HOW TO ESTIMATE YOUR CHAPTER 13 PLAN PAYMENT:

By Christopher C. Carr, Esquire, Chester County Bankruptcy Attorney:  Call (610)380-7969 or write him at cccarresq@aol.com today!  

Introduction. What does this matter?

 This exercise can be crucial to complete if you are a self filer (not recommended especially for a Chapter 13) but it is a very good idea to complete this exercise even if you have hired or plan to hire a bankruptcy attorney, because in this way you will be able to understand the general Chapter 13 process and strategy; double check his or her work-in a general sense at least – and also because it will make you aware of expenses and other offsets you might not otherwise focus upon, which could end up saving you money in the long run.  This can also be useful to help you determine whether a Chapter 13 will be advantageous for you given your particular circumstances BEFORE you retain an attorney and then file, only to find out for example that you cannot afford the monthly payment and the arrears amortization!  Bankruptcy will affect your credit and ability to borrow for at least 2 years, even if it is dismissed. Knowledge is power.

In general, it will help to remember that Part 1 of the analysis deals with repayment of secured debt (like car and home loans), whereas Parts 2 and 3 deal with unsecured debt (like credit cards, medical bills, etc) and to remember the “liquidation test” which says that the unsecured creditors cannot receive less in a Chapter 13 bankruptcy than they would have received in a Chapter 7 liquidation.

Part 1: Figuring Your Minimum Monthly Payment

Certain debts must be paid back in full through your repayment plan. This means that that the Debtor must propose a plan that pays off all of these debts within 36 months (if below the median income) or 60 months (if above the median income) regardless of income and expenses. These debts include:

  1. Priority Debts

Congress has decided that certain obligations, called priority debts, cannot be discharged in bankruptcy. Some examples of priority debts include back child support, alimony, and certain taxes. If you file for Chapter 13 bankruptcy, you must pay off these debts in full through your repayment plan. Enter the amount of all your priority debts in the Model[1]  where indicated.

 

  1. Mortgage Arrears

If you are behind on your mortgage and want to keep your house, you must pay off all your arrears (existing at the time of your filing) through your repayment plan within the applicable plan period (see above) . Enter all applicable mortgage arrears in the Model where indicated.

If you plan to surrender your house, you don’t have to pay back the arrears in your bankruptcy. In addition, if you are only behind on your second mortgage (or other junior lien) and you intend to eliminate that lien in your Chapter 13 through lien stripping, don’t include those arrears in your payment calculation.

 

Be aware that certain jurisdictions require you to make your regular mortgage payment through your Chapter 13 bankruptcy. In these jurisdictions, your plan payment may be very large but you would not have to make a separate mortgage payment directly to the lender.

 

  1. Car Loans or Other Secured Debts You Want to Pay Off Through Your Plan

In most jurisdictions, if you are behind on your car loan (or another secured debt other than your mortgage) and want to catch up on your missed payments, you typically have to pay off the entire loan (not just the arrears) through your plan. Keep in mind that in certain jurisdictions, you may be required to pay off your car loans through your Chapter 13 plan regardless of whether you are behind on your payments or not.  This is not the case in the EDPA where I practice.

Unless you intend to surrender the property or pay off these secured debts outside of bankruptcy (and your jurisdiction allows you to do so), enter the amount of your car loans and other secured debts in the calculator where indicated.

If you qualify to “cram down: your car loan or other secured debt, you only need to pay the lender the replacement value of the property through your repayment plan (not the entire loan balance). So include only the value of the vehicle (or other property) in the Model for all secured debts you intend to cram down.

 

  1. Administrative Fees and Interest Charges

Fees: Chapter 13 trustees get paid by taking a percentage of all amounts they distribute to creditors through your repayment plan. This percentage varies depending on where you live but can be up to 10% as it is in the Eastern District of Pennsylvania where I practice.

 

Interest: In addition, you typically have to pay interest on secured claims you are paying off through your plan. The required interest rate can vary depending on the type of claim and the rules in your jurisdiction. But in general, you can expect to pay the national prime rate plus 1% to 3%.

 

  1. Making Regular Monthly Payments on Loans. Keep in mind that if you want to keep your home, car, or other items securing  debts, you’ll have to keep making your regular monthly payments during your plan period, unless the court requires you to pay off the entire balance through your plan. As mentioned above, some courts might require you to make these monthly payments through your plan.  However, this is NOT the case in the EDPA, where generally speaking, the debtor pays arrears through the plan but is allowed to pay the monthly mortgage “outside” the bankruptcy,  g. directly to the lender/servicer.

