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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F is for Fresh Start

What fresh start? How does bankruptcy work to give me a “fresh start”?

Debtors obtain a fresh start because once the bankruptcy is filed creditors can no longer harass them due to the automatic stay. Later most debt is liquidated or discharged. A discharge is the legal elimination of debt through a bankruptcy case: the debt is no longer legally enforceable against the debtor. This permanent order prohibits the creditors from taking any form of collection action on discharged debts including legal action and communications with the debtor, such as telephone calls, letters and personal contacts.

Discharged Debts

Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided will remain after the bankruptcy case. Therefore a secured creditor may enforce the lien to recover the secured property. This is why you must maintain the mortgage payments if you want to keep your house and the car payments to keep the car. (Some lenders may also require a reaffirmation agreement.)

Not all debts are discharged. Certain tax claims, debts not listed in the bankruptcy paperwork, debts for child or spousal support, debts for fines and penalties, educational or student loans, debts for personal injury caused by the debtor’s operation of a motor vehicle while under the intoxicated and debts for certain condominium fees are among those not discharged.

You cannot get a Chapter 7 discharge of your debts more often than every eight years. It is your ace in the hole and not to be played lightly. However if you need the assistance of the Bankruptcy Court and the relief a “fresh start” can give it is a very useful tool.

Even if the debt is discharged you may still pay the debt after the bankruptcy case has been closed. There are times you might want to pay a debt even though it has been discharged because it is owed to a family member or treating physician. This is your decision.

Debt Follow Up After Bankruptcy

Part of the fresh start will depend on your follow up after you receive your bankruptcy discharge. Debtors need to review their credit reports approximately two to three months after the discharge. It usually takes one to two months before the credit report reflects the bankruptcy discharge. The accounts should be reported as discharged in bankruptcy and show a zero balance. Any incorrect reporting should be contested. The sooner you are aware of any mistakes, the sooner you can begin to take the steps necessary to repair the credit report.

As more and more prospective employers and insurance companies use credit reports in decision-making, the more important it is to correct these errors.

Under the Fair Credit Reporting Act (FCRA), credit bureaus and creditors have a duty to correct inaccurate information. You should request a copy of your credit report from each of the three credit bureaus and review the information listed:

Experian
P.O. Box 2104
Allen, TX 75013
www.experian.com
 
Equifax
P.O. Box 74021
Atlanta, GA 30374
www.equifax.com
 
Trans Union
P.O. Box 2000
Chester, PA 19022
www.transunion.com
 

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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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