Buying a Car After Bankruptcy
Bankruptcy can give you the hope of a new start, but depending on whether you’re filing a Chapter 7 or a Chapter 13, it may losing your car. Most people are able to keep their automobiles by taking advantage of the many available exemptions, but it’s also important to know what to expect if you do need to replace your car after bankruptcy. It may take some planning and be more expensive than you were hoping, but car ownership is possible, even right after you file bankruptcy. A Few Options While most of us consider having a car a basic necessity, I strongly advise my clients to avoid a car loan, if at all possible. Create your budget with a plan to save up and buy a used car with cash, if you can. Perhaps you can use public transportation, borrow a car, or coordinate rides with coworkers or fellow students in the meantime. When you’re ready to purchase a car, shop around to ensure you’re getting a great car at a great price. You can then enjoy having a car without any debt hanging over your head. Saving for a car may be easier said than done; in fact, about 2/3 of people who purchase cars must take out a loan to do so. With a bankruptcy on your credit report, you may need to provide a large down payment and should be prepared to pay a high interest rate. If your credit score is below 600, you might need to work with a “subprime lender” who has experience working with people with credit challenges. These lenders fund about 22% of auto loans, and about 10% of their customers end up defaulting on their loans. Because of the risk involved, subprime borrowers could pay up to double the interest rate that someone with excellent credit would. Before setting the terms of your loan, the lender will look at your overall credit report to determine if your low score is due to habitual or situational bad credit. If your report shows late or missed payments, accounts in collections, or loan defaults over a long period of time, your credit would be habitual. If you have habitual bad credit, your lender may require a cosigner, or you may need to use a “buy here, pay here” lender (using the dealership’s financing, rather than a bank.) If you use the “buy here, pay here” option, be prepared to pay a very high interest rate. If your lender can look back at your credit history and see that everything was fine up to a certain point, your bad credit may be situational. Many people never struggle financially until something like a medical emergency, job lay off, or divorce happens. In these cases, you may be able to secure a reasonable interest rate and provide a smaller down payment. Do Your Research Before taking on any new financial commitment, it’s important to take a close look at your budget to ensure you truly can afford the payments. Allow room in your budget for savings and emergencies, and shop for a new vehicle wisely. Focus on reliable transportation, and consider a used auto rather than a brand new, top of the line vehicle. Explore different financing opportunities to ensure you’re working with a reputable lender with good terms and conditions. No one wants to get into excessive debt after a bankruptcy, and planning may help you avoid this....
read moreListing Possible Legal Claims on Your Bankruptcy Paperwork
I’ll ensure that all of the information you provide is listed accurately on your paperwork, but this requires clear communication on both our parts. All of your property and assets will need to be listed, including your real property, such as your car, home, or household items, as well as “future interest” property, which includes property or assets you may receive at some point, such as something held in an irrevocable trust. Future possible legal claims will need to be listed as well, even if you aren’t sure that you’ll be taking legal action or if the judgement will be in your favor. Potential Claims Any possible future claims should be listed in Schedule B. This form includes information about your property, including contingent and unliquidated claims. I’ll help you decide what to list, but potential legal claims could be an injury or auto damage resulting from a car accident, claims against an employer for any reason, or claims for breach of contract. There are several consequences to leaving out this information. It could leave you legally unable to file the claim at a later date, or it could even damage the outcome of your bankruptcy filing. Detailed Information As the court trustee reviews all aspects of your case, claims will be evaluated to see if the settlements could be used to repay creditors. If they discover that you did not include a potential source of funding, and believe this was done intentionally, they could see it as bankruptcy fraud. Fraud could result in your case being discontinued or even legal fines or time in jail. Additionally, the trustee could judge not to allow you to use exemptions to protect your proceeds from the claim; instead, the money would go directly to your creditors to repay your debt. Even if there are no effects on your bankruptcy proceedings, omitting potential claims could make it impossible for you to file these claims in the future. The defendant could claim “judicial estoppel,” which disallows your claim. This is because by not including the claim in your bankruptcy, you’re essentially saying that you have no legal right to the claim. Pursuing the claim at a later date would be inconsistent with your bankruptcy case. Omitting the potential claim could also give you an unfair advantage in how your bankruptcy case is resolved, which the court would disallow. Valuing Your Claims When you list these possible legal claims, you’ll need to include a value of the claim, which can be difficult, since the judgement has not been issued yet. I can help you estimate values, which is fairly simple for things such as damage to your auto or actual medical bills. For more subjective claims, such as employer disputes, we can list estimated values based on past similar cases. We’ll make every effort to list accurate amounts, and it’s especially important not to underestimate your claim. The amount that you list could limit your award in a future claim, and if the court believes you purposefully undervalued the amount, you could be stopped, or barred, from future claims. This could also affect the percentage of the awarded claim that could be exempted. Experienced Assistance Every decision in your bankruptcy case can have long-lasting consequences, and this is especially important when it comes to legal proceedings. When you choose to work with an experienced bankruptcy attorney, you can rest assured that your case will be handled accurately and legally. When we meet, I’ll ask questions to obtain all the information I’ll need to resolve your case quickly and beneficially....