 

THE ABOVE COMPUTATION YIELDS JUST THE MINIMUM PLAN PAYMENT: “EXCESS” DISPOSABLE INCOME (PART 2): AND NONEXEMPT PROPERTY VALUE (PART 3)  MUST BE ADDED:

So far we have only considered debts you are required to pay off in your repayment plan regardless of your income, expenses, and nonexempt property. The debts discussed above are used in calculating your minimum Chapter 13 plan payment. However, if you have disposable income or nonexempt assets, you will also have to pay back some or all of your nonpriority unsecured debts such as credit cards and medical bills. Depending on how much you have to pay your nonpriority unsecured creditors, your monthly plan payment can be much  higher than the minimum payment calculated above.  In fact many high income or equity rich debtors will end up with 100% plans…why would anyone file bankruptcy then you may ask well and  there are several reasons:

  1. To take advantage of the automatic stay in bankruptcy and thus save the family home and/or other valuable assets from the auctioneers gavel.
  2. to avoid garnishments (which can be very embarrassing and even cause job loss) or repossession of autos, boats, RV’s, etc.
  3. To avoid liens arising in their property because of lawsuits, tax liens and the like.
  4. To force mediation and a mortgage modification (in some jurisdictions)
  5. To avoid creditor dunning
  6. Because instead of having to pay back all the debt at once, they can schedule it, and,
  7. to avoid losing a drivers license, professional privileges (e.g. inability to practice medicine, law, dentistry, etc.) or even going to jail for nonpayment of alimony, support , etc.

Part 2:  Calculate Your Disposable Income and enter the excess:

 

As part of your Chapter 13 computations, you must complete Form 22C — Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income. This form is also referred to as the Chapter 13 means test and is used to determine how long your plan will last and how much you must pay nonpriority unsecured creditors in your bankruptcy. Visit the U.S. Court’s website at www.uscourts.gov to find the most recent version of Form 22C.

If your average income for the six months preceding your bankruptcy is less than the median income for a similar household in your state, you are not required to fill out the entire form and will typically pay little or nothing to nonpriority unsecured creditors in your plan. However, if your income is above median, you must follow the instructions on the form to determine whether you have enough disposable income to pay back some of your nonpriority unsecured debts.

After completing the Chapter 13 means test, if you end up with a positive monthly disposable income figure, add that to your minimum plan payment calculated above because you must pay this amount towards your nonpriority unsecured debts each month.

Note: Why the means test result can vary significantly from  the Petition, Schedule J. The concepts of income and expenses for the Means Test differ from the income and expenses reported on Schedules I and J. Schedule I lists the debtor’s current income, while the Means Test requires an average from the last six months with Social Security Benefits excluded. Likewise, on the expense side, expense categories are different on the Means Test and Schedule J. Schedule J lists the debtor’s actual current expenses while the Means Test uses IRS standards (which are often much lower than the actual expenditures) for some expenses, and actual for others. Moreover, Schedule J allows the attorney more discretion in listing other types of expenses, whereas the Means Test doesn’t allow you to fill in unlimited “other” expenses.

 

Part 3:   Finally, Add the Value of your Nonexempt Property

Chapter 13 bankruptcy requires you to pay your nonpriority unsecured creditors at least as much as they would have received if you had filed a Chapter 7 bankruptcy. This is known as the “liquidation test” but essentially means that you must pay an amount equal to the value of your nonexempt property. If you can’t exempt all of your property, divide the value of the nonexempt portion by the number of months in your repayment plan and add it to the minimum monthly payment calculated above.

Nonexempt Property Example: Say for example that you have equity in your home of $100,000 (a rarity in this day and age but quite common  few years ago).  Your state allows you to take the federal homestead exemption and it is higher than the state version, if a choice is allowed in your state. you can currently exempt $22,975 (or $45,950 if you are married and jointly filing bankruptcy) under the federal homestead exemption.  Husband and wife, using the federal exemption,  are then left with $54,050 in nonexempt debt and have a 60 month plan.  They then must add  $900.83 to the plan payment computed above.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

 

 

 

 

[1] This article assumes that you are using a Bankruptcy Plan Model (Model) that calculates the minimum plan payment for you. Some Models will also compute the Means Test for you.  For an easy to use estimator go to http://www.alllaw.com/articles/nolo/bankruptcy/chapter-13-plan-payment-calculator.html.  However, remember that this will just yield the Minimum payment.  To this you must add Your Excess Disposable Income and Nonexempt Property Value Parts 2 and 3 below, if applicable.

