Speak With a Bankruptcy Attorney if You Plan to Buy a House in the Future

As a bankruptcy attorney, we hear a lot of questions about mortgages. Understandably, people want to know if they will be able to buy a house, refinance, or keep their current home if they file for bankruptcy. While bankruptcy does provide much-needed debt relief, it isn’t for everyone, so it is important to consider what your total financial goals are before pulling the trigger.

Here is what you need to know –

Your credit will be impacted.  When you file for bankruptcy, it will negatively impact your credit score.  However, you must consider what the alternative is.  For example, if you are maxed out on all of your credit cards, have a lot of loans and are making payments late – your credit score is probably already taken a significant dive.  It is common for people that had scores in the 700s to drop into the 500s simply by being overextended and making late payments. If you are in this situation or will be shortly, you’re going to have a lower credit score regardless of whether or not you file for bankruptcy.

You’ll have to rebuild.  As a bankruptcy attorney, we regularly provide clients with suggestions for how to rebuild their credit.  This is an important part of the process.  Once you have filed, you will need to get new credit accounts that you can use and pay on time in order to see improvement in your credit scores.  Most people have to start with a prepaid credit card where you put money on it, use it, and repay it.  While this is borrowing money from yourself, it will start to give you positive credit history again.  Most lenders require three trade lines (credit accounts) showing a good history in order to approve you for a mortgage loan.  Keep this in mind if you want to buy a house in the future so that you can set yourself up for success.

Time heals all wounds (and credit history).  If you wait long enough, the negative effects of filing for bankruptcy will dissipate as long as you have new and positive credit history.  You can ask for the bankruptcy record to be removed from your credit history after seven years though many FHA and VA lenders will give you a mortgage loan two to four years after filing a Chapter 7. Traditional lenders may require a waiting period of four years or more.

Current mortgages.  If you have a home loan now, you can typically stay in your house as long as you continue to make your mortgage payments.  Otherwise, you can discharge this debt but will have to move out.  If you want to stay in your home and refinance your loan, we can help to negotiate with the lender as part of the bankruptcy process, and you may be able to have your payments reduced, at least temporarily.  This may make it possible to make staying in your home affordable. 

To learn more about your mortgage options, call and speak with a bankruptcy attorney.

We Provide Bankruptcy Help for Military Members

As a provider of bankruptcy help, we find that there is a lot of confusion surrounding whether or not military members can file for bankruptcy.  It is commonly thought that those serving should be in a stable financial situation, pay their bills on time, and not have any direct financial issues.  This would be wise considering the situation these men and women are in, especially during deployment.  However, this is not always the case as many members of the military actually have more expenses due to relocating their families, caring for properties while they are away, etc.  With this in mind, it can be easy for military families, just like civilian families, to find themselves facing financial hardship.

If this sounds like you – we can help.  Members of the military have the same legal rights to file bankruptcy that civilians have.  In fact, thanks to the Service Member Relief Act, military members can have some added benefits such as disabled veterans not needing to take the Chapter 7 means test.  The one thing to consider prior to filing is where you are trying to go in your career and whether or not you will need a high-security clearance.  If that is the case, let us know so that we can discuss all of your options.  Bankruptcy may harm your ability to get high-level clearances so we will want to go over this in detail. 

For most military members, the main goal is to have their family financially secure and stable.  With a regular paycheck, mountains of debt can be the one thing that stands in the way of achieving that dream.  This is where filing bankruptcy can be extremely helpful.  While providing bankruptcy help, we will start by learning about the types and amount of debt that you have, including what your payments are.  We will then want to know about your income and family expenses so that we can determine if you should have any funds left over to make debt payments.  If you do, that’s okay.  You may still qualify for bankruptcy. 

There are two main types of bankruptcy that an individual can file.  Chapter 13 is a reorganization that allows you to pay your creditors a portion of what you owe them.  In this scenario, we would work with you to determine how much money you have to allocate towards debt repayments after your bills and expenses like groceries and gas have been accounted for.  Next, a repayment plan would be proposed that states how many years you would be making this debt payment.  If approved, at the end of this term any remaining debt would be wiped out.  This allows you to pay something without having your family suffer on a monthly basis. 

