge in the subsequent bankruptcy filing:

PREVIOUS CASERESULT*NEW CASEREQUIREMENTS
Chapter 7DischargeChapter 78 Years
Chapter 7DischargeChapter 134 Years
Chapter 13DischargeChapter 132 Years
Chapter 13DischargeChapter 76 Years – Unless you paid all your unsecured creditors in full in the Ch. 13 or you paid at least 70% of the claims filed in your case and you proposed your case in good faith and it was your best effort

*If your case has been dismissed and not discharged, then the filing time requirements do not apply; However, you may still be subject to additional filing requirements.

Even if you filed a previous case and received a discharge, either a Chapter 7 or a 13, you may still want to file a new Chapter 13 to protect you from foreclosure, vehicle repossession or tax garnishment if you find yourself in any of these circumstances. You may not receive a discharge but you can protect your property and pay back these debts on your own terms.

Remember, your choice in attorney matters and you need an experienced bankruptcy attorney to review your case. Contact our office today for a free consultation to see if a new case is right for you.

Contact Us

To set up a free bankruptcy consultation, contact us online or call us at 844-402-2992. For your convenience, we answer our phones 24 hours a day, 7 days a week. We will meet with you evenings or weekends upon request. Remember, your choice in attorney matters.

How To Make The Most of Your Free Consultation

BankruptcyIn today’s competitive world of legal services, many firms, like Bailey & Galyen, offer a free consultation for potential clients. The ability to speak with an attorney about your financial problems and your potential legal solutions is a very valuable service and should not be taken too lightly. Consultation fees can often be up to a couple of hundred dollars! That being said, here are some tips for making the most of your free consultation:

  1. Identify why you need to file bankruptcy. Sometimes this is easy to do – your home is in foreclosure. Other times, it takes a real hard look at what is going on in your life and your work to explain why and how you ended up in the attorney’s office.
  2. Know how much you owe and to whom. As difficult as it may be, gather up your documents and write it all down so you do not forget anything as you explain to the attorney what you need to resolve your financial problems.
  3. Be prepared to discuss your income and expenses. Make a budget for yourself before your meeting so you can communicate and share this with the attorney as he/she begins to analyze your situation to come up with the best possible solution.
  4. Think about how you will pay for the attorney’s services. We offer affordable payment plans but for some, the need to file bankruptcy is urgent and immediate. Be prepared to discuss how you will pay these fees.
  5. Be honest with yourself and the attorney. Any non-disclosures, misstatements, or non-realistic goals, for whatever reason, will put you and the attorney at risk of preparing and filing a case that will not work and in the long run, will not be beneficial to you or your family.

Most of all, know that a free consultation is not a cheap consultation. It costs time, effort and work on everyone’s behalf, so being prepared, ready to ask questions, and then understanding your options is the best outcome for you and the attorney and turns that “free” consultation into an invaluable consultation.

Contact Us

If you believe that you are ready to take control of your debt and work on improving your credit, contact us online or Call us today for a free consultation. For your convenience, we answer our phones 24 hours a day, 7 days a week. We will meet with you evenings or weekends upon request. Remember, your choice in attorney matters.

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BANKRUPTCY IS NOTHING TO BE ASHAMED OF

BankruptcyBankruptcy has often been associated with a negative image of a person who doesn’t want to pay his bills. While this may be true in a few and far between cases, the reality is that bankruptcy is often a choice of economic reality when bad things happen to good people. Clients feel ashamed or dumbfounded as to how they got to this place where they are now facing bankruptcy. To be sure, you are in good company. Many famous and successful people have filed for bankruptcy (to include Abraham Lincoln, Frances Ford Coppola and Walt Disney to name a few!). These decisions did not come lightly as you can imagine. Professional, personal and political reputations were at stake. The decision to file bankruptcy should not be taken lightly but it should be considered as a business decision, even if you do not operate your own business. It’s the business of getting your life and your family’s life back on track. Consider these questions below if you are on the fence about filing for bankruptcy:

1) Will I be better off financially in 5 years without filing bankruptcy? Will my debts be paid? Will I have savings for emergencies? Will I be able to cover my mortgage payment, my vehicle payments and my basic living expenses without undue hardship on my family? If the answer is no to all or most of these questions, bankruptcy may be the solution you are looking for.
2) Will my credit score improve over the next 5 years? If your debt to income ratio (the percentage of your monthly income going to pay off debt) is going to remain high, then that means that your credit score will not be getting any better any time soon. If you want a better credit score for future purchases such as a home with a mortgage and will not be able to pay down your debt significantly, then bankruptcy might be right for you. Eliminating your legal liability for debts eligible for discharge in bankruptcy will likely cause an improvement in your credit score over a period of 18-24 months after you file your case.
3) Can I live with the stress and uncertainty of doing nothing about my accumulating debt? The reality is that with today’s technology, creditors will find you. And they will hound you to no end. While many tactics are impermissible and even illegal, they are not likely to stop or get caught. Filing bankruptcy will stop all this. Creditor harassment affects your well being and your family’s well being in so many ways and will hinder your ability to focus getting back on the financial wellness track. Living with this constant harassment doesn’t have to be a way of life.

If embarrassment, guilt or the potential stigma of filing bankruptcy is the only thing keeping you from filing for bankruptcy, here’s my advice: Get over it! Those famous people who filed did and went on to do remarkable things. Imagine what it could do for you and yours in the next few years. Contact us online or Call us today for a free consultation.

Will my credit be ruined forever?

BankruptcyThe question “Will my credit be ruined forever?” comes up at almost every initial client consultation and the answer is “No.” Yes, a bankruptcy case stays on your credit report for up to ten years. But once you file bankruptcy and receive your discharge, your debt-to-income ratio is greatly reduced. This means that your total outstanding debt as compared to your income decreases. As a result of the discharge, you are no longer legally liable for that debt (barring some exceptions under bankruptcy law), so that means your debt as reported on your credit report after the bankruptcy discharge, essentially goes down to zero. And this means that your credit rating will gradually start to improve even if the bankruptcy filing is still on your credit report.

Even though your credit score will gradually improve, it is important to remember that you are likely to be considered a “subprime borrower” and will likely pay higher interest rates to borrow money for a house, vehicle or obtain a new credit card. Post bankruptcy filing, you are still a credit risk. But creditors are actually MORE likely to extend new credit after you file a Chapter 7 as you are not eligible to file another Chapter 7 for eight years. Creditors see this as less of a risk in extending new credit. If you file a Chapter 13, it may take a while longer for you to see the benefits because you will have to be in a repayment plan between thirty-six and sixty months but it will happen. Pointing out to a new potential creditor that you learned to live within your budget, paid back a portion of your old debt to your creditors and completed a Chapter 13 will make you a better credit risk upon completion of your Chapter 13 repayment plan. A bankruptcy discharge means that a new creditor is not competing with your old creditors for repayment of debt.

Establishing credit after bankruptcy can take between 18-24 months and debtors should start with small accounts and avoid predatory lenders like payday loans and really high interest rate credit cards. But it is possible to improve your credit score after bankruptcy and get that fresh start for you and your family.

If you believe that you are ready to take control of your debt and work on improving your credit, contact the office today for a free consultation.

Contact Us

If you believe that you are ready to take control of your debt and work on improving your credit, contact us online or Call us today for a free consultation. For your convenience, we answer our phones 24 hours a day, 7 days a week. We will meet with you evenings or weekends upon request. Remember, your choice in attorney matters.

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