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Credit Cards and Bankruptcy: What you need to Know

Bankruptcy

For most individuals, credit cards and bankruptcy go hand in hand. As a result, there are many questions regarding the process of dealing with credit cards in bankruptcy. Here is what you need to know:

• Credit card debt can be eliminated in Chapter 7 bankruptcy, along with any other unsecured debts.
• It is important to list all debts when entering into bankruptcy, including your credit cards.
• There are times when you can keep a credit card in bankruptcy, but it requires you to sign a reaffirmation agreement that essentially re-obligates you to the debt incurred on the credit card. Otherwise, it is unlikely you will be able to continue using your credit cards once you enter into bankruptcy.
• Paying off one credit card and not another before filing bankruptcy is prohibited through bankruptcy law because it shows preferential treatment of one creditor over another. In other words, you are generally not allowed to pay off one creditor before bankruptcy so you can continue to use that credit card following bankruptcy.
• Even if you don’t have a balance on a credit card proceeding bankruptcy, and therefore do not need to include it in the bankruptcy, the credit card company will find out about your bankruptcy and likely revoke the credit card.
• Charging a lot on your credit cards before filing bankruptcy is considered fraud and will likely result in a rejection through the bankruptcy court. In fact, a creditor, if they suspect fraud, has the right to object the bankruptcy discharge and even file an objection to discharge any of your debts. In other words, don’t start spending before filing for bankruptcy.
• An authorized user on your credit card account will likely not be held accountable for your credit card debt, but a co-signer will be responsible. Unlike a co-signer, who enters into a financial obligation with the credit card company, an authorized user is simply another individual who is given the right, by the cardholder, to make purchases on the card.
• A bankruptcy will affect your ability to obtain credit; but it will also provide you with an opportunity to start fresh and build a strong credit score in the future.

Seniors and Credit Card Debt: The Link to Bankruptcy Filings

Bankruptcy

We all know about the financial challenges facing many million Americans. However, what we may not be aware of is the fact that elderly individuals are also suffering from the effects of the credit and housing crisis.

In fact, seniors, unlike most of the younger generations, are living on fixed incomes and may rely on personal savings, Social Security payments and pensions to make ends meet. However, many seniors, in an attempt to meet their daily expenses when other sources just don’t cut it, are turning to credit cards.

The Problem with Seniors and Debt

The difference between seniors and younger individuals, however, is that they may have no means with which to pay off credit card debt, thereby leaving them with few alternatives.  It is no wonder, then, that credit card debt is the leading cause of bankruptcy among seniors, according to Forbes. In fact, Forbes reported that more than two-thirds of seniors who filed for bankruptcy claimed credit cards with high interest rates were the main cause. Conversely, just 53 percent of younger individuals reported credit cards as the reason for filing bankruptcy.

The number of individuals aged 65 and older filing for bankruptcy increased from 2.1 percent in 1991 to 7 percent in 2007. The median age of individuals seeking bankruptcy protection also increased during this time, growing from 36.5 to 43 years old, according to Forbes.

Why Seniors may Struggle with Debt

In addition to older Americans filing for bankruptcy, a report shows that this age group is also far less likely to ask for help from family and friends. Many individuals in this age group may also be experiencing financial difficulties because of high medical bills. Finally, older individuals may be less likely to negotiate their debt with creditors before seeking protection under the bankruptcy laws.

Even despite the stricter bankruptcy rules and costs, seniors are still struggling with finances and subsequently filing for bankruptcy. These statistics are undoubtedly linked to higher medical bills, smaller, fixed incomes and few options regarding repayment of their credit card debt.

