Buying a Car After Bankruptcy
Filing bankruptcy can be stressful, especially if you worry about losing your car in the process. We’ll take advantage of the many available exemptions to protect your property, and what happens to your car will depend on whether you’re filing a Chapter 7 or a Chapter 13. Most people are able to keep their vehicle when they file bankruptcy, but it’s good to be prepared with what to expect if your car is taken as part of your case. If you’re faced with a car purchase after your case is resolved, there are a few things you should be prepared for. Considerations Having a car is a must for many of us to get to work or school, but I advise my clients not to get into a car loan unless they absolutely have to. Public transportation may be a good idea for a while, but if this isn’t an option in your city or for your particular line of work, you’ll need to get your own transportation. See if you can borrow a car or get rides with people while you save up for your own vehicle. And when it comes time to purchase a car, shop wisely and think practically. You may be able to save up enough to buy a car with cash! About 2/3 of people who purchase automobiles do so using loans. If you do need to finance a car, be prepared to make a large down payment, and if your credit score is lower than 600, you’ll need to work with a “subprime lender.” About 22% of auto loans are considered subprime, and the delinquency rate on these types of loans is about 10%. Depending on your overall situation and your lender, you could be facing an interest rate that is double what someone with an excellent credit score would pay. Before authorizing your loan, the lender will need to determine if your bad credit is habitual or situational. Habitual bad credit would be if you have a long history of late or missed payments, loan defaults, or accounts in collections. In these cases, a lender may require you to have a cosigner or you may need to use a “buy here, pay here” lender. This is when the car dealership loans you the money directly, and there are usually very high interest rates associated. Situational bad credit is due to a divorce, medical emergency, job loss, or other unexpected life event. If you had a great credit score and history of timely payments prior to this event, you’ll qualify for a lower interest rate and may need a smaller down payment. Think Before You Act No matter what kind of loan you end up dealing with, be sure that you can truly afford the payment before taking out the loan. Take an honest look at your budget, allowing room to save for an emergency fund and for other unexpected expenses. Be thrifty when you shop for a car by considering buying a used, lease return, or former rental car rather than a brand new automobile. Do your research and only work with reputable dealerships and lenders. The last thing you want is to get into debt over your head again....
read moreListing Possible Legal Claims on Your Bankruptcy Paperwork
It’s imperative that every detail of your finances be included in your bankruptcy paperwork, including every type of property or asset you have. Property and assets could be real property, such as a car or home, or “future interest” property, such as an asset that’s held in an irrevocable trust. You’ll also need to list potential assets, such as legal claims you may or may not have in the future. Potential Claims If you believe you have the right to a legal claim, even if you don’t intend on taking legal action or it’s uncertain if the judgement would be ruled in your favor, it needs to be included in your bankruptcy paperwork. These potential claims must be included in Schedule A/B , which is where you list contingent and unliquidated claims. We can discuss your situation, but possible legal claims include an injury or auto damage resulting from a car accident, claims against an employer for any reason, or claims for breach of contract. Omitting this information could not only make it impossible to pursue legal action later if you decide to, but it could also damage your bankruptcy case. Accuracy is Key The court trustee will evaluate these possible claims to decide if they could be pursued as a potential source of funding to repay your creditors. If you fail to include this information, the trustee could determine that you purposefully omitted assets, which is bankruptcy fraud. Fraud has very serious consequences, such as the discontinuance of your case, high legal fees, and/or jail time, but the court could also rule that any proceeds from these claims go to your creditors, even if you could have used exemptions to retain the funds for yourself. Aside from the damage to your bankruptcy case, not including these potential claims in your case could make it impossible for you to take legal action and make these claims in the future. The other party could say that the claim is prohibited because of “judicial estoppel.” This means the court could disallow your claim because by not including the claim in your bankruptcy, you were stating that you had no claim. If you then turned around and filed a lawsuit, this would contradict the information you provided during your bankruptcy. Additionally, the court could say that leaving this claim out of your bankruptcy gave you an unfair advantage in your future lawsuit. Listing Values When listing these possible legal claims, it can be difficult or impossible to list an exact value of the claim, since the judgement has not yet been issued. Using my past experience, I can help you list an estimated reasonable value of your potential claim. For claims such as auto damage or medical bills, it’s easier to list an accurate amount. If you’ve previously spoken to an attorney about this matter, he or she may have given you an estimated lawsuit amount. It’s important not to underestimate the value of your claim, because this could limit the amount you can pursue in the future. If the defendant or the court believe you undervalued your claim, they could stop, or bar, you from filing the claim in the future, and it could also affect how much of the award could be claimed as exempt. Professional Help Stakes are high when it comes to accurately summarizing all the details of your bankruptcy case, especially when legal claims are involved. This is why it’s so important to not only work with an experienced bankruptcy attorney, but to be 100% open and honest about your circumstances. Even if you think...