As a provider of bankruptcy help, we can also help you to file a Chapter 7.  In this situation, your debts would be wiped out entirely.  It is important to note, however, that if you want to keep an asset like a home or car that has a loan on it, you will need to continue making those payments.  If you are in the military, or a civilian, call us to discuss your situation and which type of bankruptcy is right for you.

A Bankruptcy Lawyer Can Help With Your Reaffirmation Agreements

As a bankruptcy lawyer, I help clients to file a Chapter 7 bankruptcy on a regular basis.  This type of bankruptcy allows people to have the majority of their debts wiped out entirely.  Not everyone qualifies as you need to pass a means test, but those that do can get a fresh start on life.  

When considering whether or not you want to file a Chapter 7 it is important to think about what you want to keep and what you want to let go of.  Your home, for example, can typically be kept if you are willing to continue making the mortgage payment.  Likewise, your other secured debts can either be wiped out (this will require you to give back the item), you can buy it out (pay what you owe and keep the item) or you can reaffirm the loan agreement. This gives you a lot of flexibility in deciding what debts you want to keep based on which items you want to retain.  For example, if you own two cars that each have loans on them you can decide to keep one and reaffirm the loan while giving the other car back to the bank so that the debt can be eliminated in the bankruptcy. The only exception to this is if you have a lot of equity in an asset, the court may require it to be sold so that the cash can be distributed amongst your debtors.

If you decide to reaffirm any of your debts, you should work with a bankruptcy lawyer to ensure that it is done correctly.  Reaffirming basically means that you have decided to keep the asset, a car for example, and continue to make the loan payments.  Since you have the option of giving it back and declaring the debt as part of your bankruptcy, you have room to negotiate with the lender.  You continuing to make payments is in their best interest because they will recover the most amount of money.  As such, some banks will negotiate with you.  Typically smaller banks can be easier to work with, but we can help to negotiate on your behalf.  Some lenders will agree to reduce the amount that you owe them while others may lower your interest rate and the amount of your monthly payment.  This can be extremely helpful when you are trying to wipe out debts because you can’t financially afford the payments.  For example, a car payment at $500 a month may be unreasonable while a payment of $300 may be affordable.  

The creditor is under no obligation to renegotiate and offer you a better deal, but they often will as part of your reaffirmation agreement.  Working with a professional bankruptcy lawyer can help to increase your chances of success.  We find that as these negotiations take place, it is much easier to decide which assets to keep because a realistic picture of your total budget emerges.  Once you know how much money you can afford to spend servicing debt, we can negotiate so that the assets you do keep, fit within that budget range.

Learn About Bankruptcy Law and What Not to Do Before Filing for Bankruptcy

If you are considering this option, understanding bankruptcy law is important. There are specific criteria that you must meet in order to qualify for a Chapter 7, and a judge will have to approve your plan for a Chapter 13.  This means that they will be looking at your financial situation now and in the near past. Businesses applying for bankruptcy are under even further scrutiny.  With that in mind, it is important to exercise caution with your financial decisions so that it doesn’t appear as if you are trying to trick the system.

Here is what you should know:

• Illegal transfers.  If you transfer property out of your name to a friend or family member, it may be an illegal transfer.  First, consider if the asset has any equity or real value.  If it does and you transfer it within one year of filing for bankruptcy, the court could consider it preferential and require the asset to be transferred back so that it can be properly distributed amongst your unsecured creditors. 
• Payments within 90 days.  During the 90 days prior to filing for bankruptcy, you are not allowed to make any preferential payments. This would be paying one creditor over another.  If, for example, you paid money towards a loan your parents gave you this could be considered preferential.  As a result, they may be required to give the money back.  This can pose a far greater difficulty for the person that you paid, especially if it is an individual.  By understanding bankruptcy law, you can avoid making any illegal preferential payments and the complications that can follow. 
• Fraudulent transfers.  If you transfer any assets with an attempt to defraud creditors, you may have consequences within your bankruptcy case and be exposed to the possibility of criminal charges.  

