The Benefits and Disadvantages of Filing for Bankruptcy

Posted on August 22, 2013 by Staff Writer

The choice to file for bankruptcy is not an easy one. The benefits need to outweigh the negative results of bankruptcy. It is necessary to have a full understanding of the consequences of bankruptcy in order to make the best decision possible.

The following are possible outcomes of bankruptcy:

1. Weakened Credit Score

Filing for bankruptcy has a negative effect on your credit score. A bankruptcy shows up on your personal report for 7 to 10 years depending on the type of bankruptcy for which you file. Yet, bankruptcy allows for a financial fresh start. You can rebuild your credit over time and there is an opportunity for it to be better than before your bankruptcy.

2. Difficulty Getting Loans

One of the results of having a bad credit score post-bankruptcy is that it will be more difficult to get a loan. You will also have a difficult time being approved for credit cards and financing the purchase of a home. Yet, if you are considering filing for bankruptcy, it might not be the best idea to have new bills to pay.

3. Issues with Finding Employment

Potential employers occasionally review your credit report before offering you a job. Certain states have outlawed or limited such a practice because of the negative cycle it perpetuates. People who can’t pay their bills on time are not able to get jobs that would allow them to pay their bills on time. Arizona is not one of the states that currently regulates such activity.

The benefits of bankruptcy can far outweigh the negative aspects because it will allow you to start fresh. It is important to discuss your situation with an Arizona bankruptcy lawyer. Bankruptcy will eliminate either some or all of your debts depending on what chapter is selected. Filing will also stop harassment from creditors, foreclosure, wage garnishment, or repossession because filing creates an injunction called an automatic stay. In the long run, a bankruptcy will allow you to build your credit back up to a respectable level and allow you to regain your life. Contact a dedicated bankruptcy attorney in Casa Grande who can assist you in deciding if filing is the right step for you.

Getting a Mortgage after Bankruptcy

Posted on August 7, 2013 by Staff Writer

At one time, going through bankruptcy had a stigma that was hard to shake when trying to move on with your financial life. However, according to SFGate Home Guides, not only is the stigma around bankruptcy lessening, but it is also very possible to get a new home in as little as a couple of years after the discharge of your bankruptcy. Here are a few things that you can do to get there.

Check for Accuracy

Once your bankruptcy has been discharged, check your credit report to ensure that everything that was included in the bankruptcy has been closed and discharged. You want to make sure that you do not have any inaccuracies there to bring down your credit score.

Open New Trade Lines

If you have any debt that was not included in the bankruptcy, such as student loans, make sure that you make timely payments on them. Remember, the point is to show that you are now creditworthy and financially responsible. Now that your bankruptcy is discharged, you will be getting offers for credit cards. Find the one with the lowest interest rate and fees. Once you acquire your new credit card, never use more than 30 percent of your credit line, and pay the balance every month.

Take Out a Larger Loan

About a year after your discharge, take out a larger loan such as a car note. You need to be able to show that you can handle a larger debt. Make sure that you have zero late payments while you are in the process of rebuilding your credit profile. You have to show your creditworthiness.

If you have questions regarding what you can include in your bankruptcy or about the discharge of your bankruptcy, a qualified and experienced Arizona bankruptcy attorney can assist you.

Bankruptcy can Raise Your Credit Score

Posted on August 1, 2013 by Staff Writer

We have all heard the horror stories about what bankruptcy can do to your credit rating. Unfortunately, your credit rating is probably suffering from things much more negative than a bankruptcy. If done right, bankruptcy could actually raise your credit score.

Whether your credit rating will qualify for credit with a specific company or a certain utility is very difficult to determine. It will be subjective and completely determined by the underwriting guidelines of the creditor. This is why a straight answer to the question is so hard to find. It may not exist.

From my personal experiences, I know that secured credit, to buy things like cars and houses, is available but it will cost more and likely come from an unconventional source like Lending Tree and not from a bank. Unsecured credit, like credit cards, is available from places like Orchard Bank, but expensive and low limits. It will take some time to develop good terms with credit card companies.

