How Do I Get Credit After Filing for Bankruptcy?

One of the fears many people have over filing for bankruptcy is that they won’t be able to get credit afterwards. This is simply not the case. While declaring bankruptcy will hurt your credit score, there are strategies for rebuilding your credit immediately after filing.  Most chapter 7 clients begin receiving credit offers within 30 days of filing the case!

Right from the start you might be a more attractive prospect to a lender, since you have just dramatically reduced your debt-to-income ratio (at least in the case of Chapter 7; in a Chapter 13 this process will take longer, but it will happen). Those who have filed for a Chapter 13 bankruptcy will benefit from the discipline of being on a repayment plan. This will also help in the long-term process of rebuilding credit.

It is important after filing for bankruptcy that you closely monitor your credit reports and credit score. Make sure you get a copy of your credit report from the three main credit reporting agencies: Equifax, Experian, and TransUnion. Go over the reports and look for errors and omissions regarding your current residence, employment and contact information. Some experts recommending avoiding credit repair agencies. Not all of them are above board, and even the reputable ones may not be able to do much that you cannot do yourself.

Another way to immediately begin rebuilding your credit score following a bankruptcy is to open a secured credit card account. A secured card is a credit card that requires a cash collateral deposit which then becomes the credit line for that account. After a period of timely payments, the bank will sometimes reward you by increasing your credit line without you having to make an additional deposit. The best way to utilize a secured credit card is to make a few purchases every month and then pay them off in a timely manner. Don’t carry a balance around on the card. OlsenDaines provides all our clients with a free credit rebuilding program, an invaluable resource in helping you make a plan for rebuilding your credit.

 

 

Waiving Your Rights to Bankruptcy

Creditors want to protect themselves against the prospect of debts owed to them being discharged. One of the ways creditors try to do this is through adding a “bankruptcy waiver” clause to contracts and agreements. It’s important to remember that these waivers are not binding. Any waiver of your future bankruptcy rights is not enforceable. Congress has expressly stated in the bankruptcy codes that a bankruptcy debt discharge halts any action against the debtor “whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)

Congress found that allowing waivers of bankruptcy rights would not be good public policy. To do so would drastically undermine the consumer right to file for bankruptcy, since if the waivers were permissible every loan or credit offer would contain one. However, the debtor can choose to waive their right to discharge a debt in the following circumstances: the debtor can opt for a reaffirmation of a debt, or execute a waiver that is approved by the bankruptcy court.

While a creditor cannot enforce a waiver of bankruptcy rights, the debtor is not entitled to tell the creditor that he or she will not file for bankruptcy while intending to do so. Taking a loan with the intention of discharging it through bankruptcy later on could be considered fraudulent. Not only can the creditor ask the bankruptcy judge to make the debt non-dischargeable, they may also be able to file a criminal complaint.

 

 

 

5 Myths About Bankruptcy

There are many myths and misconceptions surrounding the bankruptcy process. When making the decision whether to initiate the bankruptcy process, it’s important to be able to separate fact from fiction. Here are 7 of the most common myths surrounding bankruptcy.

  1. Bankruptcy will ruin my credit.

For many people considering filing, this may be a moot point as they likely already have a low credit score. In any event, filing for bankruptcy can actually sometimes improve your credit score. As far as your credit report goes, a Chapter 7 bankruptcy will show on the report for 10 years. Again, this may not be a bad thing. Borrowing opportunities may actually increase when prospective lenders see that you filed and are in the process of rebuilding your credit.

  1. I make too much to file for bankruptcy.

Even if you’re taking home more than your state’s median income, you may still be eligible for Chapter 7 bankruptcy. To qualify for Chapter 7, you need to pass a mean test. Basically, this entails that if you have a certain amount of cash left over after subtracting your expenses from income you will be denied. However, you may very well have significant expenditures that outweigh your income. This is where a good bankruptcy attorney comes in; your attorney can prove your need for bankruptcy relief in spite of your income.