 

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FIXING YOUR CREDIT AFTER A BANKRUPTCY DISCHARGE

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By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

In my prior article on the topic of post discharge activities, I discuss 11 different areas for your attention.  Below, I focus in on just one of these: credit repair.

You have received an Order of Discharge from the Courts. That does not mean that your credit is being properly reported to/by the credit bureaus however.  Fixing any errors is up to you.  Here are the steps:

  1. 60-90 days after you receive the discharge, you should call the number provided on the www.annualcreditreport.com site and order your credit reports.  (Consumers are entitled to a free credit report every year or when a negative decision is made by a creditor relying on a credit report.) You will see an option to download the report or to view it on the internet.  You should request your report be mailed to you by each of the three credit reporting agencies Equifax, Experian, and Transunion.   If you are married and filed a joint bankruptcy, both of the spouses must request their own reports.  There are many websites that will claim to be “free” but will typically start assessing a monthly fee after a trial period…don’t fall for it: www.annualcredi treport.com is the only such site authorized by federal law to provide truly free reports.
  2. You will also want to get additional reports from Telecheck, Early Warning Services, and Chexsystem if you have ever had a problem with a checking account or overdrafts.  These are the agencies that banks and credit unions rely on when the bank or credit union is making a decision about whether you can open an account with them.
  3. So, you are now up to six different reports and if married multiply this by 2.  However the review you will need to do is actually rather straightforward.  Look for a line under each of the creditors that indicates whether a balance is due.  That balance should read ZERO (unless it is a debt that is not dischargeable by law, like court ordered support, taxes, criminal fines or penalties).  There may or may not be a line saying “Chapter 7 Bankruptcy” or “Chapter 13 Bankruptcy”.  These statements refer to the reason why it is no longer a debt.
  4. If any of your creditors is still listing a balance, then the next step is to dispute the report of that creditor.  The Federal Trade Commission offers a sample dispute letter to consumers.  [The sample is here. ] You may alternatively use the form supplied with the credit report (usually found near the end of the report.)  Also send a copy of the letter to the creditor who is reporting inaccurate information.   And please, make and retain in your files two extra copies (one for your file and one for your attorney). Note that if more than one entity is reporting the debt improperly, they each must be notified separately.
  5. When a consumer disputes a credit report, the agency by law must investigate.  The creditor can either verify the accuracy, update or remove the information.   The credit reporting agency has deadlines for their response to the consumer. Generally the wrongly reported debt will now be off your report.
  6. However, if a creditor verifies the report (that is, wrongfully indicates the money is still due and owing), you should seek legal advice promptly. This is likely a violation of the discharge order of the bankruptcy court. There may also be a Fair Credit Reporting Act violation.  Your lawyer may suggest a lawsuit against the original creditor, the debt collector (if applicable) and/or the credit reporting agency. . Only a lawyer experienced in these kinds of cases can properly evaluate the situation and provide advice about your options.
  7. Just to make sure your credit is being reported correctly you may want to order your reports again in a year or whenever you are again eligible for a free report from www.annualcredi treport.com. Repeat the process above as needed.

Summary:

  1. Order your credit reports 60-80 days after your Order of Discharge
  2. Order additional reports for problem with checking account or overdrafts
  3. Carefully review  your credit reports
  4. Dispute any balances that are no longer owed with both the original creditor and the credit reporting agency.
  5. Review  responses promptly
  6. If the response says you still owe the debt, seek legal advice from an experienced attorney.
  7. Repeat in a year

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  


I also provide HAMP, HAMP2 and other Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law 2009, 2013, All Rights Reserved

Now that you Have Your Bankruptcy Discharge: 10 (actually 11) Things to Do to Make the most of it!

