Indy Bankruptcy Law Blog: January 2013

Tuesday, January 22, 2013

Will I Be Able to Get Credit After Bankruptcy?

Worried about obtaining credit after bankruptcy? This is a common concern by many people contemplating bankruptcy. Most people are scared that filing bankruptcy will prevent them from having any type of credit for the next ten years. Nothing could be further from the truth.

This pesky myth has been around for quite some time now. Most often people are told from well-meaning friends and family that if they file for bankruptcy they will never get credit again. This is one
reason why seeking the advice of a qualified Indianapolis bankruptcy attorney is important. Filing for bankruptcy actually decreases your debt to income ratio which makes it more likely that you will be able to get credit. Bankruptcy allows an individual to manage new credit obligation by eliminating the burden of prior debt. Most bankruptcy filers will start to receive credit card offers in the mail as soon as they have received their bankruptcy discharge order.

Filing bankruptcy, especially in today’s economic climate, is no longer the financial death sentence that it might have been twenty years ago. Today people who have filed bankruptcy are able to get car loans and refinance mortgages while still in an open bankruptcy case. The majority of bankruptcy filers will be able to get car loans immediately following the filing of their bankruptcy petition or as soon as receiving their discharge in a chapter 7 case.

Creditors are now looking at bankruptcy as an invitation to extend credit to previously troubled people. The fact that one has just filed bankruptcy will usually mean that person cannot file bankruptcy again for at least 8 years. This makes someone who has just filed bankruptcy a much safer credit risk than they were previously.

We don’t recommend racking up credit card debt after filing bankruptcy, but an emergency card is okay. It is also okay to use a card each month for things such as gas and groceries, but pay off the balance in full each month to help rebuild credit. It is important that credit is used responsibly post-bankruptcy. The bankruptcy will be a stepping stone to rebuilding credit, but responsible credit use is a key factor to rebuilding credit after bankruptcy. By using credit responsibly after bankruptcy debtors will soon move on from bankruptcy and begin their new life with financial freedom. If you would like to see how bankruptcy can help jump start your credit repair call an experienced bankruptcy attorney today.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.

Tuesday, January 15, 2013

What Are the Time Limits Between Bankruptcy Filings and How Many Times Can I File Bankruptcy?

Have you filed bankruptcy before and are wondering if you are eligible to file again? First, there is no limit on how many times a person can file bankruptcy. You can file as many times as needed so long as you qualify. However, there are time limits that restrict the frequency of which a person can file. The time limits vary depending on whether you plan to file Chapter 7 or Chapter 13. The time limit also depends on which chapter of bankruptcy was previously filed.

Prior Chapter 7 and Wants to File a Chapter 7: The prior chapter 7 must have been filed over 8 years ago. There is an absolute bar from receiving a discharge in a new chapter 7 if a previous chapter 7 was filed within 8 years of current filing.

Prior Chapter 7 and Wants to File a Chapter 13: If a prior chapter 7, that was discharged, was filed within 4 years of current filing the debtor will NOT receive a discharge but can still file a chapter 13 (these cases, if filed, should always be a 100% repayment plan otherwise it doesn't help the debtor much; however, the debtor will receive protection of the automatic stay while in the chapter 13 even though no discharge will be entered). If the prior chapter 7 was filed over 4 years ago the debtor will be eligible to receive a discharge in new chapter 13.

Prior Chapter 13 and Wants to File a Chapter 7: If a prior chapter 13 was filed within 6 years of current chapter 7 filing there is no discharge unless:

a) Payments under the prior chapter 13 plan totaled 100% of the allowed general unsecured claims; or

b) Payments under the prior chapter 13 plan totaled at least 70% of the allowed general unsecured claims

and the chapter 13 plan was proposed in good faith and was the debtor’s best effort.

Prior Chapter 13 and Wants to File a Chapter 13: If a prior chapter 13 was filed and discharged within 2 years of the current filing, the debtor will not be eligible for a discharge in the current chapter 13.

It is important to note that the discharge date of the previous filing is irrelevant. The date the case was filed is the date that determines whether a debtor will be eligible to file a new case. If the previous case was dismissed without a discharge the previous filing will not affect eligibility for future cases.

Thursday, January 10, 2013

Benefits of Filing Chapter 13 Bankruptcy

There are two types of bankruptcies consumers most often file. The most common is a Chapter 7 bankruptcy but many people find Chapter 13 to be more beneficial. While it’s true that some people must file a Chapter 13 because they do not qualify for a Chapter 7, others file Chapter 13 because of the many benefits it has over a Chapter 7. Below are some reasons to consider filing a Chapter 13 bankruptcy.