  1. I’d be better off paying all of my debts.

While filing for bankruptcy is undoubtedly a serious financial step to take, it may still be the right one. The easing of financial stress and the sense of “wiping the slate clean” can provide a huge sense of relief. According to Time’s Money column,

“If your debts are more than 50% of your annual income and you see no way to pay them off within five years, bankruptcy is likely your best path toward living debt-free.”

  1. Filing for bankruptcy means I’m lazy or a deadbeat.

Many people buy in to the myth that bankruptcy is a personal failing. In fact, bankruptcy is simply a tool that can help people regain control over their financial state. Many people who file for bankruptcy have exhausted all other options in trying to resolve their debt problems. With stagnant wages and medical costs that continue to sky rocket, the truth is that bankruptcy is nothing more or less than a remedy for a specific set of financial conditions that can happen to anyone.

  1. If I file, I’ll lose everything.

The truth is you may be able to keep a lot more than you think. The majority of Chapter 7 bankruptcies are no-asset cases where the debtor doesn’t have to give up any possessions. In these cases, you are allowed to carve out exemptions for basic assets that are necessary for your daily life. This can vary depending on the state; for people in Oregon or Washington, your best bet is to contact a reputable bankruptcy attorney in your state to learn more.

What Debts Do You Still Owe After Bankruptcy?

Filing for Chapter 7 bankruptcy is a way for people overwhelmed with debt to get a fresh start on their finances. A debt discharge under Chapter 7 releases the debtor from personal liability for most debts. However, there are some debts that do not fall into this category. Depending on the circumstances, there are some bills that you must (or should) continue to pay.

The basic Chapter 7 timeline is as follows:

  • Mandatory credit counseling
  • Filing of papers to begin the bankruptcy process
  • Creditors’ meeting held about a month after the papers are filed
  • Mandatory budge counseling within 60 days of the creditors’ meeting
  • 60 days after the creditors’ meeting the court will send a written discharge of your debts

For most debtors the discharge order wiping out debts will be entered automatically. Once the discharge has occurred, creditors cannot initiate or continue any actions against the debtor to collect a discharged debt. This includes telephone calls, letters, and any other personal contact.

The following debts may not be discharged under Chapter 7:

  • Alimony and child support
  • Educational loans made or guaranteed by the government
  • Debts for willful or malicious injuries to another person or another person’s property
  • Debts involving death or personal injury resulting from the debtor’s operation of a motor vehicle while intoxicated
  • Debts for certain criminal restitution orders
  • Debts the debtor did not set forth in the bankruptcy filings to the court
  • Debts owed to certain tax-advantaged retirement plans
  • Debts for certain condominium or cooperative housing fees

It’s worth noting that the debt discharge under a Chapter 13 bankruptcy is slightly broader than Chapter 7. The following debts may be dischargeable under Chapter 13, but not Chapter 7:

  • Debts for willful or malicious injury to property
  • Debts involving property settlements in divorce or separation proceedings

If you would like to discuss your situation with one of our licensed bankruptcy attorneys, our doors are wide open. We offer free consultations to people throughout the state of Oregon, and we also have offices in Vancouver, and Tri-Cities in Washington. To schedule an appointment, send us a message through our contact page.

 

Is Bankruptcy a Shield Against Medicare/Medicaid Termination for Healthcare Providers?

Medicare and Medicaid payments make up a significant amount of total revenue for many healthcare providers. The question of whether a federal or state agency can terminate a Medicare or Medicaid provider agreement for a healthcare provider going through bankruptcy is an important one. So far, the answer is a conditional yes depending on jurisdiction and how the bankruptcy court attempts to stop the termination.