 

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

So You Finally Got that Bankruptcy Discharge
Congratulations!
You’re on your way to a fresh start.
Now you’ve got more to do? See why below:
1. Check debts that didn’t get discharged: Child or spousal support, student loans, or taxes for years for which you did not file a return (unless the IRS exceptions are met) are not dischargeable in bankruptcy. The discharge order will not tell you which debts survive and which do not, nor will the Court provide this information so you may continue to require the services of a knowledgeable bankruptcy lawyer to help you to assess this.
2. Verify lien balances: The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.
3. Reset Banking Priveleges: Online banking and automatic bill pay may have been disabled while you were in bankruptcy but can be restarted at your request now..
4. Do Some Record Keeping: Save your bankruptcy papers and keep a copy of your discharge paper handy: You’re likely to encounter efforts by buyers of to collect debts that have been discharged in your case, or so called “zombie debt”. You need to be able to show that the debt was discharged in your case. Creditors with notice of the bankruptcy, and likewise those who buy up their worthless accounts and try to collect on them, were discharged (unless they fall within Rule #1 above). The services of a knowledgeable bankruptcy lawyer may be necessary to stop these collectors, or even under some circumstances to sue them for unfair practices and potentially turn the tables by collecting from them, including your legal fees.
6. Join a credit union: Credit unions are owned by their members. They are in the business of extending credit to members (hence the name, “Credit Union’: “Credit” stands for what they do and “Union” for the members they lend to) and the profits from such loans flow to members. Rates are almost always lower and terms better than the commercial banks, savings and loans and private lenders. Start out with a savings or checking account. Sooner or later you will probably need a car loan or even a home loan. Joining now will give you the longevity that adds credibility to a credit union.
7. Maintain insurance coverage: Even though you may have elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liability insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title until someone else goes on title. Post bankruptcy claims arising from property you’re trying to offload can potentially ruin the fresh start.
8. Get a credit report: Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The bankruptcy history can properly remain on your credit for up to 10 years, but you are entitled to a showing that you now owe nothing on all discharged accounts (but see Factor #1 above) This is crucial because your debt to income ratio (“DTI”),one of the primary if not THE primary factor lenders look to in extending credit. Getting erroneous entries corrected may be facilitated using the services of a knowledgeable bankruptcy lawyer. You are entitled to a truly free credit report annually from each of the 3 major credit bureaus which you can get by clicking here and credit experts recommend that you check it at least once a year.
9. Budget and Learn to Spend Within Your Means: Studies have shown that people who go bankrupt only do so ONCE in their lives. WHY? Well debt relief is only one side of the coin. On the flip side are the lessons people take from bankruptcy. So, like these now money wise people, take advantage of the fresh start that bankruptcy has provided, and make lifestyle changes so that it does not happen again. Follow Rule # 10 below and stop using trade credit (AKA: Credit Cards). Get a debit card instead and be you own bank, there is no interest that way!
10. Use credit Wisely. Once Lenders see that you have received a discharge, they may well start sending you “preauthorized” credit card applications. However, if you start to load up on credit again, you will soon be right back where you started. So the rule of thumb is to have just one credit card that you keep in a drawer somewhere for emergencies; If you do use it, make it “free credit”, that is: plan to pay it all back in the same month as incurred so that you are not left carrying a balance ant interest. That way you are living within your means. See Rule # 9 above. The only other credit to use generally speaking is for major purchases such as car or home loans.
11. Build up a reserve for emergencies and start saving again. Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.
Since you no longer have trade credit, it will be easier to devote some of your income to savings…follow the rule “Pay yourself first”. Experts recommend a reserve of 6 months salary and at least a 10% savings rate. Contributions toward your IRA or 401K at work count as you can withdraw these funds (with penalty if applicable) in an emergency.
If you follow these rules, you are more likely to take full advantage of your fresh start and not ever be back to see your friendly local bankruptcy lawyer!

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

How Do Creditors Manage to Find Debtors with Such Seeming Ease?

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

One of the prime indicators that someone may need to file bankruptcy is when they start to get bombarded by calls and letters from creditors.

Well, just how do creditors manage to locate debtors? Especially in our mobile society where that have moved to a different city or even state, with no forwarding address.

