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The Debt Phoenix - Rising From the Ashes of Debt and Bankruptcy to Financial Freedom

A step by step guide to dealing with the emotional and financial problems of debt and bankruptcy and using proven strategies to overcome them and rise to a future of financial freedom.

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The Debt Phoenix

How to Purchase a House After Chapter 7 Bankruptcy – Here’s Some Strategies You Can Use

July 23, 2019 by The Debt Phoenix Leave a Comment

How to Purchase a House After Chapter 7 Bankruptcy – Here’s Some Strategies You Can Use

One of the biggest questions I get is “How can I get into a new home after filing bankruptcy?” For this article, I will focus on how to do so after filing Chapter 7, as the process is different when you filed a Chapter 13.

First, let’s get the standard advice you will see all over the internet out of the way. If you filed Chapter 7 bankruptcy, there are two usual waiting periods:

  • FHA loans – 2 years after your discharge date
  • Conventional loans – 4 years after your discharge date

Should You Really Wait 4 Years to Get a Home Loan?

Note that the date is generally after your discharge date, not when you filed. This can seem like a long wait, but for most people it is advisable to wait out the full 4 years before you try to purchase a home again. Why wait the full 4 years? The first reason is because FHA loans have a lot of costs involved. For example, there is a 1.75% origination fee. That means on a $300,000 loan you will have an additional $5,250 added to the loan balance (after subtracting for your down payment.)

In addition, ALL FHA loans require Mortgage Insurance Premiums (MIP). This is an additional fee that you pay every month that is a complete waste of money. Generally, the amount will be around $200-$250 per month, but will fluctuate with the size of the loan. This is a lot of money to waste every month.

The one good thing about FHA loans is that the interest rate is usually lower. Sometimes the lower interest rate can balance out with the MIP payment, which means a regular loan with no MIP with a higher interest rate may end up being about the same amount of loss to interest or MIP every month.

Again, my first suggestion is to keep renting until you can get a conventional loan the normal way with 20% down and a good cash backup plan. Paying all the extensive fees and moving costs with getting a new home when you are fresh out of bankruptcy is not a good idea. You will be much better off maxing out your 401k contributions and going with a low rent. In fact, low rent is a great way to save because it is a fixed cost. You never have to worry about expensive repairs which is outstanding. You need to relearn how to save and invest for the long term and get back on track.

Is It Possible To Get A Mortgage Much Sooner Than 2 or 4 Years?

Yes, it is possible. You can get loans that are neither FHA, nor conventional, with a shorter waiting period. You will generally need 10-15% as a down payment. You will also have to pay a higher interest rate, which makes these not attractive. However, if you have a high income or other unique circumstances, you can purchase a home very quickly. Just realize that you are paying a big premium to do so and you would be better off renting for cheap in nearly all situations.

Rent Cheaply – Live Bigly!

You want to rent a place that is as cheap as you can. It’s very simple – the lower your rent, the more you can save for a house. You must learn how to save a significant portion of your money every month or you will never be able to handle the financial burden of a new house. It is never good to be right at the edge of affordability. You want to be saving around 50% of your pretax income! This sounds like a lot, but it is definitely possible! You want to be taking full advantage of tax advantaged accounts, such as 401ks and IRAs. This is a much higher priority than purchasing a house.

There is nothing wrong with renting, there are only problems with renters! The problem with most renters is they have low income and they spend it all. If you can increase your income, pay low rent, and maximize your savings, you can have huge rewards in the future, far above what is expected for your income!

Final Recommendation – Rent Cheaply, Save Bigly! Purchase a home 4 years after bankruptcy discharge with a big cash cushion and with lots of retirement savings! Get your saving and budgeting on track and you’ll be in great shape for the rest of your life!

Filed Under: Bankruptcy, Credit Cards, Debt Recovery

Included in Bankruptcy (IIB) Or Not – How to Get Back In With Lenders After Bankruptcy

July 19, 2019 by The Debt Phoenix Leave a Comment

Included in Bankruptcy (IIB) Or Not – How to Get Back In With Lenders After Bankruptcy

One topic you will often see come up after filing for Bankruptcy and rebuilding your credit is whether you included an individual lender in your bankruptcy filing. This is often referenced by the abbreviation IIB (Included in bankruptcy).

Let’s use an example to make this easy to understand. If you had a Chase credit card that you built up a large balance on and eventually you filed bankruptcy, then Chase would be Included in Bankruptcy (IIB). It doesn’t matter what type of credit card it was – a Chase Freedom, Reserve, Preferred, or even one of their branded cards such as the Hyatt Chase card or the IHG Chase card. If any of these cards had a balance on them, then you included Chase in your bankruptcy filing.

This is actually a very big deal. Any lender that you include in your filing means that you will usually have a very difficult time getting another credit card or loan from them again. Let’s take a look at what certain lenders usually do:

American Express –What Are Their Rules After Including Them In Bankruptcy?

