Articles Tagged with Chapter 7

homeNot unless you would like to! It is understandable to be concerned about your home when thinking about filing bankruptcy to deal with other debt concerns. As long as you are current on your payments, the mortgage company cannot and will not foreclose.  They will send out a Reaffirmation Agreement (and more than likely offer you a loan modification as well).  The Reaffirmation Agreement is a document where you “sign back up” for your home loan either with the same loan/note details or possibly better if a loan modification is offered.

We also need to check and see if the equity in your home is over the Mississippi exemption or not.  If it is not over, your home is fully protected. If it is over, depending upon how much, there will be options to discuss.For example, your home is worth $100,000. You owe $90,000. Your equity is $10,000.  This easily falls under the Mississippi exemption ($75,000).  But if your home is worth $100,000 and is paid off, then you are over the Mississippi exemption by $25,000 and we would need to discuss options prior to filing your bankruptcy case.  It doesn’t mean that you cannot file, it simply means we have some things to take a stronger look at and discuss first.

Exemptions are protections for your property given to you by Mississippi Law. Exemptions are not the same in every state.  These protections allow you to keep the stuff that you already have, so you don’t have to start all over again with nothing.

Filing a chapter 7 bankruptcy can eliminate unsecured debts such as credit cards or credit accounts, all medical bills, any payday loans or other types of signature loans, etc.  It stops lawsuits, no matter what stage the lawsuit is in.  It stops wage garnishments.  It stops harassing phone calls and letters from debt collectors.  It gives you a new beginning, a true, financial fresh start.

In some instances, it may be advisable to file Chapter 7 bankruptcy to stop repossession, foreclosure, student loan collection efforts, and other types of debt related activity that might normally be handled through a Chapter 13 bankruptcy.  It’s a matter of what you need short term and long term.  Your attorney will discuss the pros and cons of both types of bankruptcy.

Being free from overwhelming debt is possible for you.  Take advantage of the opportunity the law allows to be debt free. The government understands that people have financial problems because they have experienced a job loss, hours cut, a failed business, divorce, illness, severe injury, or other unforeseen financial hardship.

Whether you are doing a debt consolidation, debt management, debt settlement, credit counseling, or bankruptcy, all negatively affect your credit.  The secret they don’t want you to know: your credit will suffer if you are not paying creditors exactly like you agreed or exactly like they want.  Debt consolidation, debt management, debt settlement, and credit counseling companies want you to pay them a fee in addition to what you pay on your debts.  These payments are NOT improving your credit and in many cases the payment won’t cover the interest on the debt.

Bankruptcy can get you back on track to good credit faster and cheaper than any of the other options.  Don’t sacrifice your financial future by using your savings or cashing out 401k’s and retirement accounts in an effort to stay afloat.  Right now, you need to do what is best for you and your family.  Things aren’t like they used to be.  Your credit will recover after bankruptcy.

Most unsecured debts will be wiped out in a Chapter 7 bankruptcy.  Unsecured means that the debt does not have any property pledged as security.  This includes credit cards, medical bills, lines of credit, payday loans, overdraft protection, signature loans, and personal loans.  There are certain types of unsecured debts that cannot be eliminated in bankruptcy.  The two most common types of debt that people think cannot be done away with are student loans and taxes.  These can be wiped out, but only if you meet special circumstances.  Student loans are not wiped out in bankruptcy, unless you can prove that paying them would create an undue financial hardship for you or your family.  Income tax debts can be eliminated, under certain circumstances, if they are more than 3 years old before the date you file the bankruptcy.

Secured debts are debts that have some sort of property pledged as security. When you get a loan to buy a car or a house, you take out a secured loan.  The car or the house is the security or collateral for the loan.  Secured debts can either be wiped out in a Chapter 7 bankruptcy or not – you have a choice with secured debts.  You can keep the car, house, or property and continue to pay the debt or you can give the property up and walk away, owing nothing.