Honesty is the Best Policy: Mistakes that Could Cost You in Bankruptcy Court

Bankruptcy

If you find yourself in over your head financially and there just seems to be no other way out, bankruptcy might be the solution to your financial woes. Depending on what type of bankruptcy you file, you can get rid of all or most of your debt or at least renegotiate that debt into a more suitable payment plan. Either way, bankruptcy can rid you of a lot of financial burden. However, before you go through with a bankruptcy filing, you need to know that bankruptcy is intended for the honest creditor. If you plan to lie or try to get around something by a simple omission of the facts, it could cost you. Your case could be denied, and if you are caught committing bankruptcy fraud which happens to be a felony, punishable by some time spent in jail.

Your Assets

Don’t get rid of assets that would be protected by bankruptcy laws. Don’t try to hide assets that are not protected, and do not get rid of any for less than they are worth. You will only lose; often more ways then one. If you get rid of assets that are protected, well, you no longer have them. Period. Your loss, and you will just have to live with it. However, trying to hide an asset, especially by getting rid of it for less than it is worth, just so you do not have it at the time of bankruptcy, is not a smart move. You have to disclose your assets and the transfer thereof to the court.

Laying it on Thick

Your about to file bankruptcy, so you think, why not? One last joyride while I still have the credit to spend. Again, not a very smart move. Just because you are planning to file bankruptcy does not mean you can go out and rack up all the debt you want, under the impression that the court will relieve you of it. Increased activity or suspicious activity, followed by a bankruptcy filing will be a red flag for the credit lender. They in turn will dispute your bankruptcy claim, reporting your actions to the court. If the court finds in their favor, you might wind up in hot water with a lot of debt to pay.

Omissions

Whatever lies in your financial history, you need to first disclose it to your attorney and work out a plausible solution and then tell it to the court. No matter how shameful or dumb it might be, you have to be honest. The court requires it, if you want your attorney to help you to the best of his or her potential, you have to be open and honest. He or she can not work with you on things they do not know about.

Don’t try to fool the bankruptcy court. Odds are, they will find out one way or another. Then, you will be the one really in the hurt. You’ll still have all the debt, plus a lot to answer for, one way or another.

How Often Can I File For Bankruptcy?

Bankruptcy

Debt. The dreaded d-word. None of us like to hear it, let alone say it. However, the overwhelming feeling of being smack-dab in the middle of the creek without so much as a paddle is far worse. The good news? When all else fails, there is a way out that will finally have you breathing that longed for sigh of relief.

Bankruptcy can be your savior when facing a difficult financial crisis that you can not find your way out of. Of course, you don’t want to abuse the privilege by filing and getting in over your head again, just to keep filing for bankruptcy over and over again. After all, there is a task force whose aim is to seek out those who, even if filing within the allotted time frame, seem to be abusing the bankruptcy system with frequent filings. Still, unforeseen circumstances do happen and it is nice to know that not only is bankruptcy there for you in your time of need, but should a similar situation sneak up on you again, you can call on bankruptcy more than once to bail you out. However, since this is a legal process, there are rules and limitations.

Frequency

You can file for bankruptcy as often as you like, but if you are looking to have your debts discharged, you will only be able to file every 8 years. If the court sees that you have filed more than once in an 8-year period, you will have just wasted a lot of time and money. They won’t cancel the debt you owe.

In this case, you need to be prepared to get on your feet after filing. A plan of action is good and most bankruptcy courts require you to go through some kind of debt counseling program anyway. It’s a program you do not want to take lightly. It can make a huge difference in the court’s decision to approve your bankruptcy claim and could possibly offer resources for helping you to change your life and avoid future bankruptcy.

Different rules do apply to different types of bankruptcy. Chapter 7 will discharge your debts and can be filed every 8 years if needed, as mentioned before. The catch is that your previous case must have resulted in a discharge. If you receive a dismissal, you do have the right to refile 180 days later. Chapter 13, on the other hand, is a process of reorganization. This means you will propose a plan to the court for paying off your creditors. Under Chapter 13, some debts will have to be paid in full, some may be paid partially, and some of your debts may be discharged, depending on what you can afford to repay. Chapter 13 plans last about 4- 6 years before being discharged, however, you can file another petition as soon as you receive the Chapter 13 discharge. You can even file Chapter 13 at any time after receiving a Chapter 7 discharge.