This is one of the hardest lenders to EVER get a credit card or charge card from again if you bankrupt out of an obligation you had with them. American Express typically bans you for LIFE! This includes being an authorized user on any card. If you have built up a balance on an American Express card, one good strategy can be to pay that card off and then close all of their cards BEFORE you file for bankruptcy. Remember you can only do this if your bankruptcy is a long time away! You cannot pay them off right before you file for bankruptcy. Just keep in mind that if you bankrupt on AMEX, you will be gone for life.

Chase- How Do You Get Back In With Chase After a Chapter 7 Bankruptcy?

– Another very difficult issuer if you include them in a bankruptcy. Chase will usually wait until the bankruptcy is off your credit report before giving you another chance. You are looking at 7-10 years before getting back in with Chase. The good part about Chase is that you can still become an authorized user on their cards. If you have a spouse then this is a great way to keep generating strong rewards points for your family. There are some reports of people being able to get back in with Chase while the bankruptcy is still reporting, however you will definitely need to call Chase after you apply and plead your case. The more time that passes with Chase the more of a chance you will have.

Citibank – How Do You Get a Credit Card with Citi After Bankruptcy?

Citi is also known for being hard on people who included them in bankruptcy. Expect to wait 4+ years to even have a shot, and you’ll most likely need to wait until the bankruptcy is off your record. A good follow up phone call to their reconsideration department may help here, but you’ll need to be good at pleading your case.

Capital One – The Number One Credit Card Company After Filing Bankruptcy?

Now let’s talk about the #1 card issuer for those who have previously filed bankruptcy! I owed over $50,000 to Capital One and bankrupted out of that entire amount. They took what was seemingly a big loss on my account. (However, if you add up all the interest charges I paid them and all the processing fees they generated on me over the years, the loss wasn’t nearly as big!) Within 1 year of being discharged from bankruptcy, I was bank in with them with their top tier Capital One Venture card with a credit limit of $20,000! This is truly hard to believe, but Capital One is the most lenient mainstream issuer of credit. What’s the best credit card issuer to go with after bankruptcy? It is for sure Capital One. You’ll see that my general recommendation is to avoid the shady credit card issuers and instead start with a good Capital One card with no annual fee, like their Platinum card. My suggestion is to use a debit card until you can get this after bankruptcy.

There are many more issuers all with their different rules and regulations. Keep in mind as well that there are always exceptions to any rule. If you bankrupted out of a small amount on one card you’ll have a better chance of getting back in with many issuers.

Keep all this in mind if you are planning to file for bankruptcy. I would absolutely pay off Amex and close their cards a long time before you file if it is at all possible. Obviously if you have run up large charges with them you’ll probably be stuck, but consider it as part of your overall bankruptcy strategy with your attorney.

 

Filed Under: Bankruptcy, Credit Cards, Credit Repair, Debt Recovery

Is Bankruptcy a Catastrophe or a Big Relief? Dealing with Debt and Resolving it Now…

June 11, 2019 by The Debt Phoenix Leave a Comment

Is Bankruptcy a Catastrophe or a Big Relief? Dealing with Debt and Resolving it Now…

Sometimes it’s hard to fully understand bankruptcy when you are going through the situation yourself. When you’re actively dealing with a big debt problem, it always feels like a catastrophe and that you are a total failure.

I know for me that is what it felt like – a gigantic pile of debt overwhelming me and destroying my life. 30+ debt collection calls every day, endless debt collection mail, lawsuits being threatened (and about to begin). It’s really one of the hardest things people can go through. The hardest part is that there is no support from family and friends at all. In fact, debt troubles are something no one tells anyone about. I know I kept it all a secret. It’s just way too embarrassing to appear as a big failure before everyone.

Are Large Debts Worse Than Scary Illnesses?

In some ways dealing with gigantic debt is worse than a scary illness or similar. Here’s a good example of how that can be the case. How many people do you see on Facebook who tell the whole world (or at least all of their family and friends on Facebook!) that they have a serious illness. (Cancer, diabetes, heart attack, etc.) What is the result when they share that on Facebook? They receive a huge outpouring of support! Everyone feels bad for them and many will try to help them out deal with their problems in their day to day life. It can really feel like everyone loves you and wants to help you out! It can make your illness a lot more manageable.

Does Anyone Post Debt Troubles on Facebook?

Not so for debt troubles. When was the last time you ever saw anyone post that they are in huge debt and need help managing their bankruptcy on Facebook? Probably never. Yet there are 500,000-1,000,000 bankruptcy filings every year in the USA alone! Yet no one ever talks about it with their friends and family. This makes it very difficult – as debtors often suffer alone.

This means that dealing with your debt can be a big relief once it is finally over. You don’t have to feel overwhelmed about it anymore and can more easily interact with family and friends because you don’t have a huge dark cloud hanging over your head.

