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How Does Filing for Bankruptcy Affect My Credit Score?
Every person who opens up a credit card, gets a loan, or finances a car has a credit report. Over years of making payments and opening new lines of credit, the credit report will reflect your ability to pay bills on time and effectively manage your debts. Lenders will review your report while deciding if you are a good or bad credit risk. Events like filing for bankruptcy are also reported to credit reporting agencies and can negatively impact your score.
The type of bankruptcy which is filed has different effects on your report. A Chapter 7 bankruptcy can eliminate the majority of your debts such as credit cards, medical debts, and even secured debts. Since it does not require the debtor to repay debts, it will remain on your credit report for ten years. A Chapter 13 bankruptcy is a reorganization which requires repayment of part of the debts. This kind of bankruptcy stays on your credit report for seven to ten years, depending on the credit reporting agency.
Bankruptcy and Federal Student Loans
A rising number of recent graduates are finding themselves buried in student loan debt. Sadly, sometimes this situation leads to other types of debt. Trying to make monthly student loan repayments, you might find yourself relying on a credit card to help you purchase necessities like groceries. This chain of events might make your financial situation very serious, leading you to consider bankruptcy. If you’re considering bankruptcy primarily because of student loan debt, there are a few things you need to know about how student loans are treated in bankruptcy court.
You might be able to discharge your federal student loan debt in bankruptcy, but this does not apply to every case. You have to prove to the court that repaying those student loans would result in undue hardship. This generally happens through an adversary proceeding in your bankruptcy court, and the following three criteria must be met:
2014 is the Year to Get Rid of Debt
Since the ball dropped on New Year’s Day, people have been trying to keep their resolutions. Whether that is quitting smoking, losing weight, or just improving quality of life, keeping up with resolutions can be a challenge. Another common resolution is to get out of debt, and 2014 could be the year for it.
The first step to tackling debt is to list all outstanding balances. Include everything that you might owe for your mortgage, student loans, auto loans, credit card bills, or other bills. It is also important to include the interest rates on these bills so that the most expensive debts are dealt with first.
The next step is to track your spending. Using a year’s worth of bank statements and credit card statements, find out what you spend each month. This will let you see which expenses are necessary and which are not. Use this as a starting point in creating a budget that you can live with, and stick to it. That will allow you to trim any wasteful spending and reallocate those funds to getting rid of debt quickly.
Are Cosigners Affected when Filing for Bankruptcy?
In some cases when a person has little or no credit history, it might be necessary to have a cosigner on a loan application. It can be the difference between being approved for a loan or credit card and being denied. Good cosigners have better credit scores and have shown an ability to handle their debt responsibly. Typical cosigners include parents, relatives, or spouses. But these cosigners are agreeing to be liable for debts if they are unpaid.
Since a bankruptcy can release or lessen debt obligations, it is important to know how cosigners are affected. When they cosign for a loan, they are promising to take care of a debt if the debtor cannot. A good example of when a debtor cannot handle their debt is when they file for bankruptcy. What cosigners are responsible for after a bankruptcy is dependent on which chapter of bankruptcy is filed.
What is the Texas Homestead Exemption?
Before heading into a personal bankruptcy, it is helpful to know as much as possible about federal and state laws and rules affecting your case. Texas has very unique homestead laws that you should know about before petitioning for bankruptcy. If you are thinking about bankruptcy as an option, talking over your situation with an attorney could be extremely helpful for getting your questions answered and putting you at ease.
If you file for bankruptcy, you can protect the total value of your home under this exemption. It’s important to note that there are several critical stipulations in order for a homeowner to be eligible for this exemption. A rural homestead for the head of the family cannot be more than 200 acres including the space the property is located on and a single adult cannot claim any more than 100 acres. In an urban area, the space is limited to ten acres.
Knowing Your Rights with Debt Collectors
Maybe you are waiting to contact a bankruptcy attorney because you think that the collection calls will stop. Maybe you are feeling overwhelmed and embarrassed by the situation. Rest assured that bankruptcy can happen to anyone and that you should not be afraid to reach out for help. One financial setback like the loss of a job or a serious accident can affect your finances dramatically. Once those phone calls start coming in, however, it can raise some questions about what creditors are and aren’t allowed to do or say when they are contacting you about a debt.
