Life After Bankruptcy: What You Can Expect

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If you have spent many sleepless nights worrying about what the financial future holds for you and your family, then the idea that there is a light at the end of the tunnel may seem more like fiction than fact. Right now, you may not even be able to see a speck of illumination in the tunnel, let alone a full-blown exit.

However, be assured that that there is indeed life after bankruptcy — and it likely going to be far more positive and liberating than you imagine. Yes, we know this may sound difficult (or perhaps impossible) to believe. But we have over 30 years of experience in filing consumer bankruptcy cases, during which we have had the privilege of supporting thousands of clients every step of the way through the bankruptcy process. For so many of these good and honest people, the only regret they had is that they did not file for bankruptcy sooner.

To give you a sense of what is in store for you, here are some of the things you can expect in your life after bankruptcy:

  • Your credit score will start to recover — and rather quickly. This is because filing for bankruptcy will likely wipe out debts that have been lowering your credit score for several months.
  • You will not be forced to buy everything in cash. Immediately after filing, you can apply for a secured credit card. In a few months, you can obtain a conventional credit card. As long as you don’t exceed 25% of the available credit limit at any given time, and that you pay your full balance each month, then your credit score will continue rising and you will qualify for a car loan, mortgage (learn more here), and so on.
  • Your court-appointed bankruptcy trustee will file two tax returns for you during the year of your filing. After that, you will be back in control of filing your own taxes, and do not need to share your private tax information with anyone except good old Uncle Sam.
  • You will be free to sell, give, or dispose of any assets that are in your possession. You do not have to get the approval of the court or creditors.
  • You will not be barred from renting a home or getting a job. These are myths that debt collectors want you to believe, because they don’t want you to file for bankruptcy. Once you do that, they must cease all communication with you (i.e. no more threatening letters and phone calls), and they must also wait in line with all other creditors — which is something they definitely do not want to do, because it almost certainly means they will get less money and have to wait longer vs. squeezing or shaking it out of you directly. To learn more about renting a home after bankruptcy, click here. To learn more about getting a job after bankruptcy, click here.
  • You will probably not need to rehabilitate your public reputation. Unless you are a celebrity or have a very high-profile job (e.g. politician, athlete, etc.), very few people are going to know or care about your bankruptcy filing.

The Bottom Line

Not only is there life after bankruptcy, but for over a million people a year across the U.S., it is a much better and far less stressful life, too. Remember: bankruptcy is a PROTECTION, not a PUNISHMENT. If you begin looking at it this way, then you will start to see the light at the end of the tunnel.

Learn More

To learn more, contact the Law Office of Charles H. Huber today. As noted above, we have been helping individuals file consumer bankruptcy cases for more than 30 years. We will help you make it through the process, and into your stronger, better and happier life ahead!

How Do You Know When it is Time to File for Bankruptcy?

Written by chuberadmin on . Posted in Blog

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Certain things in life come with clear instructions for when it is time to take intelligent action. For example, when we have driven a certain number of miles or for a specific length time, we head to a mechanic to get our oil changed. Or when we’re cooking something at home and the recipe tells us to “broil for 10 minutes,” we follow that advice to avoid starting all over again (or maybe just giving up and ordering a pizza!).

However, there are other scenarios in life when there is no definitive, objective standard that tells us when we should continue on our current path, or if we need to make a course correction. And unfortunately for many people, deciding on whether they should file for bankruptcy is one such scenario.

Why “unfortunately”? Because many people who ultimately end up filing for bankruptcy wish that they had done it much sooner. Indeed, the emotional dread and financial damage they anticipated never came to pass, and instead they realized something unexpected and quite astonishing: contrary to what most people think — and what all debt collectors want you to believe — bankruptcy is not a form of punishment. Fundamentally, it is a legal protection designed to give individuals, families and businesses the opportunity to get out from under an unsustainable and increasingly worsening debt situation.

Signs to Watch For

Since you’re reading this, then there is a good chance that you or someone that care about — such as a family member or friend — is contemplating bankruptcy, but is not sure whether it’s wise to file now or perhaps later. As noted above, there is no definitive, clear-cut answer to this inquiry (i.e. there is no odometer reading or recipe to consult). However, there are some well-established signs that strongly suggest that filing now is in your best interest. These signs include:

  • Your income has dropped significantly and/or your expenses have risen significantly, you cannot pay your bills, and there is no reasonable expectation that your cash flow situation will be corrected in the near future. For example, you may have recently lost your job, or you may be facing high medical bills that insurance will not cover.

  • You are at risk of losing your personal assets. For example, you may have pledged a personal guarantee on a loan for yourself or someone else, or your business may have debts that you are personally liable for.
  • You are being pursued by creditors, and may be terrified of opening your postal mail or checking your voicemail. If you are employed, it is likely just a matter of time before creditors seek to garnish your wages.
  • You are using cash advances to pay off debt. Even you are technically caught-up on your car loan or mortgage, understand that this is not sustainable and you are not managing your debt — you are racing down a runway, and will soon run off the tarmac.