The Shame of Debt Can Be Overwhelming

The shame and pain that big debt causes can be truly overwhelming. Not only are you receiving dozens of contacts from mean and angry debt collectors, but you have to suffer in silence without any support from those you know and love. You know that if you revealed publicly a big debt problem that you would be judged harshly and that people would be mocking you behind your back. You know they would be saying things like, “wow, that’s pathetic” or, “wow, he should never have started that business, what a stupid idea that was” All of these insults you know will be there even if people aren’t quite willing to say these things to your face. Then if people do know, you know that they will always know. Even decades from now they’ll remember your failure. So it often seems best to just tell nobody. As long as you don’t tell anyone, no one will know. You can file bankruptcy and no one will find out. This is all well and good except that you get no support or kindness offered towards you. All you get is debt collectors contacting you all day.

Clear Your Debts, Restore Your Peace

This is why the clearing of all your debt is such a big relief. It results in your freedom.  It is essential to clear your debts as fast as possible (keeping in mind certain reasons why it might be smart to wait to file for bankruptcy) and get yourself back to a normal life as soon as possible. Consult a bankruptcy lawyer right away (it’s free) and then put into action a plan to reclaim your life. Rebuilding your finances can take some time, but reclaiming peace in your life can happen almost instantly.

Filed Under: Bankruptcy, Debt Recovery

Good Debt vs Bad Debt: Understanding the Difference

May 10, 2019 by The Debt Phoenix Leave a Comment

While many people think of debt as being a bad thing, this is not always the case. Some debts are brought on by careless spending and can lead to problems for a person. Some debts, considered good debts, are those that are needed for big purchases such as a home. This kind of debt brings value to a person’s life. Understanding the differences in good and bad debts can help individuals to better manage their finances and even improve their financial outlook with debt consolidation.

What Is Considered Good Debt?

There are some things that are worth going into debt over. If going into debt brings you something that is going to generate an income or increase net worth, then it may be worth it. Whenever someone enters into debt, they need to be sure they carefully consider their options before making a final decision. Debt should never be entered into lightly.

Seeking a college education is worth going into debt as long as you are choosing an educational path that will lead to a solid career. Those with higher educations are generally able to secure a higher paying job. Investing in your future is always a sound decision and a good reason for going into debt.

Purchasing real estate is a type of good debt. Whether you are purchasing a home to live in or property for investment, both can improve net worth. Many people purchase a home and live it in for a few years before moving out and using the home as a rental. A rental property can bring in a steady source of income.

Starting a small business is also considered good debt. As long as you have carefully researched and are prepared to work hard, owning a small business can help to increase your net worth and income.

While good debts are considered more acceptable than bad, debt should never be thoughtlessly pursued. Whenever considering going into debt, think about whether or not the purchase is going to benefit your future income in some way. If it is not, you may be heading towards a frivolous purchase that is later a regret. Many people who get in over their heads with debt find themselves there because of poor financial decisions.

What Are Bad Debts?

Bad debts are those that are used to purchase items that will not add value or will depreciate over time. Generally speaking, you should avoid debts that will not increase your net worth or add income. For this type of purchase, it is wise for individuals to save money and make a cash purchase instead of creating more debt.

A new car purchase is bad debt. Cars immediately begin depreciating in value. New cars are expensive and they will not increase your net worth or give you income. Many people purchase a new car for pride reasons. Instead of getting into debt, it is wise to save money and purchase a used car with savings.

Credit cards are the worst of bad debts. The interest rates for this type of debt are often much worse than consumer loans. Because of the setup of payments, they are stretched out in such a way as to cause higher amounts of interest to be charged. Credit card debt should be avoided as much as possible.

Clothing, goods and services, and consumables should never warrant going into debt. These expenses can sometimes be frivolous. Going into debt for vacations, new wardrobes, and other goods is a waste of time. The interest paid on these debts is wasted and could have spent more wisely.

Some Debts Are Neither Good or Bad

In some cases, debt is not necessarily good or bad. One such case is debt consolidation loans. If someone is in over their heads with high-interest debt, taking on a debt consolidation loan can be helpful.

Using a debt consolidation loan to pay off high-interest bad debts will help to decrease the amount owed. The most important tip for obtaining a debt consolidation loan is to use the extra money that is being saved to pay off other debts. By taking this strategy, you will be able to pay off your debts much faster and reduce the amount of interest that is paid.

Conclusion

Making the right choices when going into debt is essential. Choosing good debts helps to increase your net worth and income, but they should not be pursued often. With too much debt, individuals find themselves struggling to make payments and the interest can become overwhelming.

When debt becomes a big problem, a consolidation loan may be beneficial. Using the money to pay off the high-interest debts that are owed can lessen the payments, freeing up money to pay off other debts. Taking on debt can sometimes be a good thing, as long as it is approached sensibly.

Filed Under: Bankruptcy, Debt Recovery

Going Bankrupt in Your 20s-What Debtors Must Know Today

May 8, 2019 by The Debt Phoenix Leave a Comment

Getting into debt takes very little effort on a person’s part. Paying off debt once it has amassed tends to be extremely difficult. Individuals often underestimate how much they will pay in interest and other fees and find they are in over their head in little time. For this reason, numerous people in their twenties are now opting to file for bankruptcy to secure a better financial future. Even those who come from a financially stable family may find they are in this situation. However, is bankruptcy the best option?