Save a Home from Foreclosure – Chapter 13 allows mortgage arrears to be paid over the life of the Chapter 13 plan (36-60 months). The bankruptcy will stop the foreclosure and allow the homeowner time to get caught up on payments to save the home.
Avoid or Strip a Second Mortgage – If a homeowner owes more on their first mortgage than their home is currently worth they may be able to eliminate or strip the second mortgage lien from a property’s title in a Chapter 13 bankruptcy.
Cram Down Interest Rates – In most cases interest rates can be lowered for secured debt in a Chapter 13. This includes secured debt for cars and even household goods.
Cram Down Car Value – If more is owed on the vehicle than it is worth the amount paid to the car creditor in a Chapter 13 can be crammed down to the fair market value.
Preserve Your Chapter 7 Option – Chapter 7 can only be filed once every eight years. While a person may need bankruptcy protection now to stop wage garnishment or creditor harassment they may also be anticipating more debt. For example if a person has a medical condition and know they will be incurring medical bills due to cancer or another illness they may need the option of including the new debt in the future. A Chapter 13 can be converted to a Chapter 7 in the future and debt incurred after the original Chapter 13 filing can be included in the converted Chapter 7 case. To convert a person still must qualify for a Chapter 7 based on income and other factors that a bankruptcy attorney can explain in detail.
Length of Time on Credit Report – A Chapter 13 bankruptcy remains on a person’s credit report for seven years whereas a Chapter 7 will show up for 10 years.
More Affordable – In some cases a Chapter 13 plan payment may be less than what a person is paying for their car, and the car would be included in the Chapter 13 plan payment. By cramming down interest rates and loan values a Chapter 13 could save money in the long run compared to keeping the car in a Chapter 7 bankruptcy.

There are many factors to consider when deciding which bankruptcy case may be right for you. Chapter 7 and Chapter 13 are both great options for solving financial problems. However, before you choose which chapter to file, make sure you have all the facts and speak to an experienced bankruptcy attorney. Most offer free initial consultations and I would recommend speaking to a local attorney in your area about what benefits you may expect from filing a Chapter 13 bankruptcy.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.

Thursday, January 3, 2013

Tax Time and Bankruptcy...Is My Refund Protected?

Tax time is fast approaching and a common question is “Will I get to keep my tax refund if I file bankruptcy”? With some careful planning you should be able to protect your tax refund from the Chapter 7 Trustee when filing bankruptcy. Several factors do come into play so it is always a good idea to consult a bankruptcy attorney with regard to your taxes and bankruptcy.

A Trustee in a debtor’s bankruptcy case can intercept a tax refund for the benefit of the creditors. To do so, the bankruptcy must have been filed prior to receiving and spending the tax refund. Therefore, one sure way to protect your tax refund in a Chapter 7 bankruptcy is to file bankruptcy after the tax refund has been received and spent. It is important to note that the refund must be spent on necessary living expenses and it is a good idea to keep a list of what the money was actually used for prior to filing bankruptcy.

Even if the bankruptcy case has been filed prior to receiving your tax refund the refund still may not be taken. Some factors the Trustee will consider:

· How much of the refund is Earned Income Credit? EIC is protected and cannot be taken for the benefit of creditors.

· Does the debtor owe past tax debt? If so, the IRS or State may be entitled to the refund to offset liability.

· How large is the refund? The amount must be enough to be a meaningful distribution to creditors. In Indiana the refund typically needs to be around $1,000 or more before the Trustee will be interested in taking it.

· Can the debtor exempt any of the refund? In Indiana each individual debtor may exempt up to $350 of intangible property. Therefore, part of the tax refund may be exempt depending on how much other intangible property was owned by the debtor when the case was filed.

· When was the bankruptcy filed? The amount of the tax refund allowed to be administered by the Trustee is pro-rated over the year. Therefore, the Trustee may only be able to take 75% for instance.

The rules can change from state to state and Trustees’ decisions can vary regarding the tax refund. Therefore, to ensure your tax refund is protected when filing Chapter 7 bankruptcy, consult a local bankruptcy attorney. A bankruptcy attorney will be able to determine when the best time to file will be and can give advice on how to spend the refund prior to filing the bankruptcy case.