Debts and Creditors

Certain debts can not be discharged. So think twice before you attempt to file on tax debts, child support or alimony payments.  Student loans will only be discharged if you can prove this presents an undue burden. Be prepared to prove this on all the debts you want discharged. You’ll be up against creditors who are trying to convince the court that the debt you owe them should be repaid. Should they convince the court, you will end up paying.

Fortunately, those with a successful bankruptcy case benefit from the automatic stay that prevents creditors from taking action to collect the debt. The only way they can proceed from this point is if and when the court lifts the automatic stay.

Considerations

If you own a business, you may want to consider filing Chapter 11. If you make a living as a family fisherman or farmer, go for Chapter 12, which will allow you to hang onto your property while repaying your debts. This is similar to Chapter 13, but is a bit more involved as far as including your assets and reorganization of debts. Under Chapter 11, there are really no restraints or length-of-time limits on filing. The court simply must agree that there are benefits and possibilities of reorganization when filing. Chapter 12 plans may last no more than five years and once you have received a discharge, you’re free to file again.

So, as you can see, when in debt, there are options that will relieve your financial burden. As long as you are willing to follow the courts instructions, learn the process and not abuse it, bankruptcy can be your greatest ally when times are rough.

Post Bankruptcy Tips: How to Get back on Track and Stay on Track

Bankruptcy

If you have recently filed for or been discharged from a bankruptcy, there had to have come a time when your financial life began to take a turn for the worst, slowly meeting up with its demise. While it is true that some people wind up in this boat simply because they were irresponsible or failed to heed to caution, most people who file bankruptcy got there because of life’s unforeseen circumstances and their lack of ability to control them. In those cases, bankruptcy can be a real blessing; rescuing you from the burden of a financial problem that seemed insurmountable.

The sense of relief one feels when successfully getting out from under overwhelming debt is almost indescribable. However, one thing you do not want to do is to forget how overwhelmed you felt prior to filing for bankruptcy. That way, you can avoid winding up in the same boat again, or at least take steps to avoid it as much as you can. Financial death can happen to anyone at anytime. However, financial suicide is a whole different matter. The following tips can help you to get back on track and stay on track, avoiding the post-bankruptcy blues:

Your Credit Report

Yes, you want your credit score to improve substantially. However, that’s going to take some time and effort. For now, you need to take a good look at your credit report and stay on top of it. Get copies from each of the three credit bureaus (you’re entitled to one free report from each of these every year). Look them over and make sure your bankruptcy and discharged debts are noted. If there are any discrepancies at all, call and have them fixed immediately. While this may not do much to improve your score right away, it can help some and is a step in the right direction.

Credit Counseling

If you were not required to seek credit counseling as part of your bankruptcy requirements, now might be a good time to give it a shot. You’ll learn a lot of great things about money, budgeting, savings and maintaining a healthy financial life. This counseling could truly make a difference in staying the course or falling back into bankruptcy again.

Your Debt

If you have debts leftover that were not discharged, set up a plan to pay those debts off as quickly as your income allows and get them off your back. For your current bills and any newly acquired debt, make a point to stay ahead of the game by paying the full amount due  in advance or at least on time each and every month.

A credit card is a great way to rebuild your credit. Your best option is to go with a secured card. Just make sure you pay the bill on time, the company reports your activity to a major credit bureau and that it is not reported as secured.

Loans

It is best to wait several years before amusing a loan. Smaller loans are acceptable as long as you pay them back quickly. For large loans though, give yourself some time. Get back on your feet financially. After a couple of years, if you want a car loan or a mortgage, you will be able to get a better interest rate then if you jumped right in after bankruptcy. On a car loan, minimize the term of your loan as much as possible, or you might wind up paying far more than the car is even worth! When it comes to choosing a lender, watch out for those bleeding hearts that say bad credit is ok with them. It is ok with them in the form of the highest interest rates going!