Chapter 7 Bankruptcy

Chapter 7 bankruptcy erases a person’s debt in full with certain exceptions. This provides the person with a clean slate to begin again. However, numerous individuals find the debt that remains is still overwhelming and they aren’t better off financially like they imagined. Furthermore, certain assets must be surrendered as part of the process, and bankruptcy attorneys charge a fee for their assistance. This fee is paid either as a lump sum at the beginning of the process or over a period of several weeks.

Individuals must recognize certain types of debt will not be erased when this option is selected. Student loans are very difficult to get discharged as part of a bankruptcy and the same is true of child support obligations. The debtor needs to speak to an experienced attorney to learn which items he or she may be able to keep as part of this process and which debts will remain once the bankruptcy filing has been approved.

Chapter 13 Bankruptcy

In contrast, chapter 13 bankruptcy enables the debtor to retain some of his or her assets. Nevertheless, the debt is not erased but must be paid over a period of three to five years. Any debt remaining at the end of the monthly payment plan is then erased. With this option, individuals find the attorney fee is rolled into the monthly payment as opposed to being due at the start of the process. The no-fee-up-front practice remains common among bankruptcy attorneys and the fee tends to be higher than if paid up front. Furthermore, individuals who find they cannot adhere to the repayment plan as agreed will have their case dismissed and the debt remains their responsibility.

Duties of the Attorney

Once an individual files for bankruptcy, he or she is instructed not to speak to creditors. The attorney handles all communications with creditors when the paperwork has been filed, and the debtor stops making payments on the debt. Furthermore, creditors are prohibited by law to contact a debtor following a bankruptcy filing. Be aware the first payment of the repayment plan is also due before the first court hearing on the matter.

The Bankruptcy Hearing

A person may be hesitant to file for bankruptcy as he or she fears appearing in court. However, most cases of this type are handled in a casual manner and the entire process within the courtroom may only take a matter of minutes. Once the filing has been approved, the debtor is officially bankrupt. Those who filed for Chapter 7 find the majority of their debt has been erased, in most cases, and individuals who filed for Chapter 13 will continue to make payments on the payment plan for the predetermined period of time.

The Benefits of Bankruptcy

Debtors who file for bankruptcy often feel relief upon doing so. They have a plan to deal with their finances and can improve their financial situation in less time than they originally imagined. Much of the debt may be erased, making it easier to pay on any debt that remains. However, there are drawbacks to this process that individuals need to be aware of.

The Drawbacks of Filing for Bankruptcy

Bankruptcy typically results in a person’s credit score dropping, and this can have a negative impact on the individual’s ability to secure credit, rent an apartment, obtain a mortgage, or secure a job. Furthermore, the person must report the bankruptcy on various official documents the rest of his or her life, and the bankruptcy is a matter of public record. Anyone who wishes to obtain information about this legal action can do so easily.

Other Options

Bankruptcy isn’t the only option for those individuals who find they are drowning in debt. A person may wish to look into debt consolidation loans, work directly with creditors to pay down the debt, or borrow from family and friends to get their head above water once again. Each option has its benefits and drawbacks that need to be considered before any decision is made. What works for one individual may not be appropriate for another, so be sure to take the individual circumstances into consideration when weighing each choice.

Admitting to overwhelming debt is something individuals don’t wish to do. However, this is the first step in overcoming the problem and securing a financial future that is significantly brighter. A person can then thoroughly evaluate his or her debt relief options to determine which solution best meets his or her needs.

Filed Under: Bankruptcy, Debt Recovery

Mental Strategies for Dealing With Debt Collections – And Staying Sane In The Process

April 30, 2019 by The Debt Phoenix Leave a Comment

Debt collections is often much more mentally and psychologically challenging than the actual collections themselves. Let’s take a look at a variety of ways to handle this mental challenge.

Take a Long Term View

The first step to realize is that your debt situation is a passing thing.  It WILL be resolved someday. It is not a permanent situation. You always have a way out. Try to step out of the immediate situation and acknowledge the simple reality which is:

  1. I have a lot of debt that I can’t pay
  2. I need to create a plan that will resolve the debt

Breaking it down into simple steps will allow you to focus on taking the needed action to resolve your debt issues.

Ignore the Debt Collection Calls and Letters

Pay attention to this one – when you know the status of all of your debts, you should start ignoring the debt collection calls and letters. All they are are pieces of paper and words on your voicemail. There’s no need to read the same debt letter for the 8th time or listen to the same voicemail for the 20th time. Once you have a plan in place, simply follow your plan to resolve the debt and ignore all the noise around you.

This is not to say that you should not understand how much you owe and who you owe it to, or that you should simply ignore debt collectors with no plan. Rather, that once you have a plan, such as a plan to file bankruptcy in 2 months, you no longer need to pay any attention to debt collectors.

Turn Your Phone to Silent

This is an easy one. Turn all your phones to silent so you don’t have to hear them ring 30 times a day! Keep focused on your plan.

