Renting After BankruptcyGoing through a bankruptcy is a trying experience, especially if it was brought on by foreclosure.  Your life is turned upside down, and now that it’s all over you’re given the chance to get things back on track.

A central problem is one of basic shelter – how to find a place to rent now that your credit report looks like it’s been shot full of holes.  You’ve got to move quickly, so it’s best to start preparing with these simple steps right away.

Bankroll Those Mortgage Payments

If you’re behind on your mortgage and waiting for the foreclosure to be finalized, take the opportunity to start saving at least part of what you’d otherwise be sending to the mortgage company.  You can amass your savings once the bankruptcy case is filed (that is, if it was a Chapter 7 bankruptcy case) without worrying about the trustee or creditors coming after it.

Those funds will come in handy not only for moving expenses, but also to provide for a greater security deposit or advance payment of rent to your new landlord once you’re ready to move.

Stay On Top Of Your Credit Report

Most landlords will check your credit report as part of a pre-screening process, so you’ll want to be sure that everything is accurate.  You won’t be able to do anything about the fact that the bankruptcy will appear on your credit report, but you can minimize the negative impact by ensuring that all of your other accounts properly reflect the bankruptcy discharge.

Organize Your Records

Often, landlords and other post-bankruptcy creditors will ask for proof of your bankruptcy filing and discharge.  They want to be sure the case is over, who you discharged, and whether there were any problems.  By keeping copies of all bankruptcy papers, you’ll be able to document where you were, where you are, and what you’ve left behind.

Don’t Forget The Mortgage Lender

The banks are sitting on hundreds of thousands of homes nationwide, and they’re not so happy about it.  If you’re looking for a place to live, consider picking up the phone and finding out if your mortgage lender will let you stick around for awhile and just pay rent.  You may find that the lender is grateful to have someone in the house to maintain it and keep the pipes from freezing over.  You’ll benefit by being able to keep continuity in your living arrangements.

Jay S. Fleischman is a consumer protection attorney focusing on helping people fight back against creditor harassment and credit reporting problems after bankruptcy.

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C is for Chapter 7

C is for Chapter 7

Chapter 7 is a complete liquidation of your debt through a process in Federal Bankruptcy Court. If you cannot afford to meet your monthly living expenses and pay your debts, you may be able to liquidate your debt. Not everyone will qualify to file Chapter 7 under the Bankruptcy Code’s “means test” and certain types of debt cannot be discharged or wiped out (such as most federally guaranteed student loans, many taxes and any outstanding family support obligations).

Means Test

At its simplest, the means test is based on the average California median income according to family size. The median income levels recently dropped to reflect the state of the economy. For a single person it is $47,683 a year and it goes up as family size increases. See the United States Department of Justice Census Bureau Median Family Income.

There is a long form of the means test that factors in secured debt payments such as your mortgage and other necessary expenses like medical bills and insurance. This is a complex form best undertaken by a local knowledgeable bankruptcy professional. Completion of the long form will let you know if you pass the means test even though you have above median income.

Required Courses

You will also be required to take two courses from California approved credit counseling providers. The first course must be completed before you can file (within 180 days) and the second course is completed after filing and before you can obtain a discharge. I think of theses courses as the ticket in and the ticket out of the bankruptcy proceeding.

Chapter 7

After you file for bankruptcy, most of your assets become property of the estate and subject to sale and distribution to the creditors. However, in most consumer cases all the assets are exempt and are not available for liquidation.

The debt liquidation is called a discharge. You cannot get a Chapter 7 discharge of your debts more often than every eight years. Only individuals obtain a discharge of their debts. If a corporation or partnership files for Chapter 7 relief the entity is dissolved.

The entire process of a Chapter 7 from beginning to end is generally four to six months. If there are any non-exempt assets to be sold it will take at least several months longer

A Chapter 7 will stay on your credit report for 10 years from the date of filing. The impact on credit is generally minimal because most people who need to file a bankruptcy already have low credit scores. Also there are ways to rebuild credit without going into debt after you have filed

Check out consumer protection attorney Jay Fleischman who thinks C is for Creditor. He provides a thorough explanation of who your creditors are.

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