  1. Social Media: Think creditors (and others) are not monitoring the information you post publicly?  Think again, virtually any information you might post, such as where you work, live, shop, etc., can unwittingly provide vital clues as to your whereabouts.
  2. Credit Card Applications: This is one of the most fruitful resources for your creditors. Not only is your residential address and contact information listed, so are references, contacts and acquaintances that creditors can use to track you down if you have relocated. Banks, credit references or relatives may also be detailed on the application and these also can provide promising leads.
  3. Relatives, Friends, Acquaintances, Neighbors, Etc.  These types of contacts are still acceptable if done properly. Collection agents may contact any number of people to get information on you, though there are some restrictions as to how/when they can do this under the Federal Fair Debt Collection Practices Act (FDCPA) and correlative state laws regarding debt collection, such as Pennsylvania’s Fair Credit Extension Uniformity Act.
  4. Self supplied information such as Phone Numbers. If a collection agency has or obtains your phone numbers, they may be able to then get your address using a reverse lookup. This is one reason why creditors will so frequently ask if they can add a phone number to your information on file.
  5. Voter Registration Forms: Any time you register to vote in a new area, that information can potentially be accessed by your creditors. Even if you move, your old county retains these records.
  6. Department of Motor Vehicles: These records are available to registered collection agencies in many states across the country. So when you get your license and register your car  in that new state, you may be automatically giving them the information they need to find you.
  7. USPS Change-of-Address forms: Many major credit agencies receive change of address forms when you move from your previous location. They may also take the initiative to check with the post office themselves.  Obviously, this is one of the best ways for creditors to track you down because you thereby tell them exactly where you are going.
  8. Skip Tracers:  Creditors also employ skip tracers.   These are professionals whose job it is to locate a person’s whereabouts for any number of purposes. The term “skip” refers to the person being searched for, and is derived from the idiomatic expression “to skip town”, meaning to depart (perhaps in a rush), leaving minimal clues behind to “trace” the “skip” to a new location. Records that “skiptracers” use may include phone number databases, credit reports (including information provided on a loan application, credit card application, and in other debt collector databases), job application information, criminal background checks, utility bills (electricity, gas, water, sewage, phone, Internet, and cable), social security, disability, and public tax information.  Much of this information is not available or not easily obtainable by the general public or comes from data bases that are not widely known.  Source: Wikipedia: http://en.wikipedia.org/wiki/Skiptrace

Once credit agencies do locate a debtor, their contacts are supposed to be in conformity with the Federal Fair Debt Collection Practices Act (FDCPA) and correlative state laws regarding debt collection, such as Pennsylvania’s Fair Credit Extension Uniformity Act (PFCEUA), both of which prohibit debtor harassment.  (The PFCEUA extends the requirements of the FDCPA to direct creditors.) However, many collectors are now evading the law by setting up shop in foregn countries and then calling in to the US.

©Christopher C. Carr, Attorney at Law 2012, All Rights Reserved

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

N is for Negative Impact of Bankruptcy on Credit and How to Overcome it.

N by procsilas in Bankruptcy is for the Negative Impact of Bankruptcy on Credit and How to Overcome it.

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Most people are aware that filing bankruptcy can hurt their credit and it is well known that this can take its toll for up to ten years. But then why is it that the credit card apps start arriving again just a few weeks after a discharge in bankruptcy? Is it really true that a bankrupt is doomed to being deemed uncreditworthy for ten years? We will explore these questions below but first a bit of background.

The information contained within your credit report is generally governed by the Fair Credit Reporting Act. This federal law specifies how long a bankruptcy can appear on your credit report. This in turn varies based on type of bankruptcy as well as disposition of the case. Chapter 7 and 11 bankruptcies will appear on the report for up to 10 years from the filing date. Non-discharged or dismissed Chapter 13 and 12 bankruptcies also appear on a credit report for up to 10 years. Discharged Chapter 12 and 13 bankruptcies can remain on the report for up to seven years.

Does this mean that your credit will be impaired for 7 or 10 years? Does it mean you will not be able to purchase critical items on credit?    Certainly not, at least for the debtor who learns from past errors.

Note that the period starts running from the date of filing not discharge so, for example, if you filed a a Chapter 13 bankruptcy petition 4 years ago and completed a 3 year plan 6 months ago, you only have three years to go. And during this time, you will, with persistence, be able to get credit for the things you really need (see below.)

You can begin to rebuild your credit rating immediately upon the date of your discharge order.  In a Chapter 7 this will be granted 3-4 months after your petition is filed, typically.   If you are in a Chapter 13 your plan payments will be reported even while still in bankruptcy.

Don’t even think about hiring a “Credit repair” agency. The money you might pay them can actually be used directly to repair your credit in the one way the experts agree really works.  The crucial thing you can do to rebuild your credit quickly and at no added cost is to pay all your bills on time. No exceptions.  It is not uncommon to see former clients who have rebuilt their ratings within 2 to 3 years after a bankruptcy. Their secret?  They paid their mortgage and car loans ON TIME and didn’t miss a payment. Some ideas: Send the checks EARLY in case the mail is delayed. Set up an emergency fund, perhaps in a short term CD, say with your tax refund to give yourself the “float” needed to make the payments in case you are short one month and then replenish it in flush months. Have the mental discipline to reserve it just for this purpose! If worse comes to worse, borrow against your IRA, 401K at work, life insurance policy  or pension.

