How Long Will a Bankruptcy Affect My Credit?

How Long Will a Bankruptcy Filing Impact Your Credit?

If you have opted for bankruptcy as a way to get your finances under control, you may be wondering how long the bankruptcy filing will remain on your credit report, and how long it will have an impact on your ability to obtain credit.

How long the bankruptcy will actually appear on your credit report depends on the type of bankruptcy you filed. With Chapter 7 liquidation, where you permanently discharge debts, your credit report will reflect the bankruptcy filing for 10 years. With Chapter 13, though, where you agree to repay your creditors under new terms, the bankruptcy filing only shows up for seven years. There are some situations where the bankruptcy may stay on your credit record for a longer period. For example, if you apply for a loan in excess of $150,000, the potential lender may see the bankruptcy filing, even though it has been more than 10 years.

How to Minimize the Impact of a Bankruptcy on Your Ability to Obtain Credit

When a potential lender considers your creditworthiness, they will likely look at your credit report. In many instances, though, that will be only one of many factors. Many lenders are far more interested in what you have done lately, as opposed to what you did a number of years ago. If your credit report shows that you have made all payments in a timely manner since your bankruptcy, a lender may be inclined to extend credit, perceiving that you have developed new habits, or that the bankruptcy was the result of an illness, injury or other unforeseen incident, and not the result of poor money management.

The other important thing to do, if you want to improve your chances of getting credit, is to minimize the use of available credit. If you have a credit card, don’t use it unless absolutely necessary, and pay it off every month or as soon as possible.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

How Come I Can Be Thrown in Jail for Not Paying Child Support If I’m in Bankruptcy

Bankruptcy and Delinquent Child Support Payments

You are behind on all your bills, including your child support. Maybe you lost your job, maybe you’ve had a difficult time getting back on your feet after a divorce or maybe you’ve been sick or hurt. So you decide to file for bankruptcy, having heard that a bankruptcy filing will keep creditors from harassing you. But then you get a notice from the court that, unless you pay past-due child support, you could face incarceration. How can that happen? Shouldn’t the bankruptcy laws protect you?

The simple answer is no. The bankruptcy laws do not allow for the discharge of child support (or spousal support) obligations in bankruptcy. So the laws that apply to most other debts simply do not apply to child support obligations. The state agency that has responsibility for collecting and disbursing child support payments can still take any action to try to collect those payments, from calls and letters to garnishment of wages to seizure of assets to jail time. Furthermore, child support arrearages must typically be paid off in full in a Chapter 13 proceeding.

One of the important things to remember is that a jail sentence is based on a finding of “contempt of court.” If you are truly without income — not just simply avoiding paying child support — a judge may be less inclined to order jail time. If you have some income, but not enough to pay child support and other creditors, you may want to consider a Chapter 7 bankruptcy, which will potentially eliminate all or most other debt so that you can afford child support payments.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Questions to Ask Your Lawyer About Bankruptcy

Considering Filing for Bankruptcy? Here Are the Questions to Ask Your Bankruptcy Lawyer

You’ve been working hard to get your financial life back in order, but still can’t see any light at the end of the tunnel. You’re thinking maybe it’s time to consider filing for bankruptcy, but you are uncertain what that means, now and in the future. Here are the key questions to ask a bankruptcy attorney.

