How Does Chapter 7 Bankruptcy Affect Credit
It amazes me every time I hear someone with high debt ponder the effect of bankruptcy on a credit report What good is A-1 credit if you are drowning in debt? It is nothing more than a total denial of the debt situation For example, since the credit rating is good, some believe that the debt load is under control However, those persons are not looking at the big picture Debt is still debt despite a good credit rating or credit score In fact, someone carrying high debt is less likely to receive future credit than one who clears the table and starts over Eventually, the one who starts over is better off . .It is true that a Chapter 7 bankruptcy filing stays on a credit report for ten years However, that person can receive future credit long before that ten year period has expired In fact, credit can be obtained within six months to two years after filing bankruptcy I have received feedback from hundreds of prior chapter seven filers who were receiving credit solicitations before their case had even gone to discharge Although those recent offers were likely bad deals, the offers still were made As more time passes from the filing until the attempt at credit, the better the credit offer will be It also factors on whether the person has good income and no negative credit since their bankruptcy filing To think that one would not have an offer of credit for ten years is simply wrong .
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The New Bankruptcy Law — How Will It Affect Debt Negotiation?
In April 2005, Congress made sweeping changes in U.S. bankruptcy law that will go into effect on October 17, 2005. It’s called the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” and it means big trouble for Americans struggling with debt problems. What effect will the new bankruptcy law have on the practice of Debt Settlement (also called Debt Negotiation)? Will creditors still be willing to negotiate with consumers seeking to avoid bankruptcy? Will lump-sum settlements for 30%, 40%, 50% still be possible now that this tough new law has been passed? The short answer is “YES.” It will be “business as usual” in the collection industry. People that choose to file bankruptcy will definitely be affected for the worse, as I’ll outline below, but those who choose to privately negotiate their way out of debt will notice very little difference. Creditors will still negotiate. Deals will still be made. And nothing much will change in the world of collections. In fact, a viable alternative to bankruptcy will be needed more than ever. The credit card banks lobbied with millions of dollars to get this law passed. They’ve been working at it for about a decade. Now they are celebrating. These are the folks who think the bankruptcy system has been abused by wealthy individuals, who have defrauded creditors when they could have repaid their debts. The facts tell a different story: 1. During the period from 1995 to 2004, bankruptcy filings doubled, while in that same period, credit card industry profits TRIPLED. 2. Credit card companies have not been held accountable for their targeting of “easy credit” to individuals who could not afford such loans, which in turn has contributed to the wave of bankruptcies over the past decade. 3. For people 60 or older, 85% of bankruptcies are caused by medical bills or job loss. 4. A divorced woman is 300% more likely to file bankruptcy than a married woman. 5. African-American and Hispanic homeowners are 500% more likely to file bankruptcy than white, non-Hispanic homeowners. 6. Approximately half of all bankruptcies are filed because of medical expenses due to lack of health insurance, or lack of adequate coverage leading to uncovered expenses. 7. The median income of bankruptcy filers is $25,000. (So much for the “rich” abusing the system.) The new law was a GIFT to the credit card banks, pure and simple. Some estimates show that it will add another $5 billion to the industry’s bottom line. In other words, the bill is about profits and not much else. Since my whole approach is about avoiding bankruptcy, I won’t go into a detailed analysis of the provisions of the new law. But just to summarize, the net effect is that many (if not most) people seeking relief under Chapter 7 bankruptcy will be forced to file under the Chapter 13 version instead. In plain English, that means that most filers will be forced to pay back a portion of the debt over a 5-year schedule set by the court. One of the worst aspects of the new bill is the use of IRS “allowable” expense schedules for determining your monthly budget. In other words, your actual living expense are thrown out the window in favor of the IRS standards (and we all know how generous the IRS can be!). So if your actual rent is $1,300 per month, and the IRS says it should be $1,045 for your county and state, that’s TOUGH! The court will only allow the $1,045, period. In short, people attempting to file bankruptcy after October 17, 2005 are in for an extremely rude awakening! Goodbye cell phones, cable TV, high-speed Internet access, movies, meals with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts. So what makes me so certain that the