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Bankruptcy and your credit score

People often put off filing bankruptcy because of the fear of what it will do to their credit score. However, your bankruptcy and credit score are tied together in ways most of us don’t consider. We have been taught that a high credit score is a requirement for a happy life. In fact, it is not. You can be perfectly happy and make healthy financial decisions with a low or recovering credit score. But you can’t do it if you’re overwhelmed with debt. A bankruptcy fixes that. And, your credit score WILL recover– faster than you think.

When Will My Credit Score Recover?

Your bankruptcy and credit score go hand in hand. Bankruptcy will remain on your credit report for a number of years. However, most clients report that one year after filing bankruptcy their credit score is better than it was before filing. The reason is that when you file bankruptcy, your debt to income ratio improves. Your income hasn’t gone up, but your debt has gone way down. In the eyes of creditors, you’re actually a GREAT candidate for credit– you have no other debt, and they know you can’t file bankruptcy again. All this means you are likely to make your monthly payments on credit card debt.

Having a bankruptcy on your credit report will take you out of the home purchase market for a few years, it’s true. However, most clients start getting credit card offers a month after they file bankruptcy. My hope is my clients have a new clarity around managing their money and make smart decisions about credit after filing bankruptcy. Here are a few thoughts to consider.

I Need To Own A Home, Right?

There are millions of Americans who don’t own their home. This has always been true. It doesn’t mean you’re not spending your money wisely. If you are renting you are missing out on interest deductions on taxes and on appreciation on the value of the home over time. One look at today’s market will tell you that experts are unsure as to whether prices will continue to drop. In fact, if you bought a home three years ago, you’ve most likely lost money on it.

There Are Other Ways To Invest

If you’re concerned about missing out on the appreciation that comes with home ownership, don’t be. Keep in mind you can set aside the same amount of money each month into an IRA or other investment vehicle—stocks, bonds, etc. Even when recovering from bankruptcy, you can be responsibly planning for the financial future. Filing bankruptcy and your credit score won’t keep you from doing this.

Consider Your Needs Today

A choice to file bankruptcy is both a long-term plan for financial stability and a short-term plan. While there are costs associated with credit extensions, the bigger picture is that you will reap the immediate reward of financial freedom. You will once again have disposable income. That is the foundation for building wealth. If you manage that disposable income wisely—by investing it and saving it rather than spending it on monthly credit card bills—you will start to accumulate wealth. And you do it under peaceful financial conditions. Less stress and more clarity.

Make a Call

Make a quick phone call today to talk to me about bankruptcy. I am genuinely excited to help people see the path before them and quickly achieve financial freedom from financial stress. You deserve the quality of life that comes with it.

Email me at chris@thelaytonlawfirm.com or call 704.749.7747 today for a free consultation about bankruptcy and an honest discussion about your best options. Or, click for a FREE CASE EVALUATION.

How Soon Can I File Chapter 7 Again?

If you have already filed Chapter 7 some time ago and you’re wondering “How soon can I file Chapter 7 again?” this article will help answer the question. The following scenarios help determine how soon you can file Chapter 7 again. Look below to find the situation that matches yours.

After Discharge In Chapter 7

If you received a discharge in Chapter 7, you can’t file Chapter 7 again until eight years from the date you FILED the previous Chapter 7. This will enable you to also receive a discharge in the new Chapter 7, which is one of the primary goals of filing bankruptcy.

After A Chapter 7 Without Discharge

If your Chapter 7 case was closed without a discharge, you may be able to file again immediately. In situations where a case is dismissed due to a paperwork error, this is the case. If the case was dismissed for a failure to disclose pertinent information to the court, or for some other more serious reason, you can’t file Chapter 7 again until 180 days after the initial dismissal.

After A Dismissal In Chapter 13

If your Chapter 13 case was dismissed, you should be able to file a Chapter 7 immediately. You should also be able to receive a discharge in that new Chapter 7. A Chapter 7 is distinctly different from a Chapter 13, in that a Chapter 7 is a complete discharge of debt which does NOT require paying your creditors, unless you have too many assets or income. Your attorney will know prior to filing, whether you meet the income and assets requirements for Chapter 7.

After A Discharge In Chapter 13

If you received a discharge in Chapter 13, in order to file a Chapter 7 you must wait six years from the date the Chapter 13 was filed, before you can file for and receive a discharge in the new Chapter 7. There is actually an exception to this rule. If you paid off 70% or more of your unsecured debts in the Chapter 13, you should be able to file a Chapter 7 without waiting for the six years to run.

Further Reading

If you’d like to read more articles about Chapter 7, Chapter 13, Debt Settlement, you can check out our Bankruptcy Blog.

Speak With A Charlotte Bankruptcy

If you’d like to have a free phone consultation, just call us at 704.749.7747. Phone consultations are part of the job and we’re happy to provide answers to your questions. Or, you can click to schedule a FREE CASE EVALUATION and we will reach out to you. We know you have options. We hope you choose to Recover With Us.

How Fast Can I File Chapter 7 Bankruptcy

Who Notifies Creditors About My Bankruptcy Filing?

The Bankruptcy Court notifies your creditors about your bankruptcy filing. The most common way that creditors find out about the bankruptcy filing is from a letter directly from the Clerk of the United States Bankruptcy Court.  All creditors listed in your bankruptcy schedules will receive notice of the filing. The form of the letter is known as a B-9A and it contains all kinds of detailed information about the filing.  It lists the debtor, the debtor’s address, and the last four digits of the Social Security number.  It names the attorney for the debtor as well as the address and the phone number.  Of course it has the case number.  It has the jurisdiction in which the case was filed and most importantly, it has the trustee as well as the date, time and location of the Meeting of Creditors.  There is also some information on the B-9A regarding what actions certain creditors can take or not take now that a case has been filed. Sometimes, the debtor may not want to wait for letters from the court to reach creditors. According to long time Chicago bankruptcy lawyer David Siegel:

In some situations, you don’t want to wait for the clerk to notify your creditors but you want to have your attorney send an Automatic Stay to the creditor in advance of receiving notice from the clerk.  This would be common if there is a garnishment or other type of court proceeding and you want the creditor to get notice immediately about your bankruptcy filing.  The Automatic Stay is a one-page document that gets sent to creditors either by fax or email notifying them that a case has been filed on your behalf and that certain actions cannot be taken.  Those actions include any type of effort to collect on a debt including sending statements, making phone calls or trying to attach bank accounts or wages.

Only Listed Creditors Will Receive Notice, So be Thorough

It is important to emphasize that only creditors listed on your schedules will receive notice of your bankruptcy filing. If you leave a creditor off your filing, they will not be bound by the discharge.

Having said that, if they do receive notice, they should immediately stop harassing you. If you are having problems with a particular creditor, notify your attorney.  He or she has the ability to send additional notices and motion to take that creditor before the bankruptcy court for sanctions.  Creditors are prohibited from attempting to collect on debts once they receive notice that a bankruptcy case has been filed.

The Bottom Line

As long as you follow the rule of full disclosure, and list all debts and assets, your attorney as well as the clerk will help make sure that each creditor is notified about your bankruptcy filing.

Further Reading

Can I Keep Credit Cards In Bankruptcy?

How Long Does Bankruptcy Take?

Speak With A Bankruptcy Attorney Today

Call us at 704.749.7747 to get your questions answered and take next steps toward filing bankruptcy in Charlotte, North Carolina. Or, click for a FREE BANKRUPTCY CONSULTATION and we will reach out to you shortly. The call is free and we’re here to help. We know you have options. We hope you choose to Recover With Us.