We can review your financial decisions and any transfers that you have made within the last 90 days to a year and let you know if they could put your bankruptcy at risk or if the court may seek to have the funds returned.  In some cases, people need to delay their bankruptcy filing until 90 days from a particular transfer.  We can discuss this with you in further detail during a consultation. 

It is also important to note that while you are waiting to file or in the process, you must still make certain debt payments. Some people make the mistake of thinking that if they are filing for bankruptcy they don’t have to pay any debts.  The truth lies somewhere in the middle.  If your debt is secured by something that you want to keep (house, car, etc.) then you must continue to make the payments because bankruptcy does not prevent them from exercising their right to foreclose.  That means that the bank could foreclose on your home, causing you to lose it even if you file for bankruptcy.  With this in mind, continue paying your secured debts and stop paying unsecured credit cards, medical bills, lines of credit, etc.  During your consultation, we can review each of your debts to provide specific payment advice in accordance with bankruptcy law.

When Looking for Bankruptcy Legal Services, Be Sure to Work with a Lawyer

At The Travis Law Firm, we offer bankruptcy legal services to individuals and families throughout California.  We understand that this is a major decision both financially and personally.  This makes it important to work with a trusted advisor.  In the state of California, and elsewhere, there have been issues with companies offering bankruptcy help that did not follow through or file the paperwork correctly. As an individual, it is difficult, if not impossible, to know if someone you hire will do what they say and that is why you should work with an attorney.  Attorneys have a fiduciary duty to their clients, meaning that we are held to a higher standard and responsible for giving sound advice and doing things in accordance with the law and our clients’ interest.

An example of these issues arose when California homeowners were trying to protect their homestead interest.  The state of California allows for anywhere from $75,000 to $175,000 of equity in a home to be protected as part of the bankruptcy process.  That means that when filing bankruptcy, if you owe $75,000 in unsecured debt and have $75,000 in equity in your home, you would not be required to sell your home to pay off the debt.  This is an important law that has helped families throughout the country to remain in their home while getting out from under their debts. 

Unfortunately, companies throughout California were offering bankruptcy legal services by saying that they would handle the paperwork and document filing for the homestead provision to apply then not doing it.  In order to have your home protected using this law, you have to file paperwork in the county where you live.  These companies were not lawyers but were still offering these services.  When many of them failed to do what they said, homeowners were not granted their homestead protections, and some lost their home as a result.  The state legislature responded by regulating these companies so that other families would not suffer the same fate. You can read the regulations by searching for CAL. BPC. CODE 17537.5.  

While this was a good step taken by the legislature, it simply serves to demonstrate the importance of working with a law firm when undergoing something as significant as a bankruptcy filing.  When you file bankruptcy, there is a set process that must be followed in order to ensure that it is done correctly.  There is a variety of forms and deadlines that must be met.

Additionally, if you are trying to protect your home or other assets like your car, steps must be taken to do so.  You can’t simply request it but need to go through the process, and this is where non-lawyers struggle.  The legal system is not designed to be simplistic or easily manageable.  While that would be nice, it’s simply not the case because every time a new piece of legislation is passed, the laws become that much greater.  As an attorney, it is our job, duty, and responsibility to understand the law, follow it and adhere to all procedural guidelines.  As such, if you are looking for bankruptcy legal services, call our law firm so that you can trust it will be handled correctly. 

How a Chapter 7 Attorney Can Help You With the Homestead Act

If you are considering working with a Chapter 7 attorney and filing bankruptcy, you need to consider all of your options and ensure that your family is protected.  This is an excellent way to get a clean slate and start fresh without a mountain of debt.  For families that are simply in over their head, this can be the best way to move forward and get ahead of your bills instead of always feeling that you are behind while struggling to catch up.  This type of bankruptcy provides the option of wiping away your debts instead of making payments.