read morePost-Bankruptcy Discrimination
One reason people sometimes put off or avoid filing bankruptcy is that they worry people will find out they’ve filed or that they’ll be discriminated against. It is definitely wise to consider every possible alternative to bankruptcy and also to familiarize yourself with the possible consequences of filing. Bankruptcy can have some negative effects on your life, so you need to weigh the pros and cons before taking any action. Government Protection Fortunately, there are laws in place to protect you from discrimination after you file bankruptcy. This mostly applies to government agencies. A government agency cannot use your bankruptcy as a reason to refuse to issue or renew any kind of license, permit, etc. They also may not suspend or revoke any current licenses or permits you have simply based on your bankruptcy. A bankruptcy in and of itself will not keep you from getting a government job and cannot be used as a reason to fire you from your current government position. The government cannot end or deny your public benefits or evict you from public housing. If you’re using a Section 8 voucher outside of public housing, we can talk about how you might be affected. State colleges cannot hold your transcripts due to bankruptcy, and a bankruptcy alone won’t keep you from getting a driver’s license. If you have any debts related to government fees that were discharged through bankruptcy, the consequences of those debts must come to an end. For example, if your driver’s license was suspended because you didn’t pay a judgement for a car accident, once that debt is discharged through bankruptcy, the state must reissue your driver’s license. If the debt was not eligible to be discharged in your bankruptcy, they do not need to reissue your license until you pay the debt. Keep in mind, a lender can take your bankruptcy and other financial issues into consideration when deciding to issue you a government loan or government credit of any kind. The lender needs to be confident that you have the income and credit history to make you a good risk for lending money. This does not apply to federal student loans, which are considered entitlements. Private Sector The lines are less defined when it comes to post-bankruptcy discrimination from private companies and individuals. Employers definitely cannot fire you based on your bankruptcy alone, but employers can deny you a job based on your credit and bankruptcy. There is not much you can do about this, other than making yourself shine during the interview to the point where the employer is willing to overlook your financial history. If you’re already in a lease, your landlord cannot evict you based on your bankruptcy, but if you need to move, you may have some challenges. Before renting an apartment or house, the majority of landlords will pull a credit report for potential tenants. When they do this, they will see your bankruptcy and may choose not to rent to you. This is perfectly legal. You may be able to work around this by explaining your circumstances and demonstrating that you’re able to pay your rent on time each month. Some landlords will agree to rent to you with a larger deposit or if you’re able to pay several months of rent up front. Big Decision Don’t let the possible consequences of bankruptcy keep you drowning in debt. Before making a decision either way, it’s important to look at the positive outcomes of filing bankruptcy. Depending on your circumstances, you could be debt free and able to move forward with...
read morePost-Bankruptcy Credit Card Scams
As soon as your bankruptcy is resolved, it’s important to take strategic steps to rebuild your credit. One of the best ways to do this is to apply for a credit card, even if you have to start out with a secured account. This card isn’t to be used to make large purchases you can’t afford, but only as a tool for improving your credit score. Each month, make a small purchase on the card, and then pay it off completely, on time, each month. Soon, this history of timely payments will overshadow the negative consequences that bankruptcy can bring, and you’ll see your score improve. It’s important to not only use your card wisely, but to do some research before even applying for the card. There are unscrupulous companies out there that will prey on recent bankruptcy filers, knowing they’re eager to make a new start and probably worried about how to re-establish their credit. As you prepare to apply for a new credit card, be aware of some possible scams. Look out for Scams When you’re just starting out, it’s expected that your interest rates will be high. This is unavoidable, but something to be aware of, just in case you aren’t able to pay off your balance completely. Be alert for companies that offer a low “teaser rate” for a short period of time. Read all the terms of the account to be sure that this low introductory rate isn’t followed by an astronomically high rate for the rest of your agreement. This may not be a “deal breaker” for the card, but you’ll definitely want to avoid paying high interest on your balance; that’s how debt can easily get out of control. Along with interest rates, be aware of any “overlimit fees.” Some credit card companies will allow you to charge beyond your credit line limit, but this comes with a hefty fee for each transaction (on top of the amount you’re charging and any interest.) While this can ensure your card isn’t declined, it’s also a recipe to once again end up in debt that you can’t pay off. Before taking advantage of this option, you’ll need to “opt-in” to the overlimit program. Don’t be tempted, and remember, this card is simply a tool for rebuilding your credit. Right after your bankruptcy, you’ll probably receive credit card offers in the mail. There are two things to look out for, related to these offers. First, do not respond to any offers that ask you to call a 900 or 967 number to apply. These are toll calls, and you’ll likely sit on hold and have lengthy conversations with the company, racking up a huge phone bill (and possibly not even qualify for the credit line!) You should be able to apply for the card online or by mailing in an application. Second, if you receive an offer for a card that can only be used with a certain catalog or company, it’s best not to respond. These cards charge a high interest rate and only allow you to purchase the (overpriced) merchandise in their catalog. A Disciplined Approach It can feel daunting to think about using a credit card again, especially if your bankruptcy was due to credit card debt. It’s going to take discipline and planning to use your card wisely and avoid getting into debt again. But by creating and sticking to a budget that includes saving for emergencies, your credit card can be the best way to build a solid financial future....