Get Advice to Understand Your Options

If you are experiencing one, some, or perhaps all of the above-noted signs, then the smartest and safest thing you can do is contact our office for a confidential consultation. You will have all of your specific questions answered, and will learn about your options and what the chapter 7 bankruptcy filing process is like (for an overview, read our article here).

We have been filing consumer bankruptcy cases for more than 30 years. Our experience is your advantage.

Who Pays for a Bankruptcy?

Written by chuberadmin on . Posted in Blog

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There are various mandatory administrative and education fees involved in filing for bankruptcy, along with attorney’s fees if you wisely decide not to represent yourself (for key questions to ask before hiring a bankruptcy lawyer, read our article here).

Ultimately, the costs of filing for bankruptcy are borne by the filer (individual or business). However, the process is handled differently depending on whether the filing is made under chapter 7 or chapter 13. We look at each of these below.

Paying for a Chapter 7 Bankruptcy

Typically, individuals must pay 100% of all fees prior to filing under chapter 7. This includes:

  • Court filing fees (currently $335)
  • Administrative fees (currently $75)
  • Trustee surcharge (currently $15-$25)
  • Tuition for the mandatory credit counseling course (currently $14.95 per household for the online version; the in-person version can cost $25-$50).

Attorneys’ fees vary based on the specific details of each case, and can range from $1000-$4000 (and more in some cases). No two bankruptcy filings are exactly alike, and errors in the filing process can be VERY costly. The court has no patience for self-represented (a.k.a. pro se) filers who do not understand how bankruptcy works, and will almost always side with creditors who are complying with the law and properly following the process and timelines.

Paying for a Chapter 13 Bankruptcy

Chapter 13 bankruptcy involves restructuring debt and paying back creditors over a period of 3-5 years. Mandatory filing costs include:

  • Court filing fees (currently $310)
  • Administrative fees (currently $75)

Now, at first glance it may seem like a chapter 13 filing is cheaper than a chapter 7 filing, because the lists of mandatory fees is smaller, and the court filing fee in particular is lower. However, the opposite is true: a chapter 13 filing costs more than a chapter 7 filing, because it is a far more complex process that involves extensive consultation, communication and correspondence.

While there is nothing that legally forbids chapter 13 filers from representing themselves, it is NOT a good way to try and save some money — because, as noted above, the process is complex, and there are multiple phases and stages. It is also likely that the repayment plan will need to change over the 3-5 year timeline, and it is critical that this process is handled properly, or else the requested adjustments will not be accepted by the court. Generally, attorneys fees can range from about $2500-$5000 or more, depending on the specifics of each case.

Finding the Money to Pay

If you plan on filing for chapter 7 or chapter 13 bankruptcy, then it’s widely expected that you’ll stop paying unsecured creditors (and in fact, unsecured creditors assume you’ll do this as well). The money that you otherwise would have spent on these unsecured debts can be saved and allocated to pay your filing and legal costs. What’s more, if you plan on filing for chapter 13 bankruptcy, then upon approval by the court some of your costs can be integrated into your 3-5 year repayment plan.

With this being said, you should continue paying for your required living expenses such as mortgage or rent, utilities, car payment and so on, until you have consulted an attorney, confirmed that you qualify for bankruptcy (there are different rules for chapter 7 vs. chapter 13), and decided that you are indeed going to file for bankruptcy.

Learn More

If you are thinking of filing for bankruptcy and want to clearly understand the costs involved and how you can mitigate and manage the financial impact, then contact the Law Office of Charles H. Huber today. We have more than 30 years of experience filing personal and business bankruptcy cases.

What Steps are Involved in Filing for Chapter 7 Bankruptcy?

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Bankruptcy is not a punishment. It is a protection. But contrary to popular belief, this protection is not for creditors. It is for debtors.

This is because the courts — which essentially represent the will of society — recognize that it is not in society’s best interest for condemn people in debt to a lifetime of financial agony; even if the wounds are self-inflicted vs. caused by unforeseen external events (e.g. excessive medical bills, etc.).

As such, bankruptcy gives debtors the time, legal protection, and financial relief they need to get out — and ideally stay out — of debt, so they can (again, ideally) make a positive contribution to society down the road.

Of course, this doesn’t mean that creditors are left high and dry. They will typically get partial payment based on where they are in the pecking order. And some debts such as alimony, child support, student loans, and court-ordered restitution per a previous criminal conviction cannot be discharged as part of a bankruptcy filing (with this in mind, the court may consider a structured repayment plan if debtors can prove that they cannot meet their full obligations on these debts, and programs exist to provide some relief for student loans).

Steps in Filing for Bankruptcy

Now that you are aware that filing for bankruptcy is essentially a legal protection for debtors and not a collection method for creditors (in fact, as we’ve written about creditors typically don’t want debtors to file for bankruptcy!), we can look at the other unknown aspect that fills many people with anxiety and distress: what the filing process looks like.