A bankruptcy court has two ways it can attempt to halt the termination: through an automatic stay pursuant to the Bankruptcy Code, or by ordering an injunction to maintain the status quo throughout the bankruptcy proceedings (thus keeping the provider agreement in place at least temporarily). An automatic stay is simply an automatic injunction that prevents creditors from taking actions to collect debts from a debtor who has declared bankruptcy. However, there are certain statutory exceptions to an automatic stay, including one for actions falling within the government’s use of “police and regulatory power.”

Regarding the second method (a separate court-ordered injunction), there is some question as to whether government actions pertaining to the Medicare and Medicaid Act are even within a bankruptcy court’s jurisdictional powers to begin with.

The Eleventh Circuit Court of Appeals (encompassing Florida, Georgia, and Alabama) has addressed the question of jurisdiction. According to the Eleventh Circuit, a bankruptcy judge does not have the authority to stop a government action related to the Medicare and Medicaid Act.

As to the automatic stay, the First Circuit Court of Appeals (encompassing Maine, New Hampshire, Massachusetts, and Rhode Island) found that the government could still terminate the Medicare and Medicaid provider agreements based on the statutory exception for police power. Meanwhile, the Supreme Court has so far not taken the opportunity to weigh-in.

As things stand now, there are only two definitive answers to the question of whether bankruptcy is a shield against the government terminating a provider agreement: maybe, and wait and see.

The Intersection of IRA Withdrawals and Bankruptcy Exemptions

One of the less well-known advantages to IRAs, but an important one nonetheless, is that they provide a significant amount of protection from creditors during bankruptcy. This protection comes under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) that went into effect in 2005. The BAPCPA provides protection for up to $1 million in assets held in traditional or Roth IRAs, and is subject to regular inflation adjustment. For purposes of the BAPCPA, a rollover IRA is a traditional or Roth IRA account that was originally funded through a transfer from a qualified retirement plan.

A July article in Forbes discussed a recent case that demonstrated in practice the intersection between bankruptcy law and the exempt status of IRAs. In this case, debtors had filed for Chapter 7 bankruptcy and claimed an exemption for money in an IRA. Usually a fairly routine matter in bankruptcy cases, the issue here was how the lack of a rollover affected the status of the IRA exemption. The debtors had withdrawn money from the IRA and used it to pay expenses, and these funds were not rolled over into another IRA.

The bankruptcy court held that these funds had lost their exempt status because they were not rolled over to another IRA within 60 days. The debtors appealed the decision to the district court and then to the Fifth Circuit Court of Appeals; both courts affirmed the ruling. A relevant quote from the Fifth Circuit decision, quoted in the Forbes article:

“When the [debtors] failed to deposit the funds into another retirement account within sixty days of withdrawal, the conditional exemption expired, and the [debtors] lost their right to withhold the funds from the estate.”

As the article concludes, while IRAs enjoy substantial creditor protection, it’s important to note that this protection is sensitive to the facts of the individual case and the governing law.

Bankruptcy and Entrepreneurship

Entrepreneurs are generally driven and highly motivated people. When a venture or business fails, it can be very hard for the owner to not take it personally. For an entrepreneur, bankruptcy can be a demoralizing and draining experience. However, this doesn’t have to be the case. Another way to look at bankruptcy is as a fresh start. It doesn’t have to be the end of the road. Check out these 6 steps entrepreneurs can take to bounce back after a bankruptcy.

  1. Face it head on

Don’t try to avoid or ignore the issue at hand. Things didn’t work out, and bankruptcy was the best option at hand. This is nothing to be ashamed about or take personally.

  1. Take an inventory

Part of facing the issue in a healthy way is taking a pragmatic look at your financial situation. This is crucial to processing the present and preparing to move on to the future.

  1. Budget

As you move forward, put together a budget and stick to it. This will take away stress, add to peace of mind, and is a practical step to position you for the next move.

  1. Embrace transparency

Don’t hide or dodge the issue with the people around you. Seek out family and friends, people you have healthy and affirming relationships with, to help you come to grips with your bankruptcy and move on to the next thing.