Discuss Your Plan With Your Attorney or Debt Counselor

One great way to not have so much stress is to put that burden on your lawyer or debt counselor. Let them handle your situation and help you make the right decisions. Although the situation may be very emotional for you, lawyers see these tough debt situations every day. By giving your professional the stress of the situation, you can keep your peace for yourself.

Take It Easy On Your Loved Ones

Your family members and loved ones don’t need to bear the burden of the stress as well. Discuss it with your spouse and create your plan, but don’t allow your debt to turn into fighting and yelling. I know, it’s easier said than done, but it’s something you need to strive for. The best way to avoid fighting is to create a plan! If you have a plan in place with your spouse to get out of debt you can focus on just working your plan rather than fighting. One good way to do this is to go to a bankruptcy attorney together so you can look at your finances realistically and get a good plan going.

Most Importantly – Go Easy on Yourself

Once you’ve gotten into a difficult financial situation, go easy on yourself. This means that there’s no use beating yourself up now. Accept that you made mistakes, and then move forward to correct them and resolve not to make those same mistakes again. If you beat yourself up too much you’ll be too filled with anger at yourself to analyze your situation with the patience and calm attitude that is needed. So, keep your focus on the goal – resolving your debt – and go easy on yourself!

Filed Under: Bankruptcy, Debt Recovery

Here’s How To Answer When Debt Collectors Call You

April 30, 2019 by The Debt Phoenix Leave a Comment

One of the scariest things you may encounter when you are considering a bankruptcy or you are in a tough debt situation is the endless calls from debt collectors.

At my peak, I was getting over 28 calls per day from debt collectors. That’s a lot of stress and can cause you a lot of anxiety. Through it all I was able to stay very calm and focused on my plan for getting rid of my debt, which in my case was bankruptcy.

Here’s the strategies I used to keep calm and move forward.

Never Answer a Call From A Debt Collector (Without a Plan)

You should never answer a call from a debt collector. Debt collectors are trained specialists designed to make you feel guilty and to take any and every possible dollar from you. Nothing is to be gained by talking to them. Just let all of the calls go to your voicemail. You may have a misconception that because you have a cell phone, that debt collectors should not be able to call you at that number. That is false. Since you have a relationship with the company that you owe money to, they are certainly allowed to call you to collect the debt owed.

Make sure you set all of your phones to silent mode at all times. There is nothing worse than actually hearing the phone ringing all day. Flip your cell phone over so you don’t see the calls coming in. I remember how many times I would have it flipped over and then an hour later I would take a look and see 7 calls with 7 voicemail messages left. At the beginning, it was a bit stressful, but quickly I learned to just ignore them. They are just numbers on a screen! Don’t be worried – rather – focus on your plan for eliminating the debt in the best way possible.

How to Answer a Debt Collection Call at Work

One of the scariest moments is when a debt collector calls you on your work phone. At work, you may be forced to answer the phone because you aren’t sure if it is a business contact or not. All of a sudden, you may find yourself on the phone with a debt collector. The first thing a debt collector will always do is verify your identity. They will ask you your name, and they will not start talking about your debt until you confirm it is you. For example, when you pick up the phone and say “Hello?” they will usually say, “John Doe?” or something similar to get you to quickly confirm your identity. Once you respond yes automatically, they will go right into debt collection mode.

Here’s how to respond. Once you realize it is a debt collector, say this: “I can’t take personal calls at work. Please don’t call me here anymore.” Then you hang up. Say nothing else. By law, they will no longer be able to call you at work anymore! This is a great strategy. Also, if coworkers are nearby it’s easy to play it off as someone trying to sell you something or someone calling you about some type of home service. (house cleaners, house repairs, etc.)

 

 

Filed Under: Bankruptcy, Debt Recovery

Should I Reaffirm My Debts in Chapter 7 Bankruptcy? Here’s Why Maybe You Shouldn’t

April 24, 2019 by The Debt Phoenix Leave a Comment

One of the things that you may be most concerned about when you are considering filing for Chapter 7 bankruptcy is whether you should reaffirm your debts or not. Usually people think like this when they are worried about losing something, like a car or a house, or they want to start rebuilding their credit right away with a reaffirmed loan.

The first thing you should realize is that you WILL need to list all of these debts in your bankruptcy filing even if you want to reaffirm them. Next, you should understand that the vast majority of lawyers are not going to help you with reaffirming a loan in a chapter 7 bankruptcy. Why? The reason is because there is very little good reason to do so. If you are current on your car loan and house loan, all you have to do is keep paying on it and you will be able to keep it. The bank will not be able to take these items unless you stop paying on them.

In order to get a loan reaffirmed you are going to have to absolutely make sure your lawyer goes through the process to get it reaffirmed. Unless you present yourself as extremely intelligent and have a great reason for it, they still probably won’t help you. Sometimes lawyers will even say things like “Sure you can reaffirm loans if you want to” but then they won’t actually follow through. Sometimes lawyers are in a rush and also they know that there really is not much benefit to you to reaffirm. The trustee may also question a reaffirmation, adding another layer to the process.

