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Bankruptcy is an important right that people have in this country. In fact, bankruptcy provisions were written into the United States Constitution prior to the Bill of Rights.
Bankruptcy is a legal proceeding, held in Federal Court, which permits honest people with debt problems to obtain a fresh start. Once you file a Chapter 7 bankruptcy your creditors are prohibited by Court Order from taking action to collect a debt. Your creditors cannot call you, send you bills, make threats, sue you, freeze your bank account or anything else designed to collect money from you or harass you in order to persuade you to pay money. Your property cannot be taken from you through repossession, foreclosure or garnishment.
The United States Bankruptcy Code was drastically changed in October 2005. After eight years of lobbying, millions of dollars in campaign contributions from interested lobbyists, and in spite of the recommendations of the Bankruptcy Reform Committee that Congress appointed, the Bankruptcy Code was amended to make the filing of bankruptcy more difficult.
I pride myself in being as familiar with the new law as I can, however, every case is different and I make it a point to discuss each person’s circumstances directly with them by telephone prior to having them in for their first appointment.
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| In a Chapter 7 bankruptcy, all of your debts are discharged (wiped out) by Court Order except for recently due taxes, student loans, alimony and child support, and divorce settlements. There are some other debts which the Court will not discharge under some circumstances. In order to keep your home or car, you have to keep the mortgage payments current. Your unsecured debts, those without collateral, are eliminated. This means that credit card debts, loans, medical bills, utility bills, business and personal debts and many other debts are commonly discharged in a Chapter 7 bankruptcy. Although it is possible to lose property, the law protects certain property people need to live. For example, in New York, a married couple can have up to $100,000.00 worth of home equity without losing it in bankruptcy. Retirement plans, pensions and future wages are also unaffected by a bankruptcy. I can and will explain the details of the property that you may or may not be able to keep at a consultation. |
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Many people ask me about the effects of a bankruptcy on their credit report. Unfortunately, by the time they come in to see me, the damage is already done and their credit report can not get worse. In many cases, a bankruptcy improves a person’s credit report within one year or two as most of your bad debts no longer exist.
Many people find that the credit card offers come streaming in after their bankruptcy is finished. There is nothing in the law about getting credit after bankruptcy with some exceptions:
- Pursuant to Federal Law, bankruptcy does not affect your eligibility to obtain a student loan.
- According to the rules of the FHA, bankruptcy does not affect your eligibility for a home mortgage after 18 months. The Veterans Administration Rule is 12 months.
- Federal Law prohibits discrimination by an employer or a government agency based solely on a bankruptcy filing.
If you have a stable job and pay your bills on time after the bankruptcy, many creditors will grant you loans after about 1 year.
If you have doubts about what your debt situation is, by Federal Law, you entitled to 1 free credit report from each of the big 3 agencies, Experian, Equifax and Trans Union. You can obtain all three of those free credit reports at www.annualcreditreport.com.
Some people find that old debts have come back to haunt them. Major credit card companies and lenders sometimes sell their bad debts to third parties who attempt to collect them many years after the debts were incurred. These “debt buyers” occasionally attempt to collect debts that are barred by the statute of limitations or cannot be proven otherwise. In some cases, creditors’ claims can be settled at a substantial discount. I can advise you about those alternatives as well.
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