Since you can wipe away your debts, all of your assets are also on the chopping block.  If you have a lot of equity in your home (s), cars, boats, etc. they can all be claimed and sold as a way to give your creditors some money.  This is especially true on any assets that are collateralized.  For example, if you own a boat with a loan on it, the boat is probably collateral for that loan and the bank has the right to reposes it.  There are, however, ways that you can protect yourself and your family.

The homestead laws have been established to help people that are going through a difficult time financially. They are designed to ensure that people do not end up homeless.  The laws vary from state to state but in California anywhere from $75,000 to $175,000 can be claimed as part of the homestead provisions.  Everyone qualifies for the lower amount of $75,000 with higher amounts allowed incrementally based on income and age. In order to qualify for $175,000, you have to be 65 or older or disabled.  What these laws allow people to do is to claim that dollar amount of equity is protected from creditors in a Chapter 7 or other legal action. As a Chapter 7 attorney, we can ensure that the form is filed correctly. 

When the bankruptcy judge looks at the assets that you have that can be sold to pay debts, they cannot include equity that is covered by the Homestead Act.  In many cases, this prevents a home from being sold because the equity above the protected amount is insignificant and wouldn’t be able to satisfy the outstanding debt.  In order to qualify for this protection, you must complete a homestead declaration and file it in the county where you live.  If it is not filed correctly, your home may not be safe.  As a Chapter 7 attorney, we can help with this process to ensure that you and your family are protected and able to stay in the family home.

As a lawyer, we can also help to protect some of your other assets.  For example, we can make a case that you need to keep a car so that you can drive to and from work every day, important for ensure that your financial problems to do not escalate even further.  During your consultation, we will review your assets and debts than create a strategy for each one.  To file your Chapter 7, give us a call today. 

Learn Which Debts Can Be Included in a Chapter 13 Bankruptcy Filing and What is Exempt

Working with a Chapter 13 Attorney in a Chapter 13 bankruptcy, you can get a fresh start by creating a way to get out from under your debts.This type of bankruptcy does not wipe out your debts but creates a way for them to be repaid over time.  In most cases, only a portion of the total debt is paid, and once the payments have all been received, the remaining debt is discharged or wiped out.  This provides a way for creditors to receive some form of payment without you going under from trying to keep up with debt obligations.  In essence, it is a compromise. 

Most of your debts can be included in a bankruptcy filing.  There are, however, a few debts that you cannot include and will have to continue making payments on.  These include:

• Home mortgage.  If you are planning on remaining in your home, you will need to keep making the loan payments as agreed.  If this is difficult to do, ask your lender to consider a loan modification.  They may offer you the option of paying a lesser amount for a set period of time before reverting to your original payment.  In other cases, you may be able to reduce the interest rate and lower your monthly payment by refinancing. 
• Child support.  Parents that are obligated to pay child support as part of a court order will need to continue making that payment as agreed.  This also applies to alimony. Both a Chapter 13 bankruptcy and a Chapter 7 bankruptcy, will not eliminate these debts. If you need a reduction, you will have to seek one through family court in the state that ordered it initially. 
• Student loans.  If you have student loans or other government guaranteed debt, you will need to continue making these payments and cannot get rid of them through filing a bankruptcy. 
• Taxes.  It may go without saying that tax obligations cannot be eliminated through bankruptcy.  The IRS, however, may be willing to reduce the amount that you owe directly.  There is an application process that you need to go through in order for them to consider this. 

While these debts cannot be included in your bankruptcy filing as you work with a Chapter 13 Attorney, they are included in the calculations of what you can afford to pay towards debt on a monthly basis.  The way that a Chapter 13 works is you list out your income after paying taxes and all of your monthly expenses.  This includes paying for housing, utility bills, cell phones, groceries, gas, insurance, etc.  You can also include the payments that you have to make to debts such as child support and student loans.  After deducting everything that you have to pay, the amount that is left can be allocated towards debt payments.  In this way, while you cannot discharge all of your debts you still get credit for them in determining what you can pay towards your other ones as you work with a Chapter 13 Attorney.

To learn more about the process and how a Chapter 13 bankruptcy works, call and schedule an appointment.