As long as you make a conscientious effort to stay on track after bankruptcy, you should be fine. Granted, life does happen and financial problems are not always avoidable. However, if you have been down bankruptcy road once, it is easier to identify the mistakes of the past and avoid them, increasing your chances of escaping the same pitfalls the next time around.

Financial Vulnerability: Bankruptcy Pitfalls to Avoid

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When your financial crisis has come to a head and your only option is bankruptcy, you’re at a pretty vulnerable point. There will be alluring ideas waiting on you, as well as some less than respectable people waiting to take advantage of the state you are in. This does not mean you should steer clear of filing bankruptcy if it is going to make your life a lot better, nor does it mean you should avoid businesses and services who are there to help you. You simply need to be aware and be on the lookout for things that could lead to further financial trouble and to avoid things that could easily lead to your being taken advantage of.

Credit Counselors

Credit counseling is a wise idea if you find yourself in a bad way financially. For those who are filing bankruptcy, it is often a requirement of the court that you go through a credit counseling program and receive your certification. Credit counseling can teach you how to budget, how to manage your bills and finances, they can negotiate some of your bills for smaller settlements and can give you a lot of tools for a healthy financial future. Even people who are not in financial trouble could benefit from such services. Unfortunately, not all of these services are reputable, having less than your best interest in mind. If you need to go through one of these programs, ask if your state or county offers a free program. If not, ask for a recommendation from the court or someone who knows all about it. Do not trust advertising and be one the lookout for those who want a bunch of money up front. Some of the most unscrupulous companies will gladly take your money while failing to deliver what they have promised.

Watch out for credit repair offers as well. Accurate information can not be removed, even if it is negative. If something is old and needs updated, or is inaccurate, you can call the credit bureaus yourself to see that this is taken care of.

Risky Financing

Once a bankruptcy is discharged, you might think that offers for financing and refinancing would be slow or non-existent. The truth is, a lot of these offers will start coming out of the woodwork once your bankruptcy is behind you, even if it is still on your credit report. Why? because the lenders making the offer operate on the assumption, whether true or false, that because you filed for bankruptcy, you are less likely to get into financial trouble again. It is not real smart on their part, as some people do file for bankruptcy numerous times. Some are irresponsible and others, well, life happens.

Some of the offers you might see are refinancing options for mortgages, loans and even credit card offers. It is not a bad idea to take a lender up on an offer. Sometimes, it can help to rebuild your credit. However, you will want to pay close attention to the terms and conditions, as well as the rates you will be expected to pay. You will want to weigh this against your financial ability and will want to ensure that you are responsible with paying the bill each and every time it is due.

Once you have filed bankruptcy and had a favorable decision, you just want to be careful. Work to get your financial health back on track and be wary of things that could lead you right back into bankruptcy court.

Debt Consolidation a Possible Alternative to Bankruptcy?

Bankruptcy

When financial woes have the road ahead of you seeming pretty bleak, it can be quite overwhelming. The idea of simply ignoring the debt collectors and everything else tied into your finances often sounds appealing. Unfortunately, it’s no solution. The problem is still going to be there, no matter how long you run from it. The longer you wait to take action, the worse it can get. You do have options. You could pay your bills off by making payment arrangements or paying them in full. You could file for bankruptcy, or before you race off to file those papers in court, you might consider debt consolidation.

What Debt Consolidation Isn’t

Debt consolidation. It sounds like a type of loan allowing you to pay off your creditors and transfer the debt to one company. No. That is a common misconception. Debt consolidation is not the same as a consolidation loan (a long term loan to help pay off your debts). The company is not going to give you the money to pay what you owe. You’ve probably seen the ads. “Consolidate your debts! Let us help you pay your bills! Pennies on the dollar!” Below that, most of them typically tell you that this is, in fact, not a loan.