Here’s Why You Probably Shouldn’t Reaffirm Any Loans

The reasons to not reaffirm are many. For example, if you do not reaffirm a car loan but just keep paying on it after the bankruptcy, you will be able to keep the car and when you pay it off you will get the title. If for some reason you later realize the payments are way too high, or you realize that you are underwater on the loan (owe more than it is worth) all you have to do is stop paying on it and the bank will repossess it eventually and you will not take any credit hit. If you do pay the car off you will get the title and own it and it will be yours. The same is true for the house.

In my bankruptcy I kept both my house and my car. Both loans were discharged in the bankruptcy proceedings. However, I kept paying on both of them and was current on them at the time of filing. I eventually paid off the car and then received the title, so it is 100% mine now. That car remains my daily driver and it was a great choice.

For my house, I kept paying on it for some years and then sold it. I kept all the proceeds. (The house was exempted in my bankruptcy)

In short, be very careful with trying to do a reaffirmation. Usually you just aren’t understanding properly what will happen in your bankruptcy and are too worried about keeping low value cars or houses. Just realize that you can keep these things if you keep your payments current. It’s better to have a 100% clean start in bankruptcy.

 

 

Filed Under: Bankruptcy, Debt Recovery

Choosing and Preparing for Chapter 7 Bankruptcy – A Step by Step Guide to All Of The Things to Consider

April 20, 2019 by The Debt Phoenix Leave a Comment

After meeting with several hundred clients over the years, lawyers often see common issues in bankruptcy cases. Though some of these are more serious than others are, all may have a substantial effect on the outcome of a case. Below are some things to do (and some to avoid) before filing for Chapter 7 bankruptcy protection.

Don’t Disregard Bankruptcy as an Option

Unfortunately, there are numerous misconceptions surrounding the process of consumer bankruptcy. Some people are reluctant to file because they believe their credit will be affected forever or they will lose everything they own. However, these are little more than common myths. It’s important to not rule out Chapter 7 until you’ve received some legal advice.

Don’t File an Unnecessary Bankruptcy

Although a Chapter 7 filing is an effective way for some to discharge their debts and get a fresh financial start, it’s not right for every person and every situation. Certain debts, such as student loans and child support, cannot be discharged, which is why it’s vital to determine whether Chapter 7 is appropriate. Consult an attorney to learn about your legal options.

Speak to an Attorney As Soon As Possible

Even if you’re not yet ready to file, consulting a knowledgeable and experienced bankruptcy attorney will give you the guidance you need to make informed decisions. To determine whether you’re working with the right lawyer, ask them about their other practice areas, how long they’ve been practicing bankruptcy law, how many cases they’ve filed, to name the jurisdiction’s trustees, and to outline each trustee’s documentation requirements.

If the attorney can’t provide this information, it’s likely that they don’t file bankruptcy cases on a regular basis. One of the most common issues lawyers face is meeting with prospective clients when it’s too late. If you’ve received a summons and a complaint, or if the IRS has notified you that they’re going to garnish your wages, it’s crucial to get legal representation immediately.

File Under the Correct Chapter

There are two different types of bankruptcy consumers can use to address their debts: Chapter 7 and Chapter 13. While Chapter 7 is best for those whose income falls below a certain threshold, Chapter 13 or ‘reorganization bankruptcy’ is appropriate for filers who cannot get Chapter 7.

Go Over Your Monthly Bills

Every consumer bankruptcy petition involves Schedule J. This form is an estimate of the household’s projected or average monthly expenses at the time of filing. Before setting up a consultation with an attorney, take some time to review your bank statements and learn about your spending habits. This helps to determine whether you have sufficient disposable income available to your creditors.

File Your Tax Returns

The 2005 BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) set forth new rules on the filing of bankruptcies and tax returns. If you file, you’ll have to provide the previous year’s tax return, as well as the current year’s if it’s requested. If you don’t file your return that’s due after filing for bankruptcy, the Internal Revenue Service may request that your case be dismissed.

Document and Review 1099 and Self-Employment Income

If you receive 1099 funds or you’re self-employed, it’s vital that you know your income and expenses for the six-month period before filing for Chapter 7 bankruptcy. The bankruptcy means test uses a six-month average to determine the availability of disposable income. It’s time-consuming to calculate your take-home pay when you receive 1099 income or are self-employed, but it’s a vital step in the bankruptcy filing process.

Save Each Month’s Proof of Income or Pay Stub

The aforementioned BAPCPA made substantial changes to the bankruptcy code, with one of the most notable being the creation of the means test. This test is based on national and local standards for common expenses, and it uses a half-year average that’s extrapolated to a full year. To pass the means test, you’ll need the past six months of income proof or pay statements.

File the Proper Paperwork

Bankruptcy is a time-consuming and complicated process. There are many forms to fill out and documents to submit, including tax returns, pay stubs, and bank statements. If the right documents aren’t submitted on time, your case may be dismissed. For this and other reasons, hiring an attorney is important.