read morePost-Bankruptcy Discrimination
There can be a lot of fear surrounding bankruptcy, especially thinking about how it may affect your future finances and livelihood. Some people worry they may be discriminated against, and this is understandable. Before filing bankruptcy, it’s best to do everything you can do avoid doing so, such as trimming your budget, selling property, etc. You’ll also want to weigh the pros and cons of filing. While there are negative consequences to filing, for many people, bankruptcy is the new start they need to get their finances in order. Dealing with Government Agencies It’s true that your bankruptcy will affect you, but there are laws in place to protect you from direct discrimination, especially by government agencies. A government agency cannot deny to issue or refuse to renew your licenses or permits based on your bankruptcy, nor can they suspend or revoke any of your current licenses or permits. If you have a government job and need to file bankruptcy, this will not result in losing your job, and a bankruptcy alone cannot be used as a reason not to hire you. A bankruptcy will not affect your public benefits, and you cannot be evicted from public housing. Your transcripts cannot be withheld by a state university based on bankruptcy. Some government fees can be discharged through bankruptcy. If any of these unpaid fees had negative consequences, such as a suspended driver’s license, they would be considered paid after bankruptcy. The state would be required to reissue your license. If you filed bankruptcy but a government fee was not discharged, the government does not need to reissue your license until your debt is paid. If you’re pursuing a government loan or credit, the agency is allowed to take your bankruptcy and other financial issues into consideration. If your credit history and income do not justify the loan, it is perfectly acceptable for them to deny you. The exception would be federal student loans; these are considered an entitlement for all eligible students. Private Sector Considerations Rules against post-bankruptcy discrimination are not as strict for individuals and private companies. If you’re currently employed, your employer may not fire you just because you filed bankruptcy. However, a new employer may choose not to hire you based on your bankruptcy. The best way to get around this is to show the employer what a valuable asset you’ll be during your interview. Many employers are willing to overlook a negative financial history if they know they’re getting a quality employee. If you’re currently renting a home and are in a lease, your landlord cannot evict you just because you filed bankruptcy. However, you might face some difficulties if you need to move to a new place. When you apply for a new home or apartment, your potential landlord will run a credit check and see your bankruptcy. He or she may choose not to rent to you based on this, which is completely within their legal rights. Some landlords may be willing to rent to you if you can prove to them that you now have adequate income to cover your rent on time each month. Others will rent to you only if you can provide a larger deposit or pay several months of rent in advance. Make the Best Choice Being in debt can be extremely stressful and being fearful about the future only makes things worse. Let me walk you through the bankruptcy process so that you can make the best choice for you. You may discover that the benefits of being debt free far outweigh any negative consequences you may encounter....
read morePost-Bankruptcy Credit Card Scams
Two of the biggest fears that some people have after filing bankruptcy are worrying if they’ll be able to get credit again, while at the same time being fearful of getting into debt again. This is understandable, but using a credit card is one of the best ways to rebuild your credit. You may need to start with a secured card, and you’ll need to be aware of your interest rate and any fees. But think of this card as a tool for improving your credit score, rather than a way to make purchases you can’t afford. Use the card to make a small purchase each month, or set it up to pay a small recurring monthly bill. Then make sure the card is paid off completely, on time, each month, and soon your credit score will improve. Before applying for a card, it’s very important to do some research about the company and terms of the account. Unfortunately, there are companies out there that will seek to take advantage of consumers who so badly want to get their finances on track. This leads to some scams to look out for. Current Scams Your new interest rate will most likely be much higher than any cards you had prior to bankruptcy, but watch out for low introductory “teaser rates” that skyrocket after a short period of time. If you don’t carry a balance, this isn’t really a problem, but you’ll still want to be familiar with the terms of your account, just in case you aren’t able to pay your card off completely at any point. It can be embarrassing to have your card declined during a purchase, so some companies allow you to charge beyond your credit limit. While this may sound great, it’s a recipe for getting into debt over your head. These companies will also charge an “overlimit fee” when you take advantage of this option. You’ll not only be responsible for the purchase amount and interest, but a large transaction fee as well. If you’re given this option, it’s best not to “opt-in” and to simply spend within your credit limit. Many consumers are surprised at how quickly they start receiving credit card offers in the mail after bankruptcy. Unfortunately, not all of these offers should be taken advantage of. If an application asks you to call a 900 or 967 to apply, shred and toss the application. These are toll numbers, which could result in a hefty phone bill after you sit on hold and chat with the company representative. The majority of companies now offer online or mail applications. You may also receive “credit card” offers from catalog companies. These are more like credit lines, so you’ll only be able to use them with their company to purchase overpriced merchandise. These cards also have very high interest rates. Planning for the Future Don’t let the fear of credit card debt keep you from rebuilding your credit and improving your financial future. Make a reasonable budget that includes putting money into an emergency savings account, and stick to your plan. By using your credit card wisely, you’ll avoid more debt and see your credit score improve....
read moreShould my Company File Chapter 7 or 11?