banks will be as eager as ever to settle with consumers for 50 cents on the dollar or less? Simple. Two words: Stealth Bankruptcy. Hundreds of thousands of Americans are going to discover the new reality of this tough law, and they are going to forgo the court system of filing bankruptcy in lieu of what I call “stealth bankruptcy.” A stealth bankruptcy is when you move (with no forwarding address), change your phone number, and drop off the radar screen to live on an all-cash, no-credit basis. Many people already choose this path rather than deal with the invasion of privacy that comes with formal bankruptcy. After the new law goes into effect, more people than ever will take this approach. Besides the problem of stealth bankruptcy, there are other good reasons the banks will settle as they always have. Consider these points: A. The creditor doesn’t know whether or not you’ll still qualify for Chapter 7 or Chapter 13 bankruptcy. They still face the risk that you will qualify for Chapter 7 and end up discharging your debt in full, which means they get NOTHING. B. Even if you file Chapter 13 under the new guidelines, the creditor will still only receive 30-50% of the debt on average (much less in some cases). C. Under Chapter 13, it will still take the creditors 3-5 YEARS to recover that 30-50%. D. A lump-sum of 30-50% TODAY is far better than the same amount collected over 3-5 years. Of course, I certainly expect debt collectors to use the new law to harass and intimidate people who don?t know and understand their rights. You can expect them to say things like, “You can?t file bankruptcy under the new law, so you?d better pay up today!” They will bully and threaten as always, but at the end of the day, they will still accept reasonable settlements. After October 17, 2005, it will still be “business as usual” in the world of debt collections. Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former executive in the debt settlement industry, he teaches the do-it-yourself method of debt negotiation. Audio-CD material plus expert personal coaching helps consumers achieve professional results at a fraction of the cost. <a href="http://www.zipdebt.com" target="_blank">http://www.zipdebt.com</a>
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Don t Lose Your Home! Contact a Bankruptcy Attorney Today!
The decision to file bankruptcy is a serious decision but it is a decision that can give you a fresh start if there is no other way out. Bankruptcy is a legal way to discharge unsecured debt that can provide an overwhelmed debtor with a new beginning. It may be possible to keep your present home and your car after filing bankruptcy. A law firm such as the Malaise Law Firm, with attorneys skilled in San Antonio baenkruptcy law can help you decide if bankruptcy is the correct decision for your particular situation. If the decision is made to file bankruptcy, they will explain to you the pros and cons of the two types of bankruptcy available to individuals, Chapter 7 and Chapter 13. Chapter 7 is what most people usually think of as bankruptcy. In Chapter 7 bankruptcy, a debtor s non-exempt assets are liquidated or sold with the proceeds used to pay toward unsecured debts such as credit cards, loans, and medical bills. In the majority of bankruptcy cases people do not lose any property and the unsecured creditors get nothing. Several months after filing bankruptcy the unsecured debts are discharged and the creditors can never collect on the debt. A secured creditor may still enforce a lien to recover property secured by the lien. Chapter 13 is a debt reorganization or consolidation bankruptcy. If a debtor has regular monthly income, their debts including mortgage arrears, car payments, credit card bills, medical bills, loans, student loans, etc. are combined into one low monthly payment. Since the debtor is paying back their creditors through a repayment plan, the debtor does not risk losing their assets as they may under Chapter 7 bankruptcy laws. During the repayment plan creditors are prevented from contacting the debtor without first going through the debtor s bankruptcy attorney and the court. Millions of people declared bankruptcy in 2007 to get the fresh start they needed. Contrary to popular belief, your credit is not permanently damaged and it is still possible to get credit after filing bankruptcy. At the Malaise Law Firm, our San Antonio bankruptcy attorneys have over 40 years experience helping people file bankruptcy, with two board certified attorneys. We put our emphasis on helping our clients do what is in their best interest and our clients needs always come first. The Malaise Law Firm serves the residents of San Antonio, Houston, Dallas, Fort Worth, Corpus Christi, Harlingen, Brownsville, and McAllen, Texas with all of their legal needs including bankruptcy. If you would like to see what we can do to help you please contact The Malaise Law firm today at http://www.malaiselawfirm.com/contactus or call 1-800-BANKRUPT for immediate assistance. or call 1-800-BANKRUPT for immediate assistance.Tom Moss writes about <a href ="http://www.MalaiseLawFirm.com">Bankruptcy San Antonio</a> laws.
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