Q:

When is appropriate to file for bankruptcy?

A:

When determining whether or not to file for bankruptcy, you should consider whether or not you have the ability to get out of the financial problem you’re in within a short period of time. I don’t believe that people should have to struggle with debts forever.

The majority of people who file bankruptcy have either suffered a job loss, a major medical issue, or some type of economic downturn that has prevented them from having the income to pay their debts.

If you have been struggling to pay your debts for the past 12 months, you should consider bankruptcy. If you’re going to experience unemployment, you should consider bankruptcy. If medical bills are weighing you down, you should consider bankruptcy.

To make the most informed decision, you should talk with a bankruptcy attorney about your specific financial situation.

Q:

When is not appropriate to file for bankruptcy?

A:

If your debts were acquired under dishonest circumstances—you borrowed money by not giving honest information to the creditor, or you received a loan by dishonest means—then the court will deny you bankruptcy.

It also may not be appropriate to file for bankruptcy depending on your unique financial circumstances. Before making the decision to file, you should speak with an experienced bankruptcy attorney to determine whether bankruptcy or an alternative is right for you

Q:

What are the benefits of filing for bankruptcy?

A:

Bankruptcy means a fresh start. From the date you file, all legally dischargeable debts are discharged, which means you don’t have to pay them and the creditor can’t collect. The benefit of bankruptcy is that it removes many of your financial burdens, which can be particularly beneficial while you are dealing with another issue (medical problems, job search, etc.).

There are certain kinds of debts that aren’t dischargeable, but the majority relating to peoples’ financial problems are dischargeable.

The next benefit is that if your wages are being garnished for a debt, and they’re taking a considerable amount of money out of your paycheck, bankruptcy stops that. Creditors have to stop garnishments and collection calls. They must deal only with your attorney. The fact that overzealous creditors or debt collection agencies are not allowed to bother you anymore can give you some peace of mind and the ability to relax.

Q:

What are the different types of bankruptcy?

A:

Simply put, there are four different types of bankruptcy:

  • Chapter 7: Complete discharge of debts
  • Chapter 11: Reorganization plan for businesses
  • Chapter 12: Similar to Chapter 7, but used mainly for farmers and fisherman.
  • Chapter 13: Repayment plan for certain types of debts

Chapter 7 bankruptcy is a discharge of your debts and is the most common type of bankruptcy for which people qualify.

It’s important to talk to a bankruptcy attorney if you are considering bankruptcy and are not sure which type of bankruptcy would most benefit you.

Q:

What happens after filing bankruptcy?

A:

After your case is filed, there is a meeting with a trustee, the employee of the court whose job it is to determine whether you’re filing bankruptcy in a fair way and whether you have any assets available to pay some money back to your creditors.

In addition, if you have secured debts, like a motor vehicle or home loan, you and your attorney negotiate with those creditors if you want to keep that car or your house. There is a reaffirmation process in which you and the creditor, with your attorney’s help, agree that you will continue to pay the debts and the terms of payment. If it is appropriate to continue to pay the debts, by reaffirming you are taking the debts out of the bankruptcy. You will be responsible to pay that debt as if you did not file bankruptcy.

After the meeting with the trustee, there are meetings with the court. The court conducts phone hearings on any debt that you decide to reaffirm. The court has to decide that you are able to afford to continue to make the payments on those debts. They hold a hearing where you and your attorney call the court, and the court asks you questions.

Following that, if there are any issues with the IRS or student loans, then you and your attorney meet with those agencies to negotiate payments of those debts. Generally, as a rule, student loans and taxes are not dischargeable, so you have to work with those agencies to make sure you can pay those debts.

Q:

How does bankruptcy affect my credit?

A:

One thing The Law Office of Chris D. Hefty does is get a two or three agency credit report at the beginning of your case so that we will know what your credit score is and have an accurate list of all the creditors that have made notations on your credit report.

Generally, bankruptcy will affect your credit score and credit report because all of the creditors on your credit report, as a rule, are being discharged.

Your credit report is a history of how you handle credit. Bankruptcy will be put on that report.

One of the benefits of working with our firm is that we can work with credit reporting agencies to give you a prediction of how bankruptcy can affect your current credit score. Our firm will obtain your current credit score and your estimated your credit score after 12 months of working with your agency. We can also advise you of the steps you can take to improve that score.

Many people will tell you that bankruptcy is only on your credit report for seven years. But in actuality–because of the ability of credit reporting agencies to keep your history–there really isn’t any specific time frame where the notation of bankruptcy on your credit report comes off. Some agencies, with their internal rules, update their information annually and remove information that is incorrect or too old to be helpful. But in fact, some credit agencies will keep a notation of bankruptcy on your credit score for anywhere from 10 to 20 years.

It doesn’t affect your credit as much as a lot of people think. Of course, the day after you file bankruptcy, you’re not going to be able to get a car loan. But as you pay your bills on time and borrow money and pay it back, your credit score and creditworthiness will go up, becoming more attractive to creditors.

I’ve had clients who qualified for mortgages a year after bankruptcy, and I’ve had other clients who couldn’t get a car loan for three or four years. Really, it depends on how you manage your income and your debts. The more you pay debts on time and consistently, the better your credit score is and the better the notations on your credit report.

If you need financial help, please contact my Loveland or Fort Collins office to find out how an experienced bankruptcy attorney can help you.