The majority of bankruptcy cases filed each year are consumer cases, either individuals or married couples, but many businesses of various sizes and types also seek debt relief through bankruptcy. The two most common options for businesses are a Chapter 7 or Chapter 11. When a business files bankruptcy, it not only affects the company, but also the surrounding community and economy, and business owners must decide how to take those factors into consideration. With a Chapter 7, all of the company’s assets are sold to repay creditors, which means the business is no longer in operation. A Chapter 11 provides the company with more flexibility to keep operating while they work with their creditors. Big Decisions Whether a company files a Chapter 7 or 11 depends on many factors, and the court trustee also has a say in this. They’ll explore how each Chapter would affect employees, the economy and community, and surrounding businesses of varying types. Closing a business through a Chapter 7 means people are left without jobs. The economy will determine how easy or difficult it will be to find new employment. Alternatively, a new buyer could decide to take over the business or re-open a similar business and may employ the same people. If the community is just not suited to that type of business, a new company may come in to revitalize the neighborhood, bringing in new customers and stimulating the economy. One of the risks with a Chapter 7 is that the building may sit unoccupied for a period of time. If this continues long enough and the building is not maintained somehow, the site could become an eyesore for the community. Nearby businesses or home values could even be damaged. Some companies that file a Chapter 11 are able to make the necessary changes and continue running, eventually turning a profit. However, the majority of businesses that file a Chapter 11 don’t recover and end up closing at some point. This choice could buy the owner some time, though. They’ll have the opportunity to advertise and make connections with potential new owners, if that is what they want to do. If a landlord owns the space, it also gives them time to find a new business to step into the location. Having more flexibility and time could lead to steadier employment for people in the community, as well as keeping the neighborhood vibrant. In most situations, a Chapter 11 benefits the most people, but a business owner may determine that a Chapter 7 is simply their best and only choice. He or she may be ready to move on to a new career or business. A New Start I’m here to help you make important financial decisions related to debt, whether you’re a business owner or a consumer who’s fallen on hard times and needs a new start. My first goal is always to help you explore alternatives to bankruptcy in order to avoid damaging your credit. Your creditors may be willing to work with you on payment plans, or you may be able to change your business model or priorities. If it still looks like bankruptcy is the best choice for you, I’m ready to walk you through the process and get your debt taken care of. ...
read moreSummary of Your Assets and Liabilities and Certain Statistical Information
Filing bankruptcy takes organization and attention to detail, and this is especially important when it comes to the paperwork you’ll submit to the court. I’ll ensure that each required form for your situation is included in a comprehensive package, and I’ll complete some of the forms for you ahead of time, which means all you’ll need to do is sign. Your bankruptcy packet will include all of the information the court needs to know about your debts, living expenses, income, assets, and property in order to correctly evaluate and resolve your case. To summarize your overall situation, we’ll complete the “Summary of Your Assets and Liabilities and Certain Statistical Information.” Getting it on Paper When we meet, we’ll discuss your finances and why you’re filing bankruptcy. When we’re ready to move forward, we’ll complete a series of forms, including Schedule A/B: Property, Schedule D: Creditors Who Have Claims Secured by Property, Schedule E/F: Creditors Who Have Unsecured Claims, Schedule I: Your Income, and Schedule J: Your Expenses. Depending on which chapter you’re filing, you’ll also need to fill out the Chapter 7 Statement of Your Current Monthly Income or Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period. We’ll then use these forms to calculate totals for your summary form. Schedule A/B lists your assets, including personal property and real property; this total will go on your summary. We’ll use Schedule D to list all of your liabilities, such as secured, unsecured, and unsecured nonpriority claims. Schedules I and J are where we’ll detail all of your monthly income and expenses. The summary form will include totals for all of the amounts from other forms, as well as some administrative and statistical information. You’ll be able to tell the court if you have primarily consumer debt (medical bills, credit cards, loans, etc.) or if some of your debt is business related. There is also some statistical information that we’ll transfer from Schedule E/F. To support what you’ve said in these forms, the court requires supporting documents. You’ll need to give the court a comprehensive picture of your circumstances for the six months leading to bankruptcy, including any asset/property documents and the previous year’s tax return. This will all be discussed at your 341 meeting with the court trustee, and you and I will prepare for this ahead of time to ensure that no documents are missing. Debt Relief The preparation process for bankruptcy doesn’t need to be overwhelming. When you work with an experienced, professional bankruptcy attorney, you won’t even need to worry about locating forms, and you can rest assured that you’ll have all of the required documentation for the court. After we file your paperwork and attend the 341 Meeting, your next step will be to complete the post-filing credit counseling. Not long after that, you’ll either have your unsecured debts discharged or will be ready to start your Chapter 13 repayment plan. Either way, you can be confident that you took the required action to take charge of your finances. ...
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