What It Is

So, what exactly is debt consolidation? Debt consolidation is similar to certain types of bankruptcy, without the bankruptcy tag. With the help of a debt consolidation company, your debts are reorganized and renegotiated, allowing you to pay off what you owe for a lower monthly payment than before and sometimes for less than the original amount. Of course, the debt consolidation company will want their share of money too, however, the price should not be burdensome, considering what they do. The only thing to watch out for is companies that want a significant amount of money up front and then don’t deliver results. The truth is, these companies have to give you a contract that lays out the plan in black and white with a clause that allows you to back out within 3-days. Legally, they can not ask for money until they deliver the goods.

Is Debt Consolidation Right For You?

If you’re thousands upon thousands of dollars in debt, by all means, file bankruptcy if it is the only way you can see yourself keeping your head above water amongst huge waves of debt. However, if you are only a couple of thousand to a few thousand dollars behind, consider debt consolidation. It might be the best choice for you. Think about it. There is no guarantee, depending on what chapter of bankruptcy you file, that your debts will be discharged. In that case, you are forced to reorganize and pay off what you can; sometimes a few debts will be canceled and others reduced. That’s really no different than a debt consolidation plan. With a bankruptcy, you’re going to pay, out of your own pocket, upwards of $600 to $1000 just to file. Then you may also have the expense of a credit counseling program, as well as any debts left to pay off. When you look at it from this angle, debt consolidation seems to have its advantages.

Methods for Filing Chapter 7 Bankruptcy

Bankruptcy

When it comes to out of control finances, sometimes bankruptcy is the only answer. Personal bankruptcy is quite common, with most filers choosing Chapter 7. Chapter 7 is one of the simpler forms of  personal bankruptcy, which is why it is so popular. Filing bankruptcy can ease the pain of financial burdens. However, before you file, you need to know what methods you can use and which one is right for you.

Consider DIY Bankruptcy

Yes, you can file for bankruptcy on your own. A do-it-yourself bankruptcy is not a bad idea, if you are willing to put in the time and effort to educate yourself and to do it right. In the end, it will cost you less money, as all you will have to pay out will be the cost of the filing fee and any other expenses related to your preparation and bankruptcy requirements.

Educate yourself thoroughly on both federal and state bankruptcy laws, including anything required of you during the bankruptcy process. Read a detailed book about it. As for forms, you can download them off the internet, get a DIY bankruptcy book, or a bankruptcy kit. However, do not utilize a fill in the blanks process as some courts will not accept those. Be sure to type everything in a professionally formatted manner. Make several copies for yourself and for the court. You will need to have these notarized at the time you sign them. Take them to the court with a money order for the fees in hand. Some courts still accept cash, but not all, so find out in advance.

Whatever you do, do not ask for help from the court clerks. They are not legally licensed to practice law and will not offer any advice. If you do need help, call on a paralegal, but know that you won’t get the service for free.

Assisted Bankruptcy

This is the bankruptcy method where you hire an attorney or paralegal or even a professional legal document service to prepare your case and your paperwork. You pay them a flat fee for doing so, and once the papers are finished, you are on your own. You file the papers with the fee and go through the rest of your case on your own. With this method, it is always good to find some way to become more knowledgeable about the whole bankruptcy process, so you’re not in the dark or caught off guard when you go to court.

Full Representation

Hire an attorney to oversee your entire bankruptcy case from start to finish. They take care of all the headaches. All you have to do is listen, take their advice, be honest and offer the information needed for your case and show up in court. You will be well-advised and everything will be in order. However, full representation is going to cost you, and it certainly won’t come cheap. For those brave souls who don’t mind a bit of extra effort, especially that of learning the legal system, the other two methods are probably just fine. However, if your debts amount to mountains more than molehills and you are either afraid of the system, unsure of things or just do not want to go it alone, hiring an attorney to see your case through might be the option for you.

Whatever method you choose, each one is tried and true. As long as you are honest and do your part to meet the requirements, filing Chapter 7 bankruptcy, no matter what the method, can result in your favor, relieving your financial burdens and debt-laden stress.