Archive for the ‘bankruptcy’ Category

Divorce After Chapter 13 Bankruptcy

Saturday, May 23rd, 2009

Often, divorce precedes bankruptcy, and is, in fact the “last straw” that pushes an individual into bankruptcy. While in many cases the financial hardships caused by divorce are legitimate, prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 bankruptcy was often used as a way to completely sever ties with an ex-spouse and avoid financial obligations.

Couples contemplating both bankruptcy and divorce should probably complete the divorce prior to the bankruptcy rather than wait until later. They will not be allowed to proceed with both at the same time.

One reason why couples should divorce first and file second is that their financial status will be clear from the outset. They may be allowed to file Chapter 7 rather than Chapter 13.

Chapter 13 is a bankruptcy that includes a repayment plan of some or all of a person’s debt over a three to five year period. It is generally chosen in order to save a valuable asset – such as the family home. In some cases it is the only option available because a couple’s income is too high to qualify for Chapter 7.

If you have already filed Chapter 13, your divorce could permit you to alter the terms of your bankruptcy and allow you a lower payment or even a grace period with no payments while you work things out. It could also qualify you to convert to Chapter 7 – in which all debt is wiped out.

Any change in financial circumstances can grant you this leeway. Other instances could be loss of employment or illness.

The important thing to remember is to notify your trustee immediately – especially if the pending divorce means you don’t have the money to make the scheduled Chapter 13 payment. Whatever you do, don’t just ignore the payment without first notifying the trustee of the reason.

In order to have your case reviewed and possibly alter the terms of your bankruptcy you will have to file appropriate documents, which include proof that one party has moved out and is paying rent and/or utility bills at another location. So it is important to determine that the divorce really will take place and you really will be maintaining separate households.

The increased household expense would be the determining factor in deciding whether the bankruptcy terms can be altered.

Author: Mike Clover

Should You Consider Bankruptcy?

Sunday, May 17th, 2009

Fact: Not everyone who files for bankruptcy does so because they’ve been irresponsible.

The vast majority of bankruptcy filings occur as a result of illness, death of a provider, job loss, business failure, divorce, or some combination of life-altering events that the consumer certainly didn’t plan for. Irresponsibility accounts for only a fraction of the filings.

Between 1.2 and 1.5 million Americans use the bankruptcy courts each year to get out from under unmanageable debt.

Thus, you need not feel hesitant or ashamed if this is the right option for you.

The primary drawback is that filing for bankruptcy is expensive. It not only costs money to file, but it negatively affects your ability to borrow – and the interest rates you’ll pay if you do borrow – for the next 7 to 10 years.

Consumers have two options: Chapter 7 and Chapter 13.

Under a Chapter 7 filing, consumers walk out of the courtroom debt free. In order to qualify, however, those consumers must have a modest or limited income.

Those wishing to file for Chapter 7 must provide:
1. A list of all creditors and the amount and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

In addition, he or she must provide a list of “exempt” property, because the bankruptcy trustee will dispose of all non-exempt property and use the proceeds to pay debtors. The definition of exempt property varies from state to state, and there is a Federal list as well. Debtors can choose to use the list most favorable to them.

Chapter 13, also known as the “Wage earner plan,” is actually a debt consolidation program based on the consumer’s ability to repay debt. Payments are made to a trustee, who then distributes funds to creditors.

Depending upon the consumer’s income, these payments are set for 3 to 5 years, after which time the bankruptcy will be discharged. Creditors may or may not have been paid in full.

Under the terms of Chapter 13, consumers must live on a limited budget and contribute all “disposable income” to the repayment plan. A “Hardship Discharge” may be granted in the event the wage earner is no longer able to work as a result of illness or accident.

Both plans require the consumer to complete a course of financial/credit counseling. Both types also negatively affect your credit scores. Bankruptcy remains on your credit report for 10 years.

Author: Mike Clover your resource for free credit reports, credit cards, loans, and ground breaking credit news

When Moral Obligation Leads to Financial Mistakes

Thursday, April 23rd, 2009

A debt, once discharged through bankruptcy, is no longer owed. However, the consumer going through bankruptcy can ask that some debts, such as a car loan or other secured debt, be reaffirmed. Some debtors, wishing to maintain a relationship with a credit card issuer – such as a credit union – will also ask to reaffirm that debt.

This is done through a specific, court-approved agreement. By reaffirming, the debtor becomes legally obligated to pay all or part of an otherwise dischargeable debt.

If this is done through the court system, your subsequent good payment record on that debt will be reported to the credit bureaus and you will “get credit” for on-time payments and begin to rebuild your credit scores.