read moreShould my Company File Chapter 7 or 11?
While most bankruptcy filings in the US are individuals or married couples, plenty of businesses are also faced with staggering debt and turn to bankruptcy for relief. Businesses must decide if a Chapter 7 or Chapter 11 will be most beneficial not only to their bottom line, but to the economy and community as a whole. If a company files a Chapter 7, the business is essentially dissolved, and all of their assets are sold to repay creditors. There is more flexibility with a Chapter 11, and companies can usually continue to operate while they negotiate with their creditors about how to handle assets and debts. Pros and Cons But what does this mean for employees and the economy? If a business files Chapter 7 and closes its doors, employees are obviously out of work. Depending on the location and type of business, a buyer could come in and reopen, which provides jobs and stimulates the economy. A new, different type of business that’s better suited to the community and current market could also open up in its place. However, if the business site sits unoccupied, that’s not beneficial to anyone. The building could fall into disrepair, affecting the entire feel of the community. This could affect neighboring businesses and home values as well. When a company files a Chapter 11, they may or may not become a profitable business. Some companies get back on their feet, make the necessary changes, and continue on. But the truth is, many companies that file Chapter 11 end up closing their doors eventually. One of the largest benefits of choosing a Chapter 11 is that it gives the company the necessary time to find a new buyer for the company or the landlord time to find a new business tenant. This leads to steadier employment and a smaller chance that a building will sit unoccupied. The court trustee does have a say whether a business can file a Chapter 7 or 11. They will often use information about other local businesses and the current demand for a particular type of business. In general, it appears that a Chapter 11 is most beneficial to everyone involved, but some situations simply call for a Chapter 7. This frees up the business owner to move on to a new project or other employment. Handling Debt Whether you’re in personal debt due to credit cards and medical bills, or if your business is failing to be profitable, the best course of action is to do everything you can to avoid bankruptcy. Business owners may be able to negotiate with their creditors, change their business model, or make other changes to turn things around. However, bankruptcy may be inevitable, and if that’s the case, it’s best to take action to make a new start. No matter your debt or circumstances, I’m here to help you get a handle on your finances and leave your stress behind. ...
read moreSummary of Your Assets and Liabilities and Certain Statistical Information
When you complete your bankruptcy paperwork, it will all become part of a package that we’ll submit to the court for review. I’ll ensure that you have only the necessary forms, without causing you any extra work. Many of the forms will be auto filled for you, based on the information you share with me, and all you’ll need to do is sign. The forms will include all of your financial information related to your income, debts, and living expenses, as well as your property and assets. All of these forms combined will help the court evaluate your situation and make decisions about how to resolve your case. One of the final forms we’ll complete is the “Summary of Your Assets and Liabilities and Certain Statistical Information.” As the name implies, this gives the court a summary of the other forms you’ve completed. First Steps Before we can complete this summary, we’ll need to enter information into a series of other 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 transfer the totals from each form to your Summary form. We’ll use Schedule A/B to summarize your assets and will transfer your real property, personal property, and total property values. Schedule D will allow us to summarize your liabilities, such as secured, unsecured, and unsecured nonpriority claims, along with your total claims. Schedules I and J will give us the information we’ll need about your monthly income and expenses. This summary also asks you some questions for administrative and statistical purposes. The court needs to know if your debts are primarily consumer or business debts. We’ll also use Schedule E/F to answer additional statistical questions. Along with all these forms, you’ll need to provide the required supporting documents. Most documents will need to go back for the six months before you filed, but you’ll also need to provide copies of your last tax return and documents related to your property/assets. I’ll give you a list of what you’ll need, so you won’t need to worry about being asked for more at your 341 meeting with the court trustee. Home Stretch When we get to the point of summarizing your case, you know you’re in the home stretch and closer to being debt free. After your 341 Meeting, you’ll need to complete your post-filing credit counseling. If you’re filing a Chapter 7, discharge is your next step, and if you’ve chosen a Chapter 13, you can look forward to starting your reduced repayment plan soon. ...
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