As an example, a recent Chapter 7 client finished his case; obtained his discharge order and exactly 30 months later (2 years and 6 months), purchased a new home and obtained a competitive mortgage rate for a 30 year fixed mortgage.

You will be able to get a new credit card after your bankruptcy case has been completed.   It is true that you are likely to be rejected once or twice, but you should be able to obtain approval for a small credit card as long as you are persistent. Your best bet may be to talk to that friendly bank manager you have known for years. And you may need to ask more than once.

There are also ways to surrender that car you are driving now and its high rate loan and purchase a new car even while in bankruptcy, believe it or not.  You will pay a somewhat higher interest rate but rates are at historically low levels now anyway.

You will also be able to obtain student loans, for yourself or for a child, the Bankruptcy Code (11 U.S.C. Section 525) specifically prevents the government from discriminating against individuals on the grounds that they have filed for bankruptcy relief.  I have yet to hear of anyone being denied a student loan on bankruptcy grounds.

There are in addition certain “tricks of the trade” that a competent and compassionate bankruptcy attorney can impart to you once you have retained him or her which will speed up the process of restoring your credit even further.   Be sure to ask!

In conclusion, your payment history will be crucial after (and in a Chapter 13 even during) a bankruptcy discharge, because prospective lenders really will  be looking  to see that you have paid attention to the mandatory debtor counseling sessions and have well and truly learned the lesson of how to use credit responsibly. It often will be easier to rebuild credit after a bankruptcy discharge because you will no longer have debts that hopelessly exceed your credit limits.  In this way and in general (certainly, not in every individual case) over the long haul, the consumer bankruptcy laws prove their worth. This writ large then is why the “fresh start” offered to debtors by our system of bankruptcy is a necessity to a healthy capitalistic system.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality Chester County Bankruptcy Practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!


I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved.

Other Bankruptcy Lawyers writing on the letter N include:

California Northern Bankruptcy Court  Marin County Bankrupttcy Lawyer, Cate Eranthe http://marin-bankruptcy-law.com/803/bankruptcy-a-to-z-n-is-for-california-northern-bankruptcy-court/ NACBA Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/813 Naked New York Bankruptcy Lawyer, Jay S. Fleischman http://www.consumerhelpcentral.com/bankruptcy-alphabet-naked/ Negative Notice Jacksonville Bankruptcy Attorney J. Dinkins G. Grange http://jacksonville-bankruptcy-grange.blogspot.com/2012/02/n-is-for-negative-notice-local-rule.html Never Cleveland Bankruptcy Attorney William Balena http://ohiobankruptcysource.com/?p=2418 No Asset Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-no-asset-case.html No Asset Report Honolulu Bankruptcy Lawyer, Stuart T. Ing http://www.bankruptcyhi.com/2012/01/n-is-for-no-asset-report/ Non-exempt Property Miami Bankruptcy Attorney, Dorota Trzeciecka http://dorotatrzeciecka.com/2012/02/05/bankruptcy-a-z-n-is-for-non-exempt-property/ Nondischargeable Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-nondischargeable.html Nondischargeable Northern California Bankruptcy Lawyer, Cathy Moran http://www.bankruptcysoapbox.com/bankruptcy-alphabet-n-for-nondischargeable/ Nondischargeable Debt Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/16/bankruptcy-alphabet-n-is-for-nondischargeable-debt.aspx Notice Colorado Springs Bankruptcy Attorney Bob Doig http://springsbankruptcylaw.com/?p=1227 Notice San Francisco Bankruptcy Attorney, Jeff Curl http://www.jclawgroup.com/blog/bankruptcy-alphabet-n-is-for-notice/ Notice Taylor, Michigan Bankruptcy Attorney, Chris McAvoy http://downriverbankruptcy.com/n-for-notice-creditors/#axzz1mtGwtQjh Notice of Rights to Claim Exemptions Charlotte Bankruptcy Attorneys, Collum & Perry http://www.collumperry.com/firm-news/notice-of-rights-to-claim-exemptions Numbers and New Bankruptcy Laws Los Angeles Bankruptcy Attorney, Mark J. Markus http://www.bklaw.com/bankruptcy-blog/2012/03/numbers-and-new-bankruptcy-laws/ Non-Attorney Bankruptcy Livonia Michigan Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/n-is-for-non-attorney-bankruptcy-livonia-michigan/

