Money Advice Guide

First, understand that filing bankruptcy should be a last resort if you have borrowed money and have absolutely no way or repaying it. Filing for bankruptcy will have a negative effect on your credit history for 10 years or longer and may also adversely impacts your quality of life.

If you do declare bankruptcy, here are some things to expect.
First, you will need to be prepared to explain to a bankruptcy judge or trustee how you got yourself into such a financial pickle. You will be asked some very tough questions and need to be ready with good answers. It will not be an easy or fun task.

The only credit cards you will probably be allowed to keep are those that were completely paid off before you declared bankruptcy. You will most likely lose all others.

Once you file for bankruptcy, you will have trouble getting a mortgage, a loan, new credit cards, life insurance and even some jobs. This is because there are employers who are skittish about hiring people who have filed for bankruptcy as they feel it demonstrates a lack of restraint or self-discipline.

Some of your debts will not be discharged. This includes child support, student loans and back taxes. So if you think filing for bankruptcy will relieve you of that $12,000 you owe Uncle Sam, think again.

Keep in mind that a bankruptcy will stay on your credit report for at least 10 years. This means that if you’re 35, you’ll be 45 before you can apply for a credit card, a mortgage, a loan or a job without the potential lender or employer seeing that you were once bankrupt.

The good news

Despite what you may have been told, it is possible to get a loan after filing for bankruptcy. It is called a bankruptcy loan and its purpose is to help you get back on your feet and reestablish your finances.

A bankruptcy loan is usually available only after your creditors have been paid and your bankruptcy dismissed. If you filed a Chapter 13 (reorganization) bankruptcy, your creditors must be paid in full before you apply for a large loan. And if you filed a Chapter 7 bankruptcy, you must wait at least two years after the bankruptcy to apply.

The best way is to prove to potential creditors that you are no longer a bad risk is by paying all your bills on time, and showing that you can now handle a credit card. Once you have a track record for paying your bills on time, and have successfully maintained a credit card, you can ask your creditors for reference letters to prove to potential lenders that you have become credit worthy.

You should also know that there are lenders out there who will offer you a loan while you are still in bankruptcy as a way of paying off your creditors. Don’t be lured into this. It usually just paves the way for further disaster as you are simply adding debt to debt. As a wise man once said, you just can’t borrow your way out of debt.

Going through bankruptcy can be a painful and embarrassing experience. Be sure you consider all possible alternatives before filing. You might find that bankruptcy is easy to get into but very, very difficult to get out of.

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Douglas Hanna has lived in the Denver area for nearly 35 years and is an expert on both Denver and Colorado. He is also the author of more than 120 articles on Denver and Internet marketing.

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WILL MY CREDITORS STOP HARASSING ME?

Yes, they will! By law, all actions against a debtor must cease
once bankruptcy documents are filed. Creditors cannot initiate
or continue any lawsuits, wage garnishees, or even telephone calls
demanding payments. Secured creditors such as banks holding, for
example, a lien on a car, will get the stay lifted if you cannot
make payments.

WILL MY SPOUSE BE AFFECTED?

Your wife or husband will not be affected by your bankruptcy if
they are not responsible (did not sign an agreement or contract)
for any of your debt. If they have a supplemental credit card
they are probably responsible for that debt.

However, In community property states, either spouse can contract
for a debt without the other spouse’s signature on anything, and
still obligate the marital community. There are a few exceptions
to that rule, such as the purchase or sale of real estate; those
few exceptions do require both spouse’s signatures on contracts.
But the day to day debts, such as credit cards, do NOT require
both spouses to have signed.

Your bankruptcy lawyer will be able to guide you in this regard.

WHO WILL KNOW?

Chapter 7 filings are public records. However, under normal circumstances,
no one will know you filed for Chapter 7. The Credit Bureaus will
record your filing and it will remain on your credit record for
10 years.

WILL I EVER GET CREDIT AGAIN?

Yes! A number of banks now offer “secured” credit cards
where a debtor puts up a certain amount of money (as little as
$200) in an account at the bank to guarantee payment. Usually
the credit limit is equal to the security given and is increased
as the debtor proves his or her ability to pay the debt.

Two years after a discharge, debtors are eligible for mortgage
loans on terms as good as those of others, with the same financial
profile, who have not filed Chapter 7. The size of your down payment
and the stability of your income will be much more important than
the fact you filed chapter 7 in the past.

The fact you filed Chapter 7 or 13 stays on your credit report
for 10 years. It becomes less significant the further in the past
the filing is. The truth is, that you are probably a better credit
risk after bankruptcy than before.

WHAT DOES IT COST?

Costs for filing your bankruptcy will vary depending on the type
of bankruptcy you are seeking. The rule of thumb is that a consumer
bankruptcy will cost approximately $200. This does not include
attorney fees that can run between $700 and $1500 depending on
the nature and complexity of your case. Many bankruptcy lawyers
will give you a free initial consultation. You can keep the fees
down by being well organized and well prepared. You may also be
able to keep the fees down by not requiring the lawyer to attend
the meeting of creditors with you. Check this with your lawyer.
In some states such as Massachusetts, attorneys must attend the
Section 341 meeting with the debtors otherwise attorneys are deemed
to have NOT represented the debtors.

These fee quotes are mere estimates based on nationally reported
averages and subject to variation and change. Please consult with
your local bankruptcy court and with legal counsel on fees before
commencing any action.

For more information, please visit www.mybankruptcycounseling.com

Nathan Dawson writes for http://www.mybankruptcycounseling.com

Tags: bankruptcy, bankruptcy law, bankruptcy question, filing bankruptcy, personal bankruptcybankruptcy, bankruptcy law, bankruptcy question, filing bankruptcy, personal bankruptcy

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