If I Move Out of the Country, Will My Debts Follow Me?

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Carrying a huge amount of debt can make drastic actions seem suddenly appealing. Unpaid debts (especially those with high interest rates) may have snowballed until they finally became too much for you to handle.  Realizing that just the monthly minimum payments are more than you can afford may be the wake up call you needed to finally take steps toward getting out of debt.

We’ve discussed a number of different options for New Jersey debt relief here on our bankruptcy blog. Filing for bankruptcy is one way to get rid of nearly all (or most) of your debts. Of course, you’d have to pass the Means Test in order to be approved for bankruptcy in NJ, but if you’re reading this because you can’t pay your minimum payments, you’ll probably qualify.

In the past, we’ve had people ask us if moving to a different state would erase debt. While you can move out of state if you want or need to (for work or other personal reasons), doing so won’t eradicate any of your debts. The only exception to this might be if you owe someone a large personal debt and you don’t leave a forwarding address for that person to find you. Of course, if s/he files a lawsuit against you, chances are that you’ll eventually be discovered by a process server.

Can My Debts Follow Me to Another Country?

The reason that moving from one US state to another won’t eradicate your debts is because every state in this country follows the same credit rating system and reports to the same reporting bureaus.

In contrast, other countries abide by different practices and policies when it comes to determining your credit worthiness. Additionally, a contract or agreement that you entered into in the United States (i.e. a credit card agreement) is not enforceable outside of the country. It is actually illegal for any of your creditors to file a lawsuit against you in any country that you aren’t currently living in.

[Sounds great, right?]

The bottom line is that you may be able to move abroad without your US/New Jersey debt ever catching up with you.

But! (There’s always a but!)

Should you decide to go through with this idea, you’ll need to have plenty of actual money (cash) in order to establish your residency abroad and to cover your living expenses. If you’ve been deeply in debt in the US for some time, it’s highly unlikely that you have a lot of cash lying around.

If you don’t have enough cash on hand to buy a home, you will quickly discover that it is much more difficult to borrow money (and establish a credit history) in other countries as compared to the US.

Additionally, there’s one entity that you’ll be hard-pressed to permanently escape – the IRS. If you are a United States citizen, you are expected to pay income taxes whether you live in the US or not, and this holds true even if you permanently leave the country. The only way to eliminate some of your delinquent tax debt is filing for bankruptcy, and even then there are very specific rules about which taxes can be discharged.

Any past due taxes that you accrued before you leaving the country will keep compounding every year that you remain a US citizen, no matter where you call ‘home.’ Furthermore, any creditors (aside from the IRS) to whom you are indebted have a right to write off any amount you failed to pay. When this happens, they may also file a ‘Cancellation of Debt’ form (1099-C) with the IRS. A 1099-C form essentially counts the past due amount as income that you ‘earned.’ Guess what the IRS is going to do with that additional ‘income’! That’s right – they’re going to tax it.

Short of  renouncing your United States citizenship, you’ll be hard-pressed to elude the IRS. Even moving to Mars probably wouldn’t help you evade tax debt.

Could Moving to Another Country Help Me Lower My Debts?

Ah – now you’re onto something! Moving out of the US actually is a great idea for those who are plagued with significant amounts of debt and want to pay it off rather than out-run it.

Although the cost of living in the United States isn’t the highest in the world, there are much more ideal places to live if you’re looking to free yourself from debt. As long as you have a way to make money, moving to a country with a significantly lower cost of living will mean you can pay your debt off much faster than if you remained living in the US.

With this approach, you’ll be able to breathe easier and sleep better at night knowing that you’re doing the right thing by paying back the money you owe. You will also get to experience a new culture and way of living, which is a pretty cool bonus! Your US citizenship will remain intact, and your credit score will soar, leading to a variety of options and financial freedom in the future.

Image credit: Megan Fitzgerald

Why did the Trustee Object to My Bankruptcy Discharge?