V is for “Victory”: FINDING & RESTORING CREDIT AFTER A BANKRUPTCY FILING

 V is for “VICTORY”:   FINDING & RESTORING CREDIT AFTER A BANKRUPTCY FILING

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

Why do so many of us come this way?  Well, virtually all of us who seek a bankruptcy do so in order to get a “fresh start”.  That is precisely what the law says it is there for.  Elsewhere, I argue that without such a safety net there to catch us if we fail, WE COULD NOT AND WOULD NOT HAVE A ROBUST FREE MARKET ECONOMY.  So many of us are maxxed out on our credit cards and have no more purchasing power.  We seek fresh sources of credit for autos, schooling, even our everyday purchases.  So for better or for worse, it becomes critical for us to find our way back to the credit wellspring as soon as possible after, nay even during, our bankruptcy.

A Chapter 7 “liquidation type” bankruptcy filing remains on your credit report for 10 years from the date of filing.   A Chapter 13 “debtor in possession” bankruptcy filing will remain on your credit report for 7 years from the date of filing. It will be automatically removed after the expiration of the applicable period.
Does this mean that your credit will be impaired for 7 to 10 years? Does it mean you will not be able to purchase critical items on credit?    Absolutely not.

Note that the period starts from the date of filing not discharge so, for example, if you are in a Chapter 13 and complete a 3 year plan 3.5 years later, you will only have three and a half to go. And during this time and even before, you will, with persistence, be able to get credit for the things you really need (see below.) But, you can begin to rebuild your credit rating immediately upon the date of your discharge order. (In a Chapter 7 this will be granted 3-4 months after your petition is filed, typically.)   Actually, it will often prove easier to rebuild your credit after a bankruptcy filing because you will no longer have debts that are in excess of your credit limits.

Don’t even think about hiring a “Credit repair” agency. The money you pay to them could actually be used directly to repair your credit.  As any bankruptcy practitioner will tell you, it’s really no secret, the crucial thing you need to do to rebuild your credit quickly and at no added cost is to pay all of your future bills on time. After a bankruptcy filing, your payment history will be crucial.  If you are in a Chapter 13 your plan payments will be reported. It is common to see former clients who have rebuilt their ratings within 2 to 3 years after a bankruptcy. Their secret? They paid their mortgage and car loans ON TIME and didn’t miss a payment. Some ideas: Send the checks EARLY in case the mail is delayed. Set up an emergency fund, perhaps in a short term CD, to give yourself the “float” needed to make the payments in case you are short one month and then replenish it in flush months or with your tax refund. Have the mental discipline not to use it for anything else!

As an example, a recent Chapter 7 client finished his case; obtained his discharge order and exactly 30 months later (2 years and 6 months), purchased a new home and obtained a competitive mortgage rate for a 30 year fixed.

You will be able to get a new credit card after your bankruptcy case has been completed.   It is true that you are likely to be rejected once or twice, but you should be able to obtain approval for a small credit card as long as you are persistent. Your best bet may be to talk to that friendly bank manager you have known for years. And you may need to ask more than once.

There are also ways to surrender that car you are driving now and its high rate loan and purchase a new car even while in bankruptcy, believe it or not.  You will pay a somewhat higher interest rate but rates are at historically low levels now anyway.

You will also be able to apply for student loans, for yourself or for a child.  Specifically, the Bankruptcy Code (11 U.S.C. Section 525) prevents the government from discriminating against individuals on the grounds that they have filed for bankruptcy relief.  I have yet to hear of anyone being denied a student loan on bankruptcy grounds.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law 2009, 2012, All Rights Reserved

“V” Photo by Janet McKnight

The “F” in Bankruptcy Alphabet is for “Failure” (and “Fresh Starts” in Bankruptcy)

F 2724770810_f84d80d958_t[1] is for Failure and “Fresh Starts” in Bankruptcy {Perhaps also for “Favorite”  because of all the articles I have written, this is my favorite”}

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

Many people in our culture still believe unfortunately that it is a mortal “sin” to declare bankruptcy; akin to a financial death sentence, to admitting failure as a human being and as a member of the larger economic enterprise. But in fact bankruptcy has been “built into” the US capitalist system since its beginnings with the Bill of Rights because it is essential to the very success of that model, which is in turn based on encouraging individual risk taking.

Being a success is a basic assumption of American life. We are taught almost from birth that at all costs we must be winner! But In fact, it is a harsh irony of life that success is built on trial and error and consequently upon failure. Some companies have even adopted corporate cultures which actually encourage failure so that employees will be willing to take risks and innovate.  See Why I Hire People Who Fail.