  • What are your qualifications? Before you hire a bankruptcy lawyer, find out how much experience they have, what types of bankruptcy proceedings they have handled and how well they have worked with others.
  • What are my options in bankruptcy? There are different approaches to bankruptcy. Chapter 7 allows you to permanently discharge most debts. In a Chapter 13 proceeding you have to make monthly payments to a Chapter 13 trustee who will distribute that money to your creditors over a three to five year period. A Chapter 13 bankruptcy case can also be used to catch up on missed mortgage payments, stop a foreclosure, or get back a car that has been recently repossessed.
  • Do I qualify for Chapter 7 protection? Under the 2005 revisions to the bankruptcy laws, to qualify for Chapter 7, you must demonstrate to the bankruptcy court that you lack the means to pay off your debts over a three-to-five year period. Your attorney should be able to walk you through the means test, provided you supply accurate financial information. Most people who are considering filing a Chapter 7 bankruptcy are eligible for Chapter 7.
  • If I file Chapter 7, can I keep any assets? The federal bankruptcy laws allow certain exemptions when you file for protection under Chapter 7. Each state has its own set of exemptions. You can choose one or the other. As a practical matter, nearly 98% of all people who file a Chapter 7 bankruptcy are able to keep everything that they own, including their houses and their cars.
  • What debts can I discharge? Most debts can be discharged in bankruptcy. However, not all debts may be discharged in a Chapter 7; certain tax obligations, child support arrearages and student loans are typically not dischargeable.
  • What information do I need to provide? You will be required to make an accurate and complete disclosure of your assets and liabilities as well as your monthly income and expenses. Your lawyer can work with you to collect all the documents necessary for a bankruptcy filing.
  • What is the cost? The cost for filing a bankruptcy case varies based on the complexity of the case. Between court costs and attorney’s fees, a standard Chapter 7 case can cost between $1,500 and $2,000. This amount is usually only equal to a small fraction of the debt owed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What Debts Can Be Discharged Through a Chapter 7 Bankruptcy Filing?

If you are struggling to pay your bills, you may be considering bankruptcy as a way to get a fresh financial start.. There are limits, however, on what debts may be discharged in a Chapter 7 or Chapter 13 filing. You want to know what debts you can and cannot rid yourself of in Chapter 7 or Chapter 13, so that you get the outcome you need and want. This blog provides an overview of the types of debts that can and cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy filing.

As a general rule, you cannot discharge secured debt and still keep the property. Secured debt means home mortgages, car loans and other debts secured by collateral.

The other kinds of debt that are generally excluded from discharge are:

  • Child support and alimony obligations—These obligations can never be discharged.
  • Tax obligations—There are limited instances where a tax debt can be eliminated in a Chapter 7 bankruptcy. The tax debt must be at least three years old, the tax return must have been filed at least two years ago, any assessments by the tax authority must have been made more than 240 days ago, and you must not have committed tax evasion or tax fraud.
  • Student loan payments—In rare situations, where a debtor has shown extreme hardship, the bankruptcy court has allowed the discharge of student loan payments. As a general rule, though, they cannot be extinguished in bankruptcy.
  • Equitable Distribution from a Divorce – If you owe money to a former spouse as equitable distribution (as opposed to child support or alimony) arising from a divorce, you cannot discharge this debt in a Chapter 7. However, this kind of debt can be discharged in a Chapter 13!

Even though you may not be able to discharge all of your debts by filing for bankruptcy, filing for bankruptcy can often by a smart financial decision. By wiping out your credit card, medical bills, and personal loan debts you will free up

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Exceptions to the Automatic Stay Afforded by the Bankruptcy Laws

When you file a petition in bankruptcy, you are immediately entitled to certain protections provided by the automatic stay established by federal law. This prohibits creditors from calling, writing or taking any legal action outside of the bankruptcy court to collect the debt. There are, however, certain obligations that are exempt from the automatic stay. These include:

  • Certain family law/divorce payments or arrearages—All payments of child support or spousal support ordered by a court are typically unaffected by the automatic stay. This includes any efforts by a court or state administrator to collect payments due for alimony or child support.
  • Repayment of a pension loan—If you borrowed funds from an ERISA-qualified pension plan, including a 401k or an IRA, the automatic stay does not prevent withholding from your income to repay that loan.
  • Debts related to real property—Because the automatic stay suspends legal proceedings, it will typically prohibit any attempt to evict you from rental property. However, if your landlord obtained a judgment of possession of the premises before you filed for bankruptcy protection, you will not be able to forestall the eviction through your bankruptcy filing. If, however, you can show that the eviction stemmed from your failure to pay rent, you may be able to successfully reinstate the automatic stay. An automatic stay will also not be valid in an eviction proceeding where your landlord can show that you are engaged in the illegal sale, manufacture or use of controlled substances, or that you are taking actions that will lead to the destruction of the property.

