A bankruptcy will stay on your credit report for ten years. The effect your bankruptcy will have on your credit score will depend largely on its condition before you filed. If you had a good credit score, then the bankruptcy will have a much larger impact than if your score wasn’t so great. However, your credit will not be ruined forever. After your bankruptcy, if you use credit wisely, you can help improve your score over time. If you are able to pay all of your bills on time and use your finances responsible, you can rebuild your credit enough to qualify for a credit card or even a mortgage within a few years.
Filing for bankruptcy does not necessarily mean you will have to give up your home, car or other valuables. If you file for Chapter 13 bankruptcy, you will be able to keep your property while repaying your debts through your Chapter 13 repayment plan. If you file for Chapter 7 bankruptcy, you may be able to protect your property through bankruptcy exemptions. An experienced Phoenix bankruptcy lawyer can help you determine which bankruptcy is right for you, as well as what property you may be able to exempt.
Chapter 13 bankruptcy allows you to pay back debt over a three to five year time period. The amount you need to pay each month is calculated based on your disposable income. Through Chapter 13, it is possible to pay back less than the full amount of your debt. Most individuals who file for Chapter 13 are also able to discharge some of their debts at the end of the repayment plan.
In order to qualify for bankruptcy, you must participate in credit counseling through a nonprofit agency. This counseling can be done in person, by phone or even online. You will need to bring information regarding your debts and income, which the counselor will review with you. The counselor will determine whether you could resolve your debt problems through an informal debt repayment plan or some other bankruptcy alternative. The agency may propose a repayment plan, and you will have to file it with your bankruptcy paperwork. You are not required to go along with the plan. You are required by law only to participate in credit counseling, not to agree to whatever the agency proposes.
You can file for bankruptcy more than once, but there are important limitations. Once you receive a discharge, there are a certain number of years you must wait before you can receive another. If you receive a discharge under Chapter 7 bankruptcy, you cannot receive a second discharge in another Chapter 7 case within eight years of the first filing. If you received a Chapter 13 discharge, you cannot receive a second in any Chapter 13 case filed within two years of the date your first bankruptcy was filed. There are also time limits placed on receiving a Chapter 13 discharge after a Chapter 7 bankruptcy and vice versa. In order to best determine when you may qualify for a second bankruptcy discharge, speak with an experienced bankruptcy lawyer.
In order to qualify for Chapter 7 bankruptcy, you must pass a means test. The means test is used to determine whether or not you would be able to repay your debts. It will calculate whether your income is more or less than the median income in your state. If you earn less than the median income, you qualify for Chapter 7 bankruptcy. If you earn more than the median, it will be determined by your disposable income whether you will have sufficient money to repay some of your debt.
It is possible for a bankruptcy court to dismiss your case. If it is found that you committed fraud, or if you failed to comply with any applicable laws or rules (such as completing credit counseling, paying filing fees or attending the meeting of creditors), the bankruptcy court or trustee can dismiss your bankruptcy case. If you fail the Chapter 7 means test, the trustee can either dismiss your case or give the option to convert to Chapter 13. Additionally, failing to make payments toward your Chapter 13 repayment plan can result in a dismissal.
Unsecured debts are those that are not secured by collateral, such as credit card debt. Unsecured debts will be fulfilled in bankruptcy proceedings after secured debts have been paid. Secured debts are those that have been secured by collateral, such as mortgages or car loans. These debts have priority in bankruptcy cases. Creditors may be able to seize property that is secured by collateral should you fall behind on your payments.