Our lawmakers from the very founding of our country have been mindful of the necessity to provide this “escape path for risk takers”:

The United States Constitution provides a method whereby individuals, burdened by excessive debt, can obtain a fresh financial start and pursue newly productive lives unimpaired by past financial problems. It is an important alternative for persons mired deep in financial difficulty.

The federal bankruptcy laws were enacted to provide debtors with a fresh start and to establish a ranking and equity among all the creditors who are clamoring for the debtor’s limited resources. Bankruptcy helps people avoid the kind of permanent discouragement that can prevent them from ever reestablishing themselves as hard-working members of society.

Source: Purposes, Benefits and Costs of Bankruptcy Disclosure pursuant to U.S. Code § 527(a)(1) & § 342(b)(1).

Some disagree with this proposition stating based on empirical findings that bankruptcy only helps about 2/3 of all who apply to get a fresh start and that is only because they find a steady income source.  See “The Failure of Bankruptcy’s Fresh Start”.  But for me, this only proves the point for i.) 2/3 is a pretty high rate of economic “resussitation”, ii) a study design like this just looks at a single point in time, it does not do follow ups to see what percentage ultimately do see improvement in their financial condition and iii.) how do you get people to pull themselves out of the economic mire (see quote above) unless society provides a safety net which is after all what bankruptcy really is? Not everyone will try and of those who do not all will make it but then there are no guarantees in life (or the law).

In my practice I represent many hard working small business people (from screenplay writers to truck stop owners) who are heavily engaged in the capitalist system. And what is capitalism at its core but the willingness of people to take chances in hopes of making money?  Someone–a small business venture–comes up with an idea for a business, obtains the financing and other myriad necessary resources to get that business up and running, strives to generate sufficient revenues to cover expenses over time, all in the hopes of making a profit from engaging in the business. At any point things may not work out as expected, causing the business to founder and ultimately sink.  Failure lurks in waiting at every corner!

Indeed some historians of note have argued that the American Revolution was in large part fought for debt relief:

The idea that debt is necessary for trade, and is to be forgiven liberally when necessary, is a key driver to the rise of our market economy. Americans fought to provide the same debt relief to everyone because we believe in equality and because bankruptcy protection takes the risk out of risk taking. Our historic willingness as a nation to forgive debt lies behind a good part of our prosperity. One good example is John Pintard, a state legislator and stockbroker, who was one of those who fell for William Duer’s financial scheme, which helped trigger the Panic of 1792, the nation’s first stock-market crash. Pintard ultimately landed in debtors’ prison in Newark. He got out of jail in 1798, and he filed for bankruptcy in New York in 1800. Among his many other post bankruptcy accomplismments, Pintard  founded the New-York Historical Society in 1804, and was a founder of the New York Bank for Savings in 1819.

In 1841, Congress passed a sweeping federal bankruptcy law that offered bankruptcy to everyone. Meanwhile, in 1831, the New York State Legislature abolished imprisonment for debt. Other states soon followed. Debtors’ prison was abolished, and bankruptcy law was liberalized, because Americans came to see that most people who fall into debt are victims of the economic cycle or misfortune like Pintard, and not of sloth, greed, or other negative personal attributes.

What would happen if there were no bankruptcy laws, no bankruptcy courts and no chance for people to obtain a fresh start?  Would people be as eager to innovate, to take chances and to possibly fail with no safety net to catch them? It is a fundamental premise of the capitalist system that they would not. That is why people who cannot pay their debts should not feel that they are ethically “challenged”, especially in this difficult economy, if they find they must seek the protection from their creditors for which our bankruptcy laws so prudently provide. For, failure is only the first step on the way to a fresh start!

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved.

More attorneys playing the bankruptcy alphabet game at letter F (HEY GUYS WE ARE 25% OF THE WAY TO Z!!!):

Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: F is for Family Farmer/Fisherman.

New York Bankruptcy Lawyer, Jay S. Fleischman: F is for Future Flow Agreement .

Northern California Bankruptcy Lawyer, Cathy Moran: F is for First .

Kauai Bankruptcy Attorney, Stuart Ing: F is for Foreclosure

Jacksonville, Florida Bankruptcy Attorney, J. Dinkins G. Grange: F is for Forms .

Colorado Springs Bankruptcy Attorney Bob Doig: F is for Foreclosure .

Los Angeles Bankruptcy Attorney, Mark J. Markus: F is for Forgiveness of Debt .