Losing the Protection of the Automatic Stay

There are also a couple ways to lose the automatic stay, once it is in place. If you fail to meet deadlines set by the bankruptcy laws, you can have the automatic stay revoked. In addition, if you filed one other bankruptcy proceeding within a year prior to the current petition, the automatic stay only goes into place for 30 days (although it may be extended by asking the court to extend it). If you have filed two other bankruptcy proceedings in the year prior to the current petition, the automatic stay does not go into effect unless the court orders that you be protected by the automatic stay.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).

Understanding the Different Bankruptcy Filings

Whether you face personal financial challenges or your business has fallen upon difficult times, there are options available to you under the federal bankruptcy laws. This blog post provides an overview of the most common types of bankruptcy filings.

Chapter 7 Liquidation Proceedings

The protections afforded by Chapter 7 are available to individuals or businesses. In a Chapter 7 petition, you are allowed to permanently discharge most types of debts. In a Chapter 7 bankruptcy you are allowed to “exempt”, or protect your assets up to a certain dollar amount. In more than 95% of all bankruptcy cases, the person who files for bankruptcy keeps everything they own. In a Chapter 7 certain debts, such as child support arrearages, student loans (except under very limited circumstances) and some tax obligations cannot be wiped out. Each state has its own state based exemptions, and some states allow their residents to use the federal property exemptions. You may choose the state or the federal exemption, but not both. Once your Chapter 7 bankruptcy if finalized, you are permanently freed from any obligation to repay any debts discharged.

In 2005 Congress added a “means test” to the bankruptcy code. The means test determines if an individual or couple makes “too much money” to file a Chapter 7 and instead must file a Chapter 13 to repay their creditors a portion of what is owed. For the vast majority of people looking to file bankruptcy, the means test has no impact on their ability to file Chapter 7. It is simply false to say that you “can’t file a Chapter 7” or that is it “much harder to file a Chapter 7”.

Chapter 13 Reorganization

In a Chapter 13 filing, you pay what you can afford to pay on a monthly basis. Your creditors will receive a percentage of what they are owed, and at the end of your three to five year plan, the balance of what is owed is wiped out.. As with a Chapter 7 petition, you are immediately protected by the automatic stay, which prohibits your creditors from calling, writing or taking legal action against you to recover a debt.. As long as you honor the terms of the reorganization plan, your creditors may not make any other attempts to collect any debts you owe.

Chapter 11 Business Reorganization

A Chapter 11 bankruptcy filing allows a business to obtain the protection of the automatic stay, and to negotiate new payment arrangements with creditors, in a fashion similar to the Chapter 13 petition for individuals. Chapter 13 has debt limits and if an individual owes more money than what is allowed, they will be required to file a Chapter 11 case in order to reorganize.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Can You Pick and Choose Which Debts You Want to Discharge in Bankruptcy?

If you face insurmountable debt and have concluded that your only way forward is through a personal bankruptcy filing, you may have questions about how the process works. Do you have to include all your debts in the bankruptcy filing, or can you leave specific ones out? What if you have an obligation to a friend or family member—do you have to disclose that debt, too? Can you leave your house or car out of the bankruptcy? Can you hang on to one credit card, to use in case of emergency?

Under the federal bankruptcy laws, you cannot include certain debts and exclude others in a bankruptcy filing. When you file for protection, you must disclose everything you own and all debts that you owe. There are certain obligations that cannot be discharged in a bankruptcy proceeding, such as child support or spousal support arrearages, certain tax debts, and criminal restitution.  All debts must listed in your bankruptcy petition including the ones that will not be discharged.

It is important to understand, though, that there is nothing in the bankruptcy laws that prohibit you from voluntarily repaying all or some of a debt that has been discharged in bankruptcy. Though the bankruptcy removes any legal obligation to repay the debt, you are always free to make payments to or satisfy prior obligations after your bankruptcy is finalized.

If you are concerned about your home or a vehicle, it is important to remember that there are state and federal exemptions of property that go into a bankruptcy estate. These exemptions protect your property from your creditors. The dollar amounts vary from state to state, so it is best to consult with your attorney to determine what property may be exempt, and whether you can keep certain property.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).