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At the time that your bankruptcy case is officially filed with the court, a trustee will be assigned to oversee the details of your case. The trustee is an impartial third party who will be selected by the court system. Your trustee is not working against you; however, he is not working for you, either. The job of the trustee is to ensure that your bankruptcy case proceeds smoothly and lawfully.

Trustees are typically attorneys themselves, but they will not be involved in your legal representation during your bankruptcy case. Chapter 7 trustees are paid a small administration fee as well as a percentage of the assets they are able to liquidate and disburse to your creditors.

In a chapter 13 bankruptcy, trustees are paid through your reorganized debt repayment plan at the end of your case. There are limits on how much money a chapter 13 trustee can receive per bankruptcy case.

In both chapter 7 and chapter 13 cases, it is the responsibility of the trustee to verify the validity of any and all financial information that you provide in your bankruptcy paperwork. The trustee checks all of your calculations and will certify their  accuracy to the bankruptcy court.

Chapter 7 trustees are also entrusted with holding the 341 hearing – the Meeting of the Creditors, which takes place approximately 30 days after your case was filed in court. During this hearing, the trustee may ask you some questions regarding any of the data included in your documents. You will be under oath and must answer truthfully. If there is any falsified data in your bankruptcy documentation or if you are determined to have lied under oath – your bankruptcy petition will most likely be thrown out due to charges of attempted bankruptcy fraud.

If you successfully make it past the Meeting of the Creditors and your trustee finds that all of your paperwork and testimony is accurate, it then becomes the trustee’s job to examine all of your assets to determine what can be sold in order to pay off as much of your debt as possible. Don’t panic: the trustee isn’t going to come in and sell everything you own, because that would defeat the purpose of filing for bankruptcy. The goal is to leave you in better financial condition than before you filed.

(New Jersey chapter 7 bankruptcy exemptions can be found here.)

Although your trustee most definitely isn’t working against you, it is within his job description to make sure you are being forthcoming in your bankruptcy. As long as you have nothing to hide, you can rest easy.

Your bankruptcy trustee also has the power to ultimately object to your discharge (elimination of your debts). A trustee may object if you:

  • Respond dishonestly to any information that is requested during your bankruptcy case or misrepresent any of your financial information in your bankruptcy documents
  • Hide, move (or attempt to hide) any of your assets or property with fraudulent intent
  • Repay some creditors above others (preferential payments)
  • Withhold evidence of pertinent financial information
  • Disobey a court order
  • In any other way attempt to defraud the bankruptcy court or your creditors

In the event that your trustee determines that you should not be granted a bankruptcy discharge, he will make his objection known via a lawsuit known as an adversary proceeding.

The trustee does not have the final say as to whether or not your discharge will be granted. You will be able to defend yourself against the trustee’s claims, and ultimately, the court will determine if your debts should be discharged or not.

If you are currently in the midst of a pro se bankruptcy case and your trustee has made an objection, be sure to connect with a bankruptcy attorney who has dealt with adversary proceedings in the past.

 

Image credit: Daniel O’Neil

How to Avoid a Foreclosure Defense Scam

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All too often, homeowners who are in danger of losing their home to foreclosure are under the impression that they can’t afford to pay for the assistance of an experienced foreclosure attorney.

This leads people to seek out alternatives to saving their home. You may have seen advertisements for services that make ‘too good to be true’ claims; they can often be found in local newspapers, on bulletin boards or on random signs near your home (often on telephone poles or staked into the ground.)

These “services” are very often scam artists disguised as a foreclosure defense or loan modification company. Typically, they’ll entice you by claiming to charge only a one-time flat fee amount that is less expensive than retaining a foreclosure defense attorney.

For that one-time flat fee, the scammer company will make lofty promises in relation to your specific money problems. If you’re about to lose your home to foreclosure, promises will be made to “save your home,” “stop the foreclosure,” “negotiate a loan modification,” etc.

While all of these false promises are being tossed around, the fraudulent foreclosure defense company may begin asking for more money in order to continue negotiations that have taken “longer than expected” or to initiate an automatic stay. Because of the addition of more and more fees, you will almost always end up paying a scammer a lot more money than a certified foreclosure defense lawyer!