Unfortunately for some debtors, the urge to repay certain debts because of a moral obligation remains strong. Following that urge, they begin making payments on a debt that has been discharged – believing that any time they are unable to make payments it won’t matter, because they no longer legally owe the debt.

This is not the case, and there are two good reasons for not resuming payment.
• Your payments will probably not be reported to the credit bureaus, so they will not help you rebuild your credit scores.
• The act of making payments on a debt constitutes an informal reaffirmation of the debt – thus the obligation shifts from one of personal morality back to legal obligation.

Moral obligation is also an effective tool used by unsavory debt collection agencies to collect on debt that has been discharged in bankruptcy and/or debt that has become uncollectible through the statute of limitations. (These predators also use morality to coerce family members into paying debts for the deceased.)

This claim, however, is false. No matter what moral obligation you may have felt toward your original creditor, you have no moral obligation to a collection agency that has purchased that debt for pennies on the dollar in the hope of getting you to repay their investment many times over.

The telephone solicitors they hire are very good at what they do – and are often able to convince people, either through obligation or fear, to make a payment. This is the worst thing they could do, because it not only informally reaffirms the debt, it resets the statute of limitations.

Under the statute of limitations, a creditor is no longer allowed to sue for collection after a set period of time – typically 4 years from the last payment or your last use of credit.

That legality does not stop collection agencies from filing suit against you, failing to serve you with court papers, and gaining a judgment – even on a debt that was discharged 20 years earlier. Remember – these agencies pose as legitimate business, but actually operate as crooks.

Should this happen to you, you’ll need to contact the credit bureaus with proof that the debt was discharged in bankruptcy.

Author:Marte Cliff your resource for free credit reports, credit cards, loans, and ground breaking credit news

What to do after a bankruptcy discharge

Tuesday, November 25th, 2008

When matters get tough and are out of your control bankruptcy is a great tool to protect you. Whether you are filing chapter 7 or chapter 13 there is life afterwards. Quite contrary to popular belief you can recover fairly quickly after filing bankruptcy. The problem I see the most is that most people after filing bankruptcy do not want any type of credit what so ever. This is the worst thing you can do after filing bankruptcy. In this article I wanted to discuss the importance of re-establishing credit after a bankruptcy discharge.

The first thing you need to do after you file bankruptcy is re-establish your credit. You will find that most credit card companies will not extend credit to you that is not secured. So the first step is to get a secured credit card. Secured credit cards are the quickest way to re-establish credit after a bankruptcy. This type of credit card allows you to re-establish credit quickly. There are a couple of credit cards that I would recommend. The first credit card is applied bank. The second credit card is Orchard bank. These are two good secured credit card companies that will get you in the right direction. I recommend getting one of each to help you re-establish.

Typically after 12 months of good payment history on secured credit cards you should see improvement with your credit scores. You will also see all kinds of credit card offers in the mail. Some credit card companies that offer secured credit cards will offer you a un-secured credit line with good payment history. Typically after 2 years of good credit history on a couple of secured credit cards you should be ready to apply for small credit limits.

Maybe getting credit after a bankruptcy sounds like a bad idea, but if you want to get a loan anytime soon you will need to re-establish your credit. Bankruptcy scares most creditors and they will require you to re-establish credit after any type of bankruptcy.

Once quick tip, make sure you dont charge more on your credit cards than you can pay off that month. Credit cards are for emergencies and should be used wisely.

So if you have not re-established after your bankruptcy, I would get your secured credit cards today

Comparing Bankruptcy to Collections

Thursday, July 24th, 2008

No one wants to run out on a valid debt, but sometimes things happen that make it impossible to make payments. In the best of all worlds, you could go to creditors, explain the situation, and they would let you put off making payments until you got back on your feet.

But while some creditors might be willing to cooperate, given the promise of full payment at a later date, some will not. That leaves you with some tough choices:

• Filing Chapter 7 Bankruptcy
• Filing Chapter 13 Bankruptcy
• Letting your debts go to collection

Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, almost anyone could file Chapter 7 and wipe the slate clean. The bankruptcy put a blot on their credit report and lowered their FICO credit score, but they no longer owed the debt.

Now it’s a bit tougher. If your income is greater than the state median income, your motion to file Chapter 7 will be dismissed and you will have to file Chapter 13. That means you’ll have to repay the debts over time.

A Chapter 7 bankruptcy dissolves all debts that legally qualify for the process – meaning that almost all liabilities are erased. You can’t erase a debt to the IRS – so don’t count on this system to get rid of overdue income taxes.

Chapter 7 filings remain on your credit report for 10 years, so this move is not one to take without due consideration.