A secured loan creates two obligations for the loan.  The first obligation is the security interest that allows the lender to repossess or foreclose the property if you stop making payments.  The second obligation is your obligation to pay the loan.  If the car is repossessed or the house is foreclosed, the loan company can come after you for the money you still owe on the loan.  This is known as the deficiency balance.  Chapter 7 bankruptcy eliminates your personal obligation to pay the loan and if the property is repossessed or foreclosed, the company cannot come after you for the deficiency.  If you choose to continue paying and retain the car, house, etc – the creditor provides what is called a Reaffirmation Agreement.

In chapter 7 bankruptcy cases you may be asked to sign a reaffirmation agreement for a loan, secured by collateral, that you wish to keep such as a vehicle, furniture, etc. A reaffirmation agreement is an agreement that says you want to keep the vehicle or the furniture and you will continue to pay the debt after the bankruptcy is over.  The creditor must agree to the reaffirmation, but in most cases they will agree because they want you to keep the property and continue to pay them.  They don’t want the property back.

A valid reaffirmation agreement places a legal obligation over you to continue to pay a debt that would have been wiped out in the bankruptcy.  If you become behind on payments after the bankruptcy, the creditor can repossess or foreclose on that property and sue you for the deficiency balance on the loan.

The Bankruptcy Code has many requirements that must be met for reaffirmation agreements to be valid. You should think long and hard about whether to reaffirm a debt and discuss options with your bankruptcy attorney, as this limits the benefits of your bankruptcy discharge.

Stop – if you are thinking of filing bankruptcy – do not do any of these transactions until you have spoken with me. Waiting a few days will not matter. “Better to be safe than sorry.”  There is a right way to do things before you file bankruptcy, but there are also a whole lot of wrong ways to do things. Some actions could get you into a lot of trouble.  Put it on hold and let me give you the information you need to understand your options.

  • Don’t pay back money you owe to family members.
  • Don’t pay your friends back money you owe them.

wedding ringsMississippi is not a community property state and in most cases, a husband and wife are not responsible for each other’s debts. There are some exceptions, but they usually would only come up in a divorce or action between the husband and wife, not in a situation between the husband or wife and a creditor. A bankruptcy filed by one spouse should not affect the credit of the other spouse because that spouse did not file bankruptcy. The spouse’s name and Social Security number would not be listed on the bankruptcy papers of the other.

If there are joint credit cards or other joint debts then the spouse that did not file would still owe the debts. Otherwise, if the debt is just in the name of the spouse filing for bankruptcy, creditors would not even know the other spouse exists.

Bankruptcy law allows a married couple to file together, but they are not required to do so. Either husband or wife can file by themselves, or not file, or even file two different types of bankruptcy at the same time. Your spouse may not need to file bankruptcy at all or one spouse may need to file a chapter 7 and the other may need to file a chapter 13. You are allowed to file a bankruptcy by yourself and wipe out the debts you can discharge. You have several options!

credit cardsCan you pay your credit cards after filing bankruptcy?  Of course. You can pay anyone you want to pay. But should you? Let’s explore whether first of all you can keep them, and second if you have anything to gain by paying debts that were wiped out by the bankruptcy court…

Can you keep your credit cards after filing bankruptcy?  You should know that your credit cards will be canceled by the creditor once you file bankruptcy.  Even if you want to keep them and continue to pay, they will be canceled.  Credit card companies are constantly checking your credit reports and the moment they see the bankruptcy they will cancel the card.  This is a surprise to many people who thought that by not listing one or two cards in their bankruptcy, they could keep using them.  No company is going to let you keep a credit card. They all want you to reaffirm the debt and pay it off, but they will not extend the current credit privileges, even if you agree to pay what is owed. Now after filing bankruptcy, you may get flooded with new offers for credit cards (some offers may even be from the same companies!) but they will not allow the current account to remain open.

Why? Once a debt is discharged in bankruptcy, the creditor can’t have any contact with you. No letters, no phone calls, no law suits, no efforts to collect, and no reports to the credit bureau. You can sue them if they violate these rules. So if you repay the debt, the creditor can’t and won’t report it on your credit record. They will take the money, but you won’t any recognition or credit for paying it.