Don’t Take Cash Advances on Your Credit Cards

Taking cash advances right before filing for Chapter 7 bankruptcy may present serious issues for various reasons. Of course, it’s dependent on the circumstances, but if you take a $10,000 advance on a credit card the week before filing for bankruptcy, you’ll likely hear from the credit card company first when you file. In many cases, creditors end up taking adverse actions on the grounds of fraud.

Don’t Use Your Cards At All

Another common complication in consumer bankruptcy cases is the usage of credit immediately before filing for Chapter 7. The issue is that, to the creditor, using credit right before filing for bankruptcy proves that you never planned to repay the debt. If you can’t pay your bills when they’re due, how is it possible to accrue more debt? If your financial situation is so bad that you cannot afford to make monthly payments to your creditors, do yourself a favor and stop using your credit cards before filing for bankruptcy protection.

Don’t Trade an Unsecured Debt for a Secured Debt

Before filing for Chapter 7, don’t take out a second mortgage or a home equity loan to settle payday loans, credit card bills, and other unsecured debts. Under the rules of Chapter 7, most of these debts will be discharged. However, once you’ve used your home as collateral, you risk losing it if you fail to make timely payments.

Don’t Put Assets and Money in Others’ Names

It may not seem like a big deal to transfer a car title to a family member or friend ahead of a bankruptcy filing, but it really is. Transferring assets to others to minimize them is prohibited. Each transfer must be disclosed to the court, and the failure to do so will complicate the case. When you’re filing for Chapter 7 bankruptcy, the goal is to discharge every debt possible. Transferring title to an asset to keep it out of the trustee’s hands will jeopardize your case, and you may lose your right to a debt discharge.

Don’t Borrow Money or Take Early Withdrawals from a 401(k) or IRA

Chapter 7 bankruptcy provides certain exemptions that protect retirement funds and other assets. Lawyers often meet with clients who have mistakenly withdrawn or borrowed from retirement funds in order to pay their debts. It’s crucial to weigh the benefits and drawbacks before borrowing from a retirement account. Remember, bankruptcy provides exemptions that protect the average debtor’s retirement accounts. It’s possible to file for bankruptcy and still live comfortably in retirement.

Disclose All Assets, Expenses, and Income Sources

Anyone filing for Chapter 7 bankruptcy must disclose all their assets, income, and expenses. The automatic stay is the core of the consumer bankruptcy process, but it’s equally important to treat creditors according to the nature of the debt and the priority of payment under the US bankruptcy code. As a filer, it’s your job to be honest and open about your assets, income, and debts in return for the discharge of your eligible debt. If you fail to disclose it all, you might not just lose your right to a debt discharge; you may face criminal charges as well.

Don’t Pay Your Creditors

Most people want to do the right thing by paying off certain debts before filing for Chapter 7. For instance, they may want to pay a child’s auto loan for which they’ve co-signed, or they want to pay down the balance on a credit card. However, such transactions are prohibited.

It is acceptable to pay bills as you normally would. If you incur a $200 balance on a credit card, you can certainly pay it the next month. However, you can’t make an extraordinary payment to fully satisfy an obligation. These payments are known as preferential transfers, which may lead to ‘clawback’ lawsuits. Here, the bankruptcy trustee sues the person or company you paid, to reclaim the funds and include them in the bankruptcy estate.

Don’t Make Big Bank Deposits

Before filing for Chapter 7, don’t deposit money (other than wages) into your bank account. A good example would be making a deposit as a favor to a friend. If you’re a small business owner, do not conduct business transactions through your personal account.

Don’t File any Lawsuits

Any pending legal claim is considered an asset, and as such, it’s subject to seizure by the bankruptcy court. This applies equally to unresolved cases and those with undetermined settlement amounts. In fact, even if you have a claim against someone and you haven’t yet filed it, that claim is included in the bankruptcy estate. If you have a potential legal claim, consult an attorney before your Chapter 7 filing.

Rethink Actions That May Result in Further Payments

Funds that aren’t in your possession, but are expected to be in the future, are included in the bankruptcy estate. In the event of a Chapter 7 filing, the court-appointed trustee may take those funds and use them to pay unsecured debts. Examples include accepting future bonuses at work, taking an annuity, and filing tax returns with expected refunds. If you are to receive any funds in the future, it’s a good idea to consult a bankruptcy lawyer.

Don’t File Too Soon After a Previous Bankruptcy

One significant mistake to avoid in a Chapter 7 case is improper timing. The rule is that, if you’ve filed in the past and had your debts discharged, you have to wait a full eight years before filing once more. A Chapter 7 filing within the past eight years doesn’t prevent you from filing a different type of bankruptcy. An experienced lawyer can help you find out whether you’re eligible for the fresh start Chapter 7 provides.

Use Exemptions Wisely

When requesting Chapter 7 bankruptcy protection, you’re allowed to exempt some of your personal property. While some jurisdictions allow filers to choose between state and federal exemptions, others require them to use the state’s exemption list. In any case, it’s essential to understand how exemptions work, as it may make the difference between losing and keeping an asset.