Will a fraudulent foreclosure defense company actually help me save my home?

So, you’re thinking, “Ok; I may have gotten taken for more money than the deal I thought I was getting, but at least my house will not be sold at Sheriff’s Sale.” You may be kicking yourself for spending more than you had to, but as long as your foreclosure is stopped, you’ll probably feel somewhat relieved.

The problem with that line of thinking is that these foreclosure defense scammers don’t actually plan on doing any work on your case at all. Their solitary goal is to take your money. In some cases, they may use some of your money to pay a third party to negotiate a loan modification for you (which will do nothing in terms of stopping a foreclosure), while they keep the rest of your money as profit.

Throughout the vast majority of this process, the scammers will lead you to believe that they are constantly working on your case – filing paperwork and negotiating with your lender as your foreclosure defense team. In reality, almost nothing is actually being done to further your case along at all.

Some foreclosure defense scam artists may even make bold claims that suggest they are working with or for the government or your mortgage company in order to increase your comfort level. Multiple promises will be made to you about what they can deliver in terms of saving your home. If your home is already in foreclosure, it’s important to know that a loan modification will not stop or even delay the foreclosure process in the slightest.

If you are facing foreclosure and wish to save your home, you need a New Jersey foreclosure defense attorney working for you. Although an attorney’s fees may seem higher up front, the alternative is to pay smaller amounts out over a long stretch of time to a scam artist. In the end, your certified and experienced attorney may even come out costing LESS, and you will have gotten the results you wanted.

Veitengruber Law has saved many homes for New Jersey residents who are struggling, and we will continue to save more homes for those who need help. Paying our fees is beyond worth it, because we do not stop working until your home is saved, and we don’t make any promises we can’t keep.

Image credit: Ingrid Richter

Bankruptcy Legalese: Translated (Part 2)

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There are so many important legal terms related to bankruptcy that we felt it prudent to devote two entire posts in our Back to Basics series to the topic. Hence, today we present you with Part 2 of what we in the legal profession and our clients lovingly refer to as bankruptcy ‘legalese.’

  • 341 hearing – Also referred to as the Meeting of Creditors, this  event takes place 21 – 40 days from the date your bankruptcy case was filed. Your trustee will head up the 341 hearing, with the purpose of investigating the validity and dischargeability of your debts, as well as any exemptions you may have. This hearing is open to all of your creditors, and you are personally required to attend.
  • Adversary proceeding – Although rare, this is a lawsuit filed by you or one of your creditors (even potentially the trustee) during the course of your bankruptcy case. Technically, an adversary proceeding is part of your bankruptcy, but it is a separate case in its own right. Reasons for filing: suspected fraud, potential preference payments, questions about whether or not a debt is dischargeable and property that is jointly owned (and therefore must be split in order for the trustee to sell it).
  • Bankruptcy code – The group of laws put into place after the Bankruptcy Reform Act (1978) that govern the entire bankruptcy process.
  • Collateral – Property that is subject to a lien. An example is a home that has been mortgaged. The collateral is the home, while the mortgage is the lien. If a creditor has the right to any collateral, they are considered to be a secured creditor*. The Bankruptcy Code gives specific protection for secured creditors and the collateral they have an interest in.
  • Liquidation – While it may sound like something you’d do with a blender, in reference to bankruptcies, liquidation is the act of selling as much of the debtor’s property as possible in order to repay as many of their debts as possible prior to discharge (chapter 7).
  • Means test – Added to the Bankruptcy Code in 2005, the means test is used as a screening tool. This tool allows the bankruptcy court to determine whether or not you “qualify” to file for bankruptcy. The factors used to determine your bankruptcy worthiness include an average of your most recent six months of income in comparison to your state’s median income and the total amount of your unsecured debts. The means test helps prevent abuse of the bankruptcy process.
  • Secured creditor* – When you borrow money from a company without any collateral involved (credit card companies, your electric company, internet service providers, fitness centers, etc) – those creditors are considered to be unsecured. Secured creditors, then, are those that have a claim to some property that you own, like a car or house. As far as creditors are concerned, it is riskier to be unsecured. Secured creditors  can seize the property they have an interest in if you fail to make good on your payments to them.

