December 2015 Archives

Rebuilding Credit After Personal Bankruptcy

Rebuilding credit after filing a Chapter 7 or Chapter 13 personal bankruptcy and receiving a discharge is an important question often asked by individuals filing bankruptcy. Whether the individuals live in Cherry Hill New Jersey, Blackwood New Jersey, Mount Laurel New Jersey or any of the many cities and towns in the area, years ago when those individuals filed for bankruptcy it was much more difficult to build up credit. However, that has changed to a large degree. In fact often people file bankruptcy at a point where their credit score is low from a number of defaults and the mere filing of the bankruptcy itself can be a huge first step towards rebuilding credit. However, there are other important steps to take in reestablishing credit.
It is important to understand that credit reports are often inaccurate. Consequently a few months after receiving a bankruptcy discharge it is highly recommended that you get a credit report and confirm that it properly states your financial circumstances. Debts discharged in bankruptcy should be reflected in the credit report as having been discharged. Sometimes for whatever reason a credit card may reflect as still being open and in default. In that circumstance you would want to contact the credit reporting company and provide them a copy of your bankruptcy schedules showing that the creditor had been included in the bankruptcy and ask that they correct their credit report. Another way to build up credit is to apply for a credit card or retail card. While the individuals should certainly be cautious especially if bankruptcy was caused by credit card debt, having a credit card where it is used and paid off each month will help build up credit. In addition, opening up a bank account is a good way to help demonstrate you are responsible. Also, it is important to make sure all payments, whether it is utilities, rent or your new credit card, are timely paid.Following these simple steps can help to rebuild credit after bankruptcy in no time.

Limiting Student Loan Payments in Chapter 13

As previously discussed in my Blog at bravermanlaw.com in certain hardship cases student loans can be eliminated. However, what about those circumstances where the student loan cannot be eliminated. Is there anything that can be done in bankruptcy that can help with limiting the student loan payments? The answer is yes. A Chapter 13 can be used to provide some relief. Chapter 13 is a form of bankruptcy where payments are made over a period of 3 to 5 years. It is often used to pay mortgage arrears over 5 years to allow the borrower to save their home. However, what about a situation where someone has unsecured debt, such as $20,000.00 in credit cards, and $80,000.00 in student loans, the student loan lender is demanding $600.00 per month and your salary cannot yet support that kind of payment. One option would be to file chapter 7 personal bankruptcy which would eliminate the credit cards but not help with the student loan payment. Another option is to file Chapter 13. Lets say you live in Northeast Philadelphia, your budget, when you don't count the student loans or the credit cards, would allow you to pay $200 per month for 5 years. In the Chapter 13, you stop paying all of the creditors and you pay $200.00 per month to the trustee which would total $12,000.00. After certain trustee deductions, your creditors, totaling $100,000.00 ($20,000.00 credit cards and $80,000.00 student loans) would share about $10,000 or roughly 10% of their claim. At the end of 5 years, the other 90% owed to the credit cards would be eliminated. As for the student loan, once the bankruptcy is over, you would then be obligated to continue making payments on the student loan. However, you will have made a manageable payment for 5 years with the hope that you are now in a better position to pay the student loan.

Discharging Student Loans in Chapter 7 Bankruptcy

Contrary to popular belief, student loans can be discharged in bankruptcy in certain circumstances. While most borrowers would prefer to be able to repay their debts, sometimes their financial situation requires another approach. One way to eliminate student loans is to file a Chapter 7 bankruptcy and show a hardship. Under the bankruptcy rules, hardship is difficult to prove, but not impossible. The Brunner Test must be applied. Under the Brunner Test, the debtor must prove three things. The first two are not that difficult. The debtor must show an effort was made to pay in the past. The debtor must also show there is no ability to pay at present. Under the third prong of the test, the debtor must show he or she will not be able to pay in the future. For example, if you are permanantly disabled, you would have a very good chance of being able to discharge the debt.

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