Under Chapter 13, you must pay off at least a portion of your debts over time. For 5 years you’ll pay money to a court appointed Trustee, who will disperse the funds to your creditors. This option is usually for people who have a steady income.

Be aware that certain restrictions will apply to your life. You won’t be able to go out and buy a new car, that’s for sure! This stays on your credit report for 7 years.

The third option might be the best in some cases: Letting your debts go to collection.

When your original creditor decides that collecting from you is a lost cause, it will sell your debt to a collection agency for pennies on the dollar. The collection agency will, of course, attempt to get the full balance from you, but you can negotiate a lesser balance agreement. Even when you pay far less than the original debt, the collection agency makes money because they paid so little for the debt.

The future will see fewer people filing Chapter 7, if for no other reason than the income limitations. It should see fewer people overall filing, because of the life restrictions imposed under Chapter 13.

Always pay your debts if you can, but if you can’t, consider letting them go to collection as an alternative to bankruptcy.

Do you really need to file bankruptcy?

Sunday, July 13th, 2008

Current reports show that bankruptcy filings are at an all time high. This is probably due to the fall of the real estate sector, which affects everything. The way the current bankruptcy law is, does it really protect you and is it necessary? I personally don’t think bankruptcy is necessary for individuals. Bankruptcy for one will destroy your credit report and credit scores. There are two types of bankruptcies for individuals, and they are Chapter 7 and Chapter 13. The most common now with the new law in place is Chapter 13. Chapter 13 forces you to pay back a porting of your debts usually over 5 years to a court appointed trustee. With all the creditors currently having records defaults, you would think that some kind of resolution is in order with the actual creditor on your own. This is actually true; you can call and negotiate with your creditors a lesser balance and a payment plan. Plus if you have retirement funds you don’t have to liquidate them. With bankruptcy you do.

Disadvantages of bankruptcy

If you have wracked up a bunch of unsecured debt, you can assure yourself calls all day from creditors if you don’t pay them. Bankruptcy will stop the calls but it does not change the fact that the negative record will be on your credit report for 7 years if it is Chapter 13. If its chapter 7 it will stay on your credit report for 10 years. So depending on what your situation is, I think in most cases bankruptcy is not necessary. If you have found yourself in financial trouble you can call your creditors and negotiate an affordable payment plans on your own. In most cases you can reduce 40 – 60 percent of what you actually owe to credit card companies with a fixed interest rate and low payments. So do you research before you jump into a bankruptcy and pay a bunch of money to an attorney for no good reason.

Advantages of bankruptcy
If you file bankruptcy the phones calls with stop. It will also stop creditors from taking you to court. You have the option under the bankruptcy laws to file every 6 years. Most lawyers will tell you that the bankruptcy laws are in place not to protect you but the creditor. So keep this in mind. If you are able to file chapter 7 bankruptcy, this will liquidate all your debts with no obligation to pay anything back. This chapter bankruptcy is harder to file now due to the income restrictions. So don’t think bankruptcy is the easy way out now, because its not. I personally think the only advantage is it will stop the harassment from creditors.

Just remember you can negotiate with your creditors yourself, and it cost you nothing but your time. You can also get a payment plan in place you can afford. Creditors will typically work with you to determine a budget over a period of time. Remember you owe this debt; the creditor did not rack up the debt for you. The long term affect of bankruptcy is hard on your credit report vs setting up a payment plan with your creditors and getting them to stop the interest.

There are also other options like debt consolidation. This is could be a alternative as well. Look at your options before jumping into anything.

Bankruptcy Q & A

Wednesday, July 9th, 2008

Hello Mike,
I have a question about bankruptcies. I have a bankruptcy on my credit reports, it is a Chapter 13. I have been told different things about how long it will be on my credit report. I have been told it will be on there for 7 years and I have been told it will be on there for 11 years. Which is it?

Lorena Ochoa

Hi Lorena,
A chapter 13 bankruptcy stays on your credit report for 7 years from file date. There are two common bankruptcies filed currently. The two are Chapter 7 and Chapter 13.Chapter 7 bankruptcy will be on your credit report for 10 years from file date. You will need to watch your credit report closely, because its common that the bureaus don’t remove bankruptcies like they should once the expired date has hit.

Mike Clover

Bankruptcy Q & A

Friday, June 20th, 2008

I have a question in regards to bankruptcy. I have just recently discharged my chapter 13 bankruptcy. I was curious how long it will be on my credit report. I have looked all over the web and found different answers to this. I also was curious what was recommended to re-establish some credit. I currently don’t have any credit reporting on my credit report. The bankruptcy said I should be able to re-establish credit right a way.