You can learn more about the terms included in our Back to Basics series as well as additional important bankruptcy verbiage here. For more detailed information about a specific bankruptcy topic, be sure to search our bankruptcy blog or call us directly. Veitengruber Law is always more than happy to help you fully understand the New Jersey bankruptcy process.

 

Image credit: Caleb Roenigk

Bankruptcy Legalese: Translated (Part 1)

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Today, our Back to Basics series continues with a look at all of the ‘legalese‘ used in association with filing for bankruptcy. Like almost any area of law, bankruptcies are chock full of legal terms that can be difficult to understand. It’s extremely important that you have a good grasp on bankruptcy legalese before filing so that you can make sound decisions regarding your case, and subsequently, your future.

When you meet with Veitengruber Law, we will take all the time it takes to ensure that you thoroughly comprehend everything that we discuss. With that being said, you can get a jump start by learning about some bankruptcy terminology before our first meeting. Therefore, we have compiled a list of the most common legal terms used in chapter 7 and chapter 13 bankruptcies in New Jersey.

Automatic stay – One of the most important bankruptcy terms, an automatic stay means that as soon as you file for bankruptcy, none of your creditors can attempt to collect any money from you until after your case has ended. An automatic stay can also help you keep your home if it’s in danger of being sold via foreclosure (Sheriff’s Sale).

Bankruptcy estate – Your estate is simply any property of value that you own or have equitable interest in at the time of your bankruptcy filing.

Creditor – People, or more likely companies, from whom you have borrowed money that you are having trouble repaying.

Debtor – In this case, the debtor is you. A debtor is a person who owes money to someone else.

Discharge – This is the bankruptcy outcome that every debtor hopes for. A bankruptcy discharge is issued by your bankruptcy judge at the end of your case, and it states that your dischargeable debts are dismissed. A discharge means you will no longer be responsible for repaying the dischargeable debts that were included in your petition and that creditors are no longer allowed to contact you regarding any debts that were discharged.

Dischargeable debts – These are debts that can be virtually erased with a bankruptcy discharge, and they include: credit card debt, medical debt, personal debt, past due utility bills, and even car loans and mortgage loans. It’s important to know, though, that if you choose to have any debts discharged in order to remove a lien*, you will lose the property at the end of your bankruptcy case.

Exemptions – If you file for chapter 7 bankruptcy, a trustee will be assigned to your case. The trustee’s job in a chapter 7 bankruptcy is to sell some of your property (called liquidation) in order to repay some of your debts. Certain property is protected or exempt from being sold. You can read about New Jersey’s bankruptcy exemptions here.

Lien* – A notice that is attached to property (your home, vehicle, etc) that makes it known that you owe a creditor money before the property is officially owned by you.

Nondischargeable debts – Certain specific debts do not qualify for bankruptcy discharge because of their high importance. Examples include: child/spousal support, student loans, fraudulent debts, and some taxes (tax liens, property taxes, certain employment taxes).

Reaffirmation – If you want to keep an item that is considered dischargeable (i.e. could be sold by the trustee), you can reaffirm the debt and continue making payments after your bankruptcy is concluded. This allows you to keep your home and vehicle (which you’ll still be required to pay for), if you so desire.

Trustee – A third party (typically another attorney) who is appointed by the bankruptcy court to be in charge of overseeing your case to ensure that nothing is missed and that all nonexempt assets are liquidated appropriately.

The bankruptcy terms we included today are some of the most common and most important legalese that you’ll come across in your bankruptcy case. Now that you have a solid grasp of the most basic bankruptcy terminology, we will delve deeper into some more complicated bankruptcy language next week. Stay tuned for Part 2!

Image credit: Dave Worley

5 Common Bankruptcy Myths: Debunked

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Without a doubt, there is no shortage of misinformation when it comes to bankruptcy. Veitengruber Law works hard to consistently provide valid, up-to-date information about bankruptcy in New Jersey to help our readers and clients educate themselves based on facts.

