Many people who are struggling with overwhelming debt hesitate to file for bankruptcy, even when it is their best option for debt relief. They worry that having a bankruptcy on their credit report will harm any chance they have of ever owning their own home. The reality is, however, that having delinquent payments and/or charged-off accounts on your credit report is just as – if not more – harmful and could torpedo any plans of obtaining approval for a mortgage. The following are some steps you can take to help obtain that approval in your post-bankruptcy life.

Rebuilding Credit Is Key

Once your bankruptcy petition has been completed and your debts discharged, although your credit score will likely be low, think of this as starting out with a new and clean financial slate. Rebuilding your credit should be your goal.

Start by looking over your credit report. Make sure that it is correct and that all of the items that were discharged in your bankruptcy have been removed from your credit report. Also, make sure there are no other derogatory items that should not be there.

If you are considering bankruptcy, you have most likely been placed in a difficult financial position due to circumstances beyond your control. While most people have some debts, they will often do everything they can to meet their financial obligations. However, a person or family may encounter issues such as the unexpected loss of a job or a serious illness that leads to large medical bills while also affecting a person’s ability to earn an income. In these cases, debts may become unmanageable, and bankruptcy may be the best option for debt relief. Even though a person or family will usually be aware of the reasons why they are in this situation, a debtor will be required to receive credit counseling during the bankruptcy process.

Credit Counseling and Debtor Education

The U.S. Bankruptcy Code requires debtors to complete two types of counseling during the bankruptcy process. These forms of education are meant to help debtors understand the issues that may have led them to experience financial difficulties and encourage them to follow practices that will allow them to maintain financial stability in the future. Prior to filing for bankruptcy, a debtor will need to complete credit counseling, and before discharging their debts, they will be required to take a debtor education course.

Pre-bankruptcy credit counseling must be completed before a debtor files a petition for bankruptcy. This counseling may be completed in-person or online through an approved agency, and it will usually take around an hour. During counseling, the debtor will review their finances, discussing their income, expenses, and debts. The counselor may advise the debtor of potential alternatives to bankruptcy and help them create a workable budget that will allow them to maintain financial stability going forward. After completing the course, the debtor will receive a certificate of completion that will be filed along with their bankruptcy petition. This certificate will be valid for 180 days.

If you have significant debts, bankruptcy may be your best option for receiving relief and ensuring that your family will be able to live comfortably and cover your ongoing expenses. However, it is important to make sure you follow the correct procedures when filing for bankruptcy and provide accurate information when submitting bankruptcy forms. Misreporting financial information or other types of activities could lead to accusations of bankruptcy fraud. This could cause your bankruptcy case to be dismissed, or you could even face criminal charges. By understanding the reasons why a person may be accused of bankruptcy fraud, you can make sure you are avoiding these issues and taking the correct steps to discharge your debts.

Forms of Bankruptcy Fraud

Criminal charges for bankruptcy fraud usually require prosecutors to show that a person intentionally provided false information or took improper actions to abuse the bankruptcy system. These actions may include:

• Failing to report assets - In a Chapter 7 bankruptcy, a debtor’s non-exempt assets may be seized and liquidated. In some cases, debtors may not report certain assets to avoid turning over some of their property, or they may undervalue assets with the intent of protecting property through the applicable exemptions. Intentionally concealing or misreporting assets is considered to be perjury, and an offender who is convicted of this offense may face significant fines or be sentenced to multiple years in prison.

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Debts can be a significant problem that affect a family’s financial resources and its ability to pay ongoing expenses. In cases where debts become unmanageable, a family may experience a number of difficulties as they face harassment from creditors and attempts to collect what is owed. In cases where a person gets behind on payments on an auto loan, a creditor may take action to repossess the vehicle. In these cases, debtors will want to understand their options, including determining whether they may be able to get their vehicle back by filing for bankruptcy.

Responding to a Repossession

Most of the time, debtors will want to address their debts before creditors take action to recover money owed or repossess property. Filing for bankruptcy will place an automatic stay on any collection actions and prevent the repossession of a vehicle. However, if a vehicle has already been repossessed, a debtor will need to act quickly to determine whether they can get their vehicle back. If a lender sells a repossessed vehicle through an auction, it will belong to the new owner, and the debtor will not be able to regain ownership.

Debtors may have multiple options for reclaiming a repossessed vehicle depending on the type of bankruptcy they choose to pursue. In a Chapter 7 bankruptcy, any equity the debtor owns in the vehicle may be exempt from liquidation. Texas laws allow for the exemption of one motor vehicle for each member of a family with a valid driver’s license. Because a vehicle is part of the bankruptcy estate, a debtor may seek a court order requiring the lender to return their vehicle while their case is ongoing. During the bankruptcy process, the debtor may redeem the vehicle by paying off the outstanding balance of the loan, or they may reaffirm the loan by making an agreement with the lender detailing how the past-due amount will be paid. If the person will be able to make ongoing payments on their auto loan after discharging other debts through bankruptcy, they will be able to maintain ownership of the vehicle.

Most American consumers have debt in some form, and those who experience financial difficulties may struggle to repay these debts. Failing to make payments on time can have a significant effect on a person’s credit score, and this may make it more difficult to obtain loans or other forms of credit in the future. A low credit score can also affect a person in other ways, including their ability to find employment or obtain housing. While those who are struggling with debts may be able to receive relief by filing for bankruptcy, this will have a further negative impact on their credit score. As they determine how to rebuild their credit, a person may consider some alternatives to bankruptcy, and by consulting with an experienced attorney, they can understand their best options for receiving debt relief and maintaining financial stability.

Addressing Debts and Rebuilding Credit

There are multiple approaches that a person can take toward their debts as they determine how to repay what is owed while ensuring that they can obtain loans or credit in the future. Some of these options include:

• Debt settlement - A debtor may be able to negotiate with creditors to pay off a certain percentage of what is owed while canceling the remaining debt. Since a person will usually need to pay a lump sum to a creditor, this option may only be available in cases where savings are available or where assets may be sold to raise the necessary funds. A debt settlement may decrease a person’s credit score, but this may be preferable to risking future decreases due to missed payments. 

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