Appear at Every Court Proceeding

If there’s a collections case pending in federal or state court, don’t assume that you can avoid the process just because you’ve chosen to file for bankruptcy protection. Until the case has been filed, collection activities continue. Before and during a bankruptcy, it’s important to attend scheduled court hearings.

Go Through Credit Counseling

Before filing for bankruptcy, you must complete an approved credit counseling course within 180 days. When your case is submitted to the court, you’ll have to provide proof of completion; the failure to do so may result in the dismissal of your case. After filing, you’ll also have to take (and finish) a debtor’s education course.

Waiting for a Filing

Most of the mistakes mentioned here may be avoided by waiting to file for Chapter 7 bankruptcy protection. There’s a ‘look back’ period for most transaction types, which means that the court only considers transactions made within a certain period before filing. By delaying your Chapter 7 filing until the period has elapsed, you may avoid some serious issues.

A Few Closing Thoughts

If you are considering filing for Chapter 7 bankruptcy, numerous financial decisions may affect your case, whether or not they’re intentional and even if you haven’t yet decided to file. It is usually best to work with an attorney when planning a bankruptcy. Even before doing so, it’s crucial to take certain actions and avoid mistakes. By doing so, you’ll prevent challenges by the trustee and your creditors, and you’ll also ensure a smooth bankruptcy filing. If you have questions or concerns about the bankruptcy process, don’t hesitate to schedule an initial consultation with an attorney.

 

Filed Under: Bankruptcy

How I Got a 5.9% Car Loan 5 Days After Chapter 7 Bankruptcy Discharge

April 17, 2019 by The Debt Phoenix Leave a Comment

One of the things that people considering filing for bankruptcy are most worried about is what is going to happen to their car. In other articles I talk about the different options you have to both keep your car or to abandon it if it is upside down (you owe more than it is worth). Today I’ll be writing about how to get a good car loan after bankruptcy.

The first thing you want to make sure you have in place is a solid income with your W2 statement. If you have no income or very irregular income you are going to have a hard time getting a car loan with a relatively low interest rate. You will probably get targeted at 28% interest if your income is not in place – and, of course – the higher the income, the better! It’s important to get a solid income/job in place BEFORE you file for bankruptcy. I talk about that in other articles.

Why People Who Just Got Discharged Are a Great Catch for a Lender!

Next, you need to realize that if you have an income and you just got discharged from bankruptcy, you are actually a very good person to lend to. Why? Well, first of all, you can’t file for bankruptcy again for many years! This results in the ability of the lender to be able to hound you if you don’t pay! That means you should only take out a car loan if absolutely necessary. You should never take out a car loan at 10%+ rates. You should also make sure you pay off any car loan as fast as possible.

Now, the most important thing to do to get a low rate on a car loan is to go to the right dealer to buy a car! Remember, that the best way to get a car after bankruptcy is to pay $1,000-$3,000 for a car in cash for an older car that you can find on craigslist. You should be able to save up that much money before you file for bankruptcy at least. Many states allow you to keep much more than that. In California, you can keep around $28,000! More than enough to pay for a car if you need one.

Choosing a Car Brand After Your Bankruptcy

Now, the right place to go is to a reputable mainstream car dealer. My current picks are Hyundai or Ford. Both of these brands have reliable cars that can be purchased for quite a bit cheaper on the used market than other brands such as Toyota, Honda, or Subaru. Your goal is to get as high quality of a car as possible for the cheapest price, and Hyundai and Ford are good brands to do this at this time.

You want to go to their used car area and choose the best car you can find for $10,000-$17,000. You are not buying a new car at the dealership. Next, you’ll be stuck going through their financing team. This can be a real struggle for the uninformed and vulnerable who just filed for bankruptcy! The good news is that generally they will try to get anyone approved that they can, because it means a sale and more money for the dealership. The dealership will definitely try as hard as they can to get you approved.

Getting Financed by the Car Dealer After Bankruptcy

The other good news is they will run your info by as many possible lenders that they can. This gives you a lot of options. Also keep in mind that they will probably want you to take a 72 month loan. This is OK, as your goal will be to pay the car off as fast as possible especially since your interest rate still won’t be very good. Even 5.9% is not a rate I want to be paying for very long!

You should be able to get a loan under 8% by shopping around for rates if you have a solid W2 income. This is a high rate but it’s a lot better than the loan sharks who want to trap you into 25%+ rates. Never take out a loan like that. You filed bankruptcy to get out of debt, not to get destroyed by it again!

To wrap up, if you absolutely must get a loan for a car after bankruptcy, know that you can definitely still get a very reasonable rate. The goal is then to pay it off as quickly as possible. I paid my 5.9% car loan off in about 20 months – instead of the 72 they wanted me to pay for! That makes the interest hit not too hard – and now I have a paid off car that is nearly new and in great condition and should last for many more years.

Filed Under: Bankruptcy, Debt Recovery

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