Today, however, we’re going to address some of the biggest bankruptcy myths and the truth that lies behind them. Much like the mythical mermaid, believing in something that isn’t based on facts won’t make it a reality any way you look at it.

  1. “You can’t discharge income taxes in bankruptcy.” For some reason, it is a common misconception that income taxes are non-dischargeable in a chapter 7 bankruptcy. The reality is that income taxes are the only type of tax debt that can be discharged! Read more about the rules associated with tax debt qualifications for bankruptcy here.
  2. “Because of the Means Test, I’ll have to file chapter 13, which won’t help me get rid of any debt, so why bother?” While the first half of this may be true, even if you don’t qualify for chapter 7 based on the Means Test, filing for chapter 13 does not automatically mean that you will have to repay all of your debts in full. In fact, most chapter 13 reorganization plans see the debtor only paying a fraction of their total debt amount.
  3. “I can’t risk ruining my spouse’s credit, so bankruptcy’s not an option.” This is something we hear constantly. In New Jersey, bankruptcy does not have to be filed jointly with your spouse. You may need to disclose how much money your spouse makes, but ultimately you can file solo and it will literally have no impact on your spouse’s credit score.
  4. “Bankruptcy is only for people who are unemployed and/or impoverished.” While we understand why this belief exists, we want to be clear that it doesn’t matter how much money you make when it comes to bankruptcy. As long as your debts and expenses outweigh your income, you will almost certainly pass the Means Test, which will qualify you to file for bankruptcy in NJ.
  5. “Any attorney can help me file for bankruptcy. The cheaper the better.” Did you know that some attorneys will take your retainer even if they have zero experience with bankruptcy law? Do your research and select a bankruptcy attorney in New Jersey who has hundreds of bankruptcy cases under his belt. Selecting a NJ lawyer with little to no bankruptcy experience may cost you less money up front, but the end result can be catastrophic.

At Veitengruber Law, we’ve made it our priority to help New Jersey debtors get out from under their debt. We provide our clients with personalized and in-depth meetings so we can evaluate your debts from every angle.

As our client, you’ll receive tailored advice and a team to walk you through the entire bankruptcy process from start to finish and beyond. Because we understand the financial strife our clients are facing, we offer free consultations and extremely flexible payment plans that fit into your reality.

“There are very few monsters who warrant the fear we have of them.” ~ Andre Gide

Image credit: AK Rockefeller

What is Credit Counseling? Is it Right for Me?

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All of the terms associated with getting out of debt can get so confusing that you may end up not even understanding which service(s) you could benefit from. That’s why we’re putting out a Back to Basics series, explaining many of the most common terms we use regularly. Look for a new Back to Basics post every week.

What is Credit Counseling?

Just as a marriage counselor sits down with a married couple in order to evaluate the state of their relationship, a credit counselor takes a good look at your finances. He will then work with you to design a plan of action that will see you paying off your debts faster, spending less money on non-essentials, and putting more money into savings.

Typically, you’ll be seeking credit counseling when you’ve found yourself deep in debt with no end in sight, but you can also seek this kind of help if you don’t have a lot of debt but want to save for retirement, pay for your child’s college education, refinance a loan, and more.

During your credit counseling sessions, you will essentially receive an education about how to improve your ‘Money IQ.’ This means that credit counseling is not just a temporary quick fix; you will learn how to maintain financial stability for good.

Who Provides Credit Counseling Services?

Firstly, you should know that there are many credit counseling services in business today who use unethical and often illegal methods to attempt to get you the results you want.

It is important to choose wisely when looking for help with your finances. If you have a lot of debt and need assistance negotiating with lenders, look for a certified and experienced NJ debt settlement law firm.

Many credit counseling services will claim to be able to help you settle your debts in addition to providing you with credit counseling assistance. The truth is that they usually don’t have the ability and necessary knowledge required to negotiate with lenders or to help you file for bankruptcy. All too often, debtors end up even deeper in debt after working with a so-called ‘credit counseling company!’