No matter what kind of credit you apply for, someone will have to read your credit report and make a determination if you qualify. Right now, your credit report probably shows some negative references . Each one of these negative marks will count against you. There is also a section of the report dealing with public documents and filings. This is where judgments and bankruptcy show up. These will really count against you because there is less of a chance they are a mistake. However, bankruptcy has a redeeming quality.

When bankruptcy is reported on your credit report, it will count against you. However, you are then able to re-classify all of the other negative reports to “Discharged in Bankruptcy” instead of “Delinquent” or other negative terms. This might take a few letters to the credit bureau, but it will be worth it. You will also be able to classify other judgments the same way. Now you only have one thing counting against you instead of several.

Another way bankruptcy can help is that it will dramatically change the amount of outstanding debt as well as available debt. Too much of either of these is normally a bad thing.

Really good bankruptcy attorneys will offer packages to rebuild your credit. They can explain it and help rebuilt it. Schedule a FREE CONSULTATION with a really good bankruptcy attorney now.

How to avoid filing Bankruptcy Again

Posted on July 19, 2013 by Staff Writer

Filing bankruptcy can give you the fresh start that you are looking for. You are finally free of debt, you are not in collections, and you don’t have bill collectors ringing your phone off the hook. It feels great to feel free but the most important thing is to be financially responsible. Recent reports showed that of all of the bankruptcies filed in 2011, 28 percent of them were repeat filings. Here are a few steps that you can follow to ensure that you are not a part of this statistic.

Be Careful with Credit

Part of having good credit is having positive trade lines on your account. The easiest way to establish these positive reports is my establishing credit. The most common way to establish credit and have it reported is through a credit card. Many credit card companies will start sending offers as soon as a person has their bankruptcy discharged. Treat these new credit cards with respect. Use them only when needed and pay them off in full each month.

Seek Preventative Medical Care

The highest debt for many people is for medical care. A way to keep medical debt down is to go see your regular doctor as soon as you begin feeling ill. Trips to the emergency room can be much more costly and can lead to a hospitalization. The office visit charge is usually cheaper and if you are strapped for cash, many offices allow you to make interest free payments.

Live within your Means

It is easy for people to be carried away into living beyond their means. Create a budget and stick to it. Diligent budgeting can also make it feasible to purchase a luxury item for yourself occasionally. If you have questions regarding the discharge of your bankruptcy or starting all over, your Arizona bankruptcy attorney can answer those questions for you.

Getting a Mortgage after Bankruptcy

Posted on June 21, 2013 by Staff Writer

While having to file bankruptcy may be a clear setback for some, it really can be utilized to get a fresh start. Part of this fresh start is reestablishing your credit profile so that you are able to move on from your state of bankruptcy.

The first thing that you need to do is to allow yourself enough time before applying for a mortgage loan. Most lenders will require that you wait for at least a year after your bankruptcy is discharged. Even after a year, your interest rates may be high. The longer you can wait the better it will be for you.

During this waiting time, you want to start building new trade lines. Lenders determine your creditworthiness by your payment activity. The longer that you show a positive payment history, the better your chances are for being approved. Being approved for any type of credit can be challenging initially. You may be charged higher interest rates initially. You can start with small lines of credit such as secured credit cards or even an installment loan through your bank.

While you are rebuilding your credit, evaluate your financial situation. You need to figure out how much you can afford to pay monthly. It is important to stay within your means so that you do not end up in another financially binding situation such as the one that led to your initial bankruptcy filing. You will need to show your ability to pay for the new mortgage loan with your financial statements.

This would also be a great time to create a new budget. Cut back on the things that are not completely necessary. If you look at everything that you spend, you will find something that you can do without. Having a good credit profile is important. If you have questions regarding filing bankruptcy or reestablishing your credit after bankruptcy, contact your Arizona bankruptcy attorney today.