In Texas, your rights are protected under the Texas Debt Collection Act. This law outlines how and when creditors can contact you, but it is also stipulates what is illegal. This law is attempting to cut down on the abusive, unfair, or fraudulent debt collection attempts that have made life frustrating for individuals throughout Texas.
Protecting Yourself From Refinancing Scams
Believe it or not, financial scammers often do not target the wealthiest individuals. Instead, those facing financial pressures and even considering bankruptcy are most often victimized. Those with money problems may painted into a corner, under immense stress, willing to do whatever it takes for a fresh start, and more susceptible to the dubious claims of scam artists.
Staying educated on the tricks of these con artists will help protect you from falling into their trap. How do scammers seek to steal from vulnerable Texas residents? A few of the most common scams include:
Home Affordable Refinance Program Scams (“HARP”): HARP is a program available to those who are not behind on their mortgage but have difficulty refinancing. Scam artists are well aware that this program exists. They may try to contact you by phone or through the mail, claim that you qualify for HARP support, and ask for money to work through the process on your behalf. The only way to truly know if you qualify for HARP is to check HARP’s website, or contact your mortgage lender. Eligibility for HARP is based on a number of factors listed by HARP. If you are not sure you can check Freddie Mac’s website to gauge your potential eligibility for HARP.
Unfortunately, scammers often use HARP as a way to funnel money their way. The main thing to look out for are third parties asking for large fees to help you take advantage of the program.
Can Anyone Stop my Personal Bankruptcy?
Filing for bankruptcy is a great financial tool for people who have accrued too much debt to handle responsibly. Maybe you lost your job and do not want to lose your house. There are several kinds of bankruptcy for which a person or a business can file. A chapter 7 can eliminate credit card balances, unpaid medical bills, tax penalties and other unsecured debt. On the other hand, a chapter 13 allows you to repay a portion of your debts if you have the means to do so and have the rest forgiven.
While this seems beneficial to anyone with unmanageable debts, there are ways that your bankruptcy might not discharge your debts. During a required meeting with your creditors, objections may be raised as to prevent you from eliminating some or all of your debts.
What is a Chapter 20 Bankruptcy?
A Chapter 7 bankruptcy is a common form of bankruptcy because it excuses the filer from all eligible debts. It is commonly referred to as a liquidation bankruptcy because debts are eliminated by the sale of property and other assets. Creditors are repaid through the proceeds of those transactions.
A Chapter 13 is also called the wage-earner’s bankruptcy. If someone is earning an income but cannot keep up with past due payments, then a Chapter 13 bankruptcy can give them time to pay those debts. There is a repayment plan that last from three to five years and is based on each person’s income.
Occasionally there are cases when nether Chapter of bankruptcy is appropriate. While a Chapter 20 bankruptcy is not a term found in the bankruptcy code, it is a common strategy to get a fresh start. It is the process of filing two bankruptcies right after each other to resolve difficult financial situations. The approach is filing for Chapter 7 protection and then for Chapter 13.
What You Need to Know Before Filing for Bankruptcy
If you are considering filing for bankruptcy in Texas, there are several things to consider before filing. While bankruptcy is a great way for many Americans to discharge or reorganize their debt, it could actually be a detriment for some families. In the wake of the Great Recession, the number of personal bankruptcies rose, according to a report from the Columbia Law School. In 2011, according to the report, bankruptcy filing “totaled about 5,800 per million individuals, meaning about one in every 175 Americans filed for bankruptcy protection.” This number was even higher in 2010, during which one in every 150 Americans filed. 
Now that the Recession has receded, many families that were close to insolvency are now on solid financial ground. Because of bankruptcy’s prevalence, however, many people who could otherwise solve their debts differently may think bankruptcy is their only option. The first step to determine if you should file for bankruptcy, according to the USA Today is to determine if you are judgment proof. “If you’re judgment proof,” according to Lawyers.com, “creditors can do virtually nothing legally to obtain money or property from you.” Examples of individuals who are judgment proof are those who have no assets to be collected, have insufficient property to pay a creditor’s claim, or who are protected by laws “that exclude wages and property from being used to pay a debt.”
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