When you work with a certified debt negotiation attorney, you’ll be in good hands. Look for a New Jersey credit counseling law firm that also specializes in debt restructuring, bankruptcy, credit repair, asset protection and real estate matters (especially if your debt has pushed you into or toward foreclosure.)

How Much Does Credit Counseling Cost?

While you may be able to find a company that will quote you a remarkably low price for their services, remember the saying: “You get what you pay for.” Also – keep in mind that these companies are routinely engaging in fraudulent methods (scams) that have them promising results to customers that they simply cannot, and will never, deliver.

Rather than paying an uncertified company for credit counseling services that’ll get you nowhere fast, consider paying someone who really knows what they’re doing and get a huge return on your investment!

It can be a knee-jerk reaction to balk at the thought of hiring an attorney, but when you find the right certified New Jersey bankruptcy attorney, he will always have valuable experience in the areas of credit counseling and debt negotiation.

Will you have to pay an attorney to teach you how to get out of your unfortunate financial bind? You definitely will – but it will be more than worth it when your debts are either completely discharged (via bankruptcy), negotiated down to much lower amounts, or refinanced and restructured.

Do you think you could benefit from some high quality credit counseling? Would your life be less stressful if your finances weren’t constantly on your mind? If you want to learn more about our credit counseling program – call today and we’ll set up your free consultation. [(732) 852-7295]

We are happy to consult with you in our offices or over the phone, and we look forward to helping you.

Image credit: Coalition for ICC

Can Parking Tickets Ruin My Credit Score?

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Most of us know the feeling of discovering a parking ticket tucked not-so-discreetly under a windshield wiper. Feeling instantly frustrated, it can be tempting to crumple the entire thing and toss it into the nearest recycling bin. Unfortunately, if you’re hoping  your parking ticket(s) will just disappear, you may be in for a rude awakening.

Many people are under the impression that parking tickets are such small infractions that they can be ignored without consequences. After all, “It’s just a parking ticket,” right? Wrong. While it may start out as a simple traffic citation that likely would’ve cost you less than $100, letting a parking ticket go unpaid will cost you much more the longer you ignore it.

You may find yourself wondering just how much trouble you can get into for failing to pay a measly parking fine. What starts out as a small infraction dealt to you for using a no-parking zone can gain momentum if you leave the fine unpaid.

How can a parking ticket possibly hurt me?

To be clear, it’s not the parking ticket itself that will do the most damage. At some point,most people have been parked somewhere they shouldn’t have been, and receiving a parking violation and ticket really isn’t a huge deal – assuming you pay the fine.

The problem begins the moment you shrug off your responsibility – as soon as your fingers slip the notice out from under your windshield wiper and proceed to crush it up into a wad that means no more to you than a piece of paper to be recycled. (Bravo on the recycling, in any case.)

The second you disregard a parking (or other traffic) ticket, it becomes a debt that you have neglected to pay. The city or township that dealt you the parking ticket can report unpaid parking fines to collections. When you have a debt that has been reported to a collections agency, it will appear on your credit report and will start dragging your credit score down.

More and more cities are finding themselves with an abundance of parking tickets that are unpaid. In the past, a city with only a few unpaid tickets may not have taken any action against the offenders. However, faced with endless piles of unpaid parking tickets, these cities and townships are now left with no choice but to take action in order to receive payment. Thus, many American drivers are discovering that the parking fine they ignored six months ago has torn a hole in their credit report, causing their score to lose valuable points.

In addition to the obvious infractions of: failing to pay your mortgage payment, missing credit card payments, and neglecting unpaid medical bills, there are quite a few surprising ways to damage your credit score. It’s important to be aware of anything that may (unbeknownst to you) be pulling your credit score lower and lower. Checking your credit report on a regular basis will ensure that you are never in the dark about a debt that needs your attention.

 

Image credit: Paul Sableman

After Bankruptcy: Am I Doomed or Can I Rebuild My Credit?