Image courtesy of patpitchaya/freedigitalphotos.net

Good Credit after Bankruptcy Is Possible

Posted on June 19, 2013 by Staff Writer

Arizona residents and others may hesitate to file bankruptcy for various reasons. One such reason may be the fear that having a good credit score again seems impossible after bankruptcy. That is simply not true. You can improve your credit score even after you have filed bankruptcy.

Life happens, and bills can get out of control. To restore order, many people turn to bankruptcy. Bankruptcy is a personal choice and one that can provide a person with a fresh start. It will affect your credit but credit is forgiving. Certain actions can help you regain your good score over time.

Keep certain accounts open, such as car and mortgage accounts. Most often, these types of lenders will send you a reaffirmation letter asking for your confirmation to continue your payments. If you can afford to it is beneficial to your credit to do so. By continuing your payments, you are rebuilding your credit, as these lenders will continue to report monthly to the credit bureaus.

Secured credit is still credit and it is a good way to rebuild credit. With as little as $250, you can be well on track to regaining a good credit score. Check with your bank to see if they offer a secured card. The initial deposit is held as collateral. This deposit is usually released after you have proven you can maintain a good payment history.

Build credit by association when you become an authorized user on someone else’s account who has good credit. Some friends and family may not be willing to do this. This will not reflect poorly on his or her score, but it can work to improve your score.

Are you considering bankruptcy? Contact an Arizona bankruptcy attorney to help with any questions that you may have. He or she can help protect your assets and discuss how to get your credit back on track. It is a free consultation.

Image courtesy Steve Miles of freedigitalphotos.net

Am I allowed to keep any credit cards I had prior to filing bankruptcy?

Posted on February 11, 2013 by Staff Writer

Most likely you will not be able to keep any of your credit cards after filing bankruptcy. If a credit card has a balance then it must be listed in the bankruptcy. The credit card company will then be notified that you filed for bankruptcy and close down your account. Now, if the balance on a specific credit card is zero then they do not have to be listed in the bankruptcy and won’t be notified when you’ve filed. However, if they check your credit at a later date and see the bankruptcy then they will most likely close out the card.

As soon as a bankruptcy is filed an Automatic Stay of Protection is created. This Automatic Stay prevents creditors from ever attempting to collect from you again. The penalties for violating the Automatic Stay are very harsh and this is why your credit card company will close out your account—they don’t want to be accused of attempting to collect money from you after filing bankruptcy.

Don’t worry; you will be able to get another credit card after filing for bankruptcy. Most clients report that they are inundated with credit offers soon after filing.

Do you have a great credit score? Can you keep it?

Posted on January 22, 2013 by Staff Writer

How your credit score looks after bankruptcy depends in large part to what your credit score looked like before you filed for bankruptcy.

For most bankruptcy filers they don’t see their credit score drop much. Why? Because their credit score is already so low it has nowhere to go but up! Almost always, a person filing for bankruptcy has repayment problems such as late payments, missed payments, maxed-out credit cards, charged-off accounts, collection accounts, and judgments. Each of these problems has a devastating impact on credit scores.

Many see a slight boost in their credit score from filing bankruptcy. Why? Because they are no longer responsible for the debts discharged in the bankruptcy. High balances are removed as are any late payments or records of unpaid debts. Instead, accounts will read “included in Bankruptcy.” Therefore, you become a better credit risk after having filed bankruptcy because you no longer have unpaid obligations.

Your credit score alone shouldn’t be the deciding factor in whether you file for bankruptcy. Look at all options before making a decision. So, speak with one of our knowledgeable bankruptcy attorneys to see how bankruptcy will affect your credit score.