Basically, here are the steps that you’ll take on your journey of filing for chapter 7 bankruptcy:

  1. Within six months of filing for bankruptcy, you must complete a mandatory credit counseling course. The course is delivered through in-person training, as well as via the web.
  2. You must submit a complete application to the court that includes financial statements, income tax assessments, and proof that you pass your state’s respective chapter 7 means test. If you wisely hire a bankruptcy attorney to represent and guide you, then he or she will handle this on your behalf and ensure that your application is complete. Note that if your application is incomplete, then it will be delayed or may be denied, and you will not be granted an automatic stay from your creditors. They will continue to contact you, charge interest on debts, and proceed with collection activity such as wage garnishment and civil lawsuits.
  3. If your application is complete and accepted, the court will assign a trustee to govern the remainder of the bankruptcy process. Keep in mind that the trustee does not work for you or for creditors. He or she is an officer of the court.

  4. Your creditors will be invited to a meeting that you must attend (if you have an attorney, then he or she will accompany you). During this meeting, the trustee and creditors will have the opportunity to ask you questions about your finances and future earning potential.

  5. After the meeting of creditors (also called a “341 Meeting’), your eligibility to file for chapter 7 will either be confirmed or denied, largely on the basis of whether you passed the chapter 7 means test. If you are not eligible, then you will typically be able to file for chapter 13 bankruptcy in which you propose a structure repayment plan that is typically executed for 3-5 years.

  6. The trustee will then take an inventory of your non-exempt assets (i.e. items that can be sold or liquidated to pay off your debts). You might also be able to negotiate with the trustee to retain certain non-exempt assets. Essentially, if the trustee can get as much or more from you vs. another party, there is a good chance you will be able to keep the asset(s).

  7. Next, the trustee goes through your secured assets and determines what assets will be returned to creditors. You may be able to retain some of these assets by paying for them, or reaffirming debt. However, keep in mind that if you wish to reaffirm any debts, then you must attend a reaffirmation hearing in front of a judge. If you have an attorney, then he or she can represent you at the hearing and you do not have to attend.

  8. You must complete a financial management course. Similar to the credit counseling course that must be taken within the six months immediately prior to filing for bankruptcy, the financial management course is available in-person and online. Once you have completed the course, you must submit a form to the court verifying your achievement.

  9. Within 3-6 months after filing, you will receive a discharge notice in the mail (your attorney will also receive a copy). At this point, the automatic stay is lifted — which is fine, because even if you have creditors at this point, they will not be threatening you with collection activity.

  10. Typically within a few days (or sometimes a few weeks) after getting your discharge notice in the mail, you will receive a letter informing you that your case has been closed. You will no longer be liable to most (or ideally all) of your creditors, and can start your new life ahead with a clean financial slate.

Learn More

To learn more about the process of filing for chapter 7 bankruptcy, contact the Law Office of Charles Huber today. We have over 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!

FAQ: Getting a Mortgage after Filing for Bankruptcy

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Understandably, the biggest concern that many people have about filing for bankruptcy is how it may hinder their ability to get a mortgage in the future.

To provide clarity and reduce anxieties that are based on myths and misinformation — and unfortunately there is a great deal of both floating around the web — below we answer some frequently asked questions about getting a mortgage after bankruptcy:

Question: “Do I need to wait until a bankruptcy filing is removed from my credit score before I get a mortgage?”

Answer: No, you do not. If your bankruptcy was caused by reason(s) beyond your control, then you should be able to apply for a mortgage two years after discharge. If your bankruptcy was the result of financial mismanagement on your part, then you will be able to apply for a mortgage four years after discharge.

Question: “Does a bankruptcy filing make me ineligible for federal housing loan programs?”

Answer: No, your eligibility is not affected. However, you will have to abide the required waiting period. For example, if you wish to apply for a Federal Housing Authority (FHA) loan, then you will need to wait two years after discharge. Or if you wish to apply for a United States Department of Agriculture (USDA) loan, the waiting period is three years (for chapter 7 filings) and one year (for chapter 13 filings).

Question: “Are there any exceptions to the two-year post-discharge waiting period before applying for an FHA loan?”

Answer: Yes, there is. You may be able to apply for an FHA loan less than two years after discharge if you meet two conditions: 1) your bankruptcy was not the result of financial mismanagement on your part (e.g. you were forced to cover excessive medical bills or major home repairs after a natural disaster); 2) since filing for bankruptcy, you have behaved in a financially responsible and prudent manner.

Question: “Will conventional lenders make me pay more for a mortgage based on my bankruptcy filing?”

Answer: This depends. Conventional lenders (a.k.a. private lenders) rely on a variety of factors to determine lending rates, including — but not exclusively — credit scores and bankruptcy filings. With this being said, all lenders (banks and private organizations) are governed by Federal and State guidelines that forbid predatory lending practices, discrimination, and other transgressions.

Generally speaking, if you pay less than a 20% down payment on your home, then you’ll be required to pay mortgage insurance (contrary to what some people believe, the government does not insure private conventional mortgages). However, once you have 20% equity in your home, the insurance payment should drop or be eliminated.

Learn More

To learn more about getting a mortgage after bankruptcy, contact the Law Office of Charles Huber today. We have over 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!