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If all (or most) of your debts were discharged at the end of your bankruptcy case, you filed for chapter 7 bankruptcy. This type of bankruptcy is sometimes referred to as a liquidation bankruptcy because some of your assets will be sold so that you can repay at least some of your debts. Chapter 7 bankruptcies will appear on your credit report for the next ten years.

When you first file for bankruptcy, you’ll be required to take what is called the “Means Test.” This test will tell you whether it’s feasible for you to repay some of your debts or none of your debts. In the event that you are capable of repaying at least some of your debts, you’ll file for Chapter 13 bankruptcy. This will allow you to retain possession of all of your property, and a repayment schedule that you can achieve will be drafted. Chapter 13 bankruptcies stay on your credit report for seven years.

The fact that a bankruptcy is visible on a credit report for so long is a big deterrent to some debtors who could really benefit from a bankruptcy. The unknown is quite frightening – what will happen to you in the seven or ten years following your bankruptcy case?

We won’t sugar coat it and tell you that filing for bankruptcy will immediately do good things to your credit score. The truth is that any bankruptcy will temporarily drop your credit score significantly. This is something you have to accept before you enter the process. All potential lenders will see that you filed for bankruptcy, and it may be quite difficult to get a substantial loan.

With that being said, one of the things we do for our clients is to help them rebuild their credit score after a bankruptcy. You are not doomed! In fact, if you were really in over your head, filing for bankruptcy is one of the best decisions you could ever make. You’ve now freed up a lot more of your income and should have a much easier time paying your bills.

At the end of your bankruptcy case, your debts will either be wiped out (chapter 7) or renegotiated into a schedule that you’ll be able to make payments on without going into further debt (chapter 13).

The lowest your credit score will ever dip is immediately after your bankruptcy case is finalized. The best part about that is that you have nowhere to go but up!

Rebuilding your credit score after bankruptcy

Naturally, you can’t just wait seven to ten years for the bankruptcy to disappear from your credit report. You have a life to live in the meantime! Even with a bankruptcy on your credit report, raising your credit score can be accomplished. Use the following ideas to help boost your score:

  • Check your credit report. First and foremost, request copies of your credit report from all three credit reporting agencies. This will give you a ground zero starting point and will also allow you to check for any errors. Make sure that all of your (formerly outstanding) debts no longer appear on your report if they were discharged in a chapter 7 bankruptcy. Also, be sure that any renegotiated debts are reported accurately if you filed for chapter 13. Continue checking your credit report regularly from here on out.
  • Pay your bills on time. Before you even think about applying for a new credit card or loan, take several months (at minimum) to simply make sure your living expenses are paid in full and on time. This includes: mortgage/rent, utilities, cell phone, cable/satellite, internet connection, HOA fees, membership fees and any remaining debts (if they were reorganized in a chapter 13).
  • Set up a budget. Aside from making sure the bills mentioned above are promptly paid, you can make sure you don’t repeat any of your overspending habits by living on a rather strict budget. By allotting a specific amount of money for each of your monthly expenditures, you’ll give yourself a safeguard against spending more than you can afford.
  • Get new credit. In order for your credit score to rise faster, you’ll have to prove that you can handle owning a credit card and making the necessary payments each month. A bankruptcy on your record means that getting a new credit card won’t be easy, but you can apply for a secured card that is safeguarded by a deposit made by you. Every month that you successfully make your payment on time, this action will be reported to the credit bureaus, which will give your credit score a boost.

As time goes by and you manage to stay within your spending limits, you will see your credit score rise. Most banks and lenders will start to offer you lower interest rates again on an unsecured card once your score reaches 650 – some even at 600. If you still feel like you may lose spending control with a regular credit card, don’t apply for any. It’s better to watch your score rise slowly than to find yourself in over your head in debt once again.

For more information about rebuilding your credit after a bankruptcy, reach out to Veitengruber Law. We can also walk you through the process of filing for bankruptcy, and remember, we won’t quit until your credit score is repaired to your level of satisfaction.

 

Image credit: Frankie Leon