Hi Julie,
Thanks for the question. Bankruptcy can be confusing at times with how long is stays on your credit report. Chapter 13 bankruptcy will be on your credit report for 7 years from file date. You will need to check your credit report because the bureaus usually don’t update this properly. After filing bankruptcy and it has been discharged, getting your credit rebuilt is your next step. The best way to do this is with secured credit cards. You can go to our credit card tab and apply for some credit cards there. We recommend Orchard Bank Card as your first choice. You should have at least 2 credit cards to get your credit scores boosted.

Reduce debt with Debt Consolidation Q & A

Wednesday, May 28th, 2008

Debt consolidation is becoming the wave of the future currently. We are starting to get more and more questions about how to get out of debt. We have partnered with a company that provides a unique approach called debt elimination. This company is based here in Texas with us. CreditSolutions is the name and they have received a very powerful award by JD Power & Associates for customer service.

Credit Solutions of America, Inc.

Hi Mike,
I am self employed and have accumulated $75,000 in consumer debt, mainly because of this downturn in the economy. I own a company where I was providing handy man work for realtors in the California area. With the current market in California, my cash flow has almost come to a stop. What would you suggest I do? I have run through my savings, and cannot pay this debt currently.
Johnny Carbelo

Hi Johnny,
We have definitely seen the issues in California, and how it’s affecting people in that state. If you don’t have income coming in to pay the debt, you definitely need to look at your options. I work with a company that provides debt consolidation of a different kind. In other words they provide a service they like to call debt elimination. This would be my first step in trying to resolve your debt issues. These guys can get you out of debt within 36 months. Go to our link on the front of our website and select the get out of debt link.

About the Author: Mike Clover is the owner of is the one of the most unique on-line resources for free credit score report, fico score, free credit check, identity theft protection, secured credit cards, student credit cards , credit cards, mortgage loans, auto loans, insurance, debt consolidation ,and a BlOG with a wealth of personal credit information. The information within this website is written by professionals that know about credit, and what determines ones credit worthiness.

Credit Report after a Bankruptcy

Saturday, May 24th, 2008

Your credit report after a bankruptcy will look like a bomb was dropped on it. Your credit score report will be littered with all kinds of derogatory information. Depending on what type of bankruptcy you filed will determine how long it will take to re-establish your credit. The two most common bankruptcies are Chapter 7 and Chapter 13. With the new bankruptcy law, more people will be forced to file Chapter 13. Here are the differences.

Chapter 7 bankruptcy- is considered liquidation of your non-exempt assets. This bankruptcy is considered the quickest and simplest of all bankruptcies. A court appointed trustee sells off all your assets in an attempt to pay back some of your creditors. During most Chapter 7 bankruptcies the client will not have any assets to liquidate.

Chapter 13 – This bankruptcy is considered a wage earner plan. This plan allows individuals whom have income to develop a plan to pay back there creditors over a 3 to 5 year period. Under this bankruptcy you are assigned a court appointed trustee that you make the agreed upon payments to, which they in return pay your creditors.

Bankruptcy is all too common these days with the economy the way it is. The mortgage crisis and the price of gas have caused many people financial troubles all over the United States. Luckily there is hope after a bankruptcy. It’s kind of like polishing up your shoes after you have got some scuff marks on them. Your credit is the same way, you can re-establish credit after a bankruptcy, and that is the first step once you are done with your bankruptcy.

How to establish credit afterwards
The first step is to get two secured credit cards. No bank is going to allow you to get an un-secured credit card after a bankruptcy. All of your past credit will be on your credit report for 7 years. If you filed chapter 7, it will be on your credit report for 10yrs from file date. But most of your past negative credit will be on your report for 7 yrs. The main objective is to get new credit on your report as soon as possible. The only way to do that is with secured credit cards, and Orchard bank is a great one. FICO likes to see a mix of credit, so make sure you get a couple of secured credit cards. This process will take you at least 12 to 24 months to get your credit scores where they are somewhat decent. After a little time with no slow pays, your creditors will start extending credit to you again.

Don’t be a repeat offender
FICO will forgive you for past bad credit mistakes, but if you are a repeat offender it will be tough to recover. The new FICO scoring process does not want to see you continually having problems. So learn from past mistakes, save your money for hard times and emergencies. Also remember to always stay ontop of your free credit score report.

About the Author: Mike Clover is the owner of is the one of the most unique on-line resources for free credit score report, fico score, free credit check, identity theft protection, secured credit cards, student credit cards , credit cards, mortgage loans, auto loans, insurance, debt consolidation ,and a BlOG with a wealth of personal credit information. The information within this website is written by professionals that know about credit, and what determines ones credit worthiness.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.