5 Common Bankruptcy Myths Debunked:

Posted on January 18, 2013 by Staff Writer

Myth #1: The Bankruptcy Court Will Take Everything You Own. The bankruptcy code provides exemptions which protect most of your property in a bankruptcy proceeding. Exemptions are laws which protect a specific piece of property. For example, most states have a “homestead exemption”. Homestead exemptions protect your primary residence from becoming part of the bankruptcy estate. Most states even provide exemptions for household goods, clothing, retirement accounts, wedding rings, guns, and even burial plots. Most people who file for chapter 7 bankruptcy do not own un-exempt property. However, if you own a yacht in the Bahamas we may need to talk…

Myth #2: Your Employer, Neighbors, and Friends Will Know that you Have Filed for Bankruptcy. A bankruptcy proceeding is a public record and so someone who specifically searches for your bankruptcy will probably find it, otherwise, it is unlikely any of your friends or family will know you filed for bankruptcy. Unless you are currently being garnished your employer will not be notified of your Chapter 7 bankruptcy. Also, the court will not notify your neighbors of the bankruptcy. The court does not come and plant a big sign in your yard letting everyone know that you’ve recently filed for bankruptcy, nor does the bankruptcy court post flyers in the local park. Additionally, unless you are some type of a celebrity it is highly improbable that any newspapers or other media outlets will publish anything about your bankruptcy.

Myth #3: New Laws Make it Impossible to File Bankruptcy. While it is true that in late 2005, the U.S. Congress enacted the Bankruptcy Abuse Prevention & Consumer Protection Act (BAPCPA) which made dramatic changes to our bankruptcy laws most people do not have a problem qualifying for bankruptcy. Unfortunately, the effect of these laws is to make the filing a bankruptcy case much more complex, lengthy, and expensive. Additionally, Congress added steps to the bankruptcy process that simply did not exist before. For instance, all filers are required to complete a means-test and pre-approved educational courses.

Myth #4: Bankruptcy Permanently Ruins Your Credit. You can begin rebuilding your credit almost immediately after filing for bankruptcy. People who file bankruptcy are often surprised by how quickly they’ll start getting credit offers in the mail again. Offers for secured credit cards (which require a deposit to the bank) with a low limit can arrive within a few months of filing. Usually after regular, on-time payments people are able to boost their credit scores high enough to get a regular unsecured credit card. Additionally, car dealerships often mail offers to sell people new or used cars. We’ve even seen people qualify for a mortgage within two or three years of a bankruptcy.

After the debts are discharged, it’s also smart to check your credit report for errors and omissions. Also, check and make sure that everything that was discharged in the bankruptcy is properly marked on your credit report. So work hard to improve your credit score and you’ll be surprised by how quickly your credit score returns to its former glory.

Myth #5: People Who File for Bankruptcy are Financially Irresponsible. Actually, most people who file for bankruptcy run into very serious personal problems and aren’t forced into bankruptcy because of reckless behavior. Often these financial problems stem from: job loss, divorce, serious illness, or a failed business. Long periods of unemployment, loss of income through garnishments, the legal fees associated with divorce, the cost of running two households following a divorce, or the high cost of medical care have all driven well-intentioned Arizonians into bankruptcy. Most people who file for bankruptcy are honest hard working people who’ve run into hard times.

Declaring Bankruptcy before or after Marriage?

Posted on January 2, 2013 by Staff Writer

When two people forge a bond and want to get married, there are a lot of things to consider. On one hand, there is the planning that goes into a wedding. Finding a florist, booking a venue, and all the other vendors that must be contacted make a long list. On the other hand, there are issues with where you will live, what your goals are, and other important marriage related concerns. So if you have debts, this is the time to consider filing for bankruptcy.

There are many reasons to file for bankruptcy before marriage. The means test is a very important part of being able to declare for bankruptcy because it measures if you are able to recover from being in a bad financial position by yourself. Having a separate income, being single, you may be more likely to be qualified for a bankruptcy. Once you are married, your income is considered with your spouse, even if your debts are not.

This is because Arizona is a community property state. That means that your new spouse is not accountable for the debts accrued before marriage. Those debts will be in your name regardless of your marital status. It behooves you to consider your future spouse’s credit score and income. If they also have a bad credit score, you might be better off trying to work through your debts so that you can get loans for cars or a house.

Help alleviate the stress associated with these major steps in your life. Don’t put too many things on your plate because going through a bankruptcy is as time-consuming as preparing for a wedding. The best advice is to contact a skilled bankruptcy attorney in Arizona who can help you decide the best step for you before your nuptials.