  1. Focus on where you’re at

The same laser focus entrepreneurs have with their businesses needs to be applied to bankruptcy. Rid yourself of distractions. Focus on budgeting and making wise financial decisions that set you up for success in your next venture.

  1. Reengage

Remember, you’re not a loser or a failure. As stated above, this is your clean slate. Concentrate on getting through the bankruptcy efficiently and in a healthy a way, take of yourself, and get ready for the next adventure.  We advise clients to make a list with the heading “Knowing what I know now, what would I do differently?”  Take this knowledge with you as you head on toward your next adventure.

Know Your Bankruptcy Rights as a Consumer

Bankruptcy laws are on the books to give people a fresh start when financial conditions have become too overwhelming. It’s a right provided to you when you are hit with circumstances like loss of employment, illness, divorce, and other financial hardships; it gives you the ability to stop harassing debt collection actions and provides various other means of relief. It’s important to know the rights you have as a consumer under our bankruptcy laws.

Creditors understandably want to protect themselves against the prospect of debts owed to them being discharged. One of the ways creditors sometimes try to do this is through adding a “bankruptcy waiver” clause to contracts and agreements. Understandable or not, these waivers are not binding. Any waiver of your future bankruptcy rights is not enforceable. Congress has expressly stated in the bankruptcy codes that a bankruptcy debt discharge halts any action against the debtor “whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)

Once your debts have been discharged, your creditors are prohibited from any collection action per the federal discharge order.  You do not have to tolerate any bullying or undue collection actions from creditors.   If a creditor attempts collection on a discharged debt they can be brought in front of the bankruptcy judge on a Motion for Contempt.

Even prior to filing bankruptcy creditors do not have the right to harass you with excessive telephone calls and letters, or unwanted visits to your residence. The Federal Trade Commission has established rules under the Fair Debt Collection Practices Act that creditors must follow. Creditors cannot:

  • Demand you pay more than you actually owe
  • Add additional fees to the agreement
  • Call excessively, call during unreasonable hours, or call you at your workplace if you have requested that they desist
  • Use threatening or obscene language
  • Contact your employer regarding your debt

If you are being illegally harassed by creditors, you do have recourse. To learn more about your bankruptcy rights, and how they can be enforced against creditors, set up a consultation with a bankruptcy attorney.

 

5 Advantages to Filing for Bankruptcy

Declaring bankruptcy is a means and a right to get a fresh financial start. It allows individuals or businesses to resolve financial issues, rebuild credit, put a stop to aggressive debt collecting actions, and discharge certain kinds of debt that have become unmanageable. Here are 5 advantages to declaring bankruptcy.

  1. Address missed payments, defaults, repossessions, and lawsuits that are keeping your credit score down. While bankruptcy will also hurt your credit score, it is often an easier and quicker way to rebuild your credit score than to try and deal with each creditor individually over a number of years.
  2. Put a stop to creditors’ aggressive debt collecting practices like harassing phone calls, dunning letters, repossessions, and declined transactions. Even in the case of student loans, which are not dischargeable, at least you can prevent future aggressive collecting actions.
  3. You’re wiping the slate clean. The opportunity to get a fresh financial start should not be underestimated. While bankruptcy can have its own stresses, there is a great deal of peace of mind and relief to be gained from declaring bankruptcy. And keep in mind that you will probably end up keeping all of your personal possessions, either because of exemptions or lack of interest from creditors.
  4. While being in a disastrous financial situation often becomes all too public, bankruptcy is something you can keep fairly private. Friends, co-workers, and even your family do not have to know that you have filed for bankruptcy (unless you owe them money as well). The only time your bankruptcy will show up is on a credit history report, and as stated above, that can sometimes make a better statement to a lender than being stuck in a financial quagmire. And even if your employer was to find out, it is illegal under bankruptcy laws for an employer to discriminate based on bankruptcy.
  5. Debt discharge. This is an obvious one, but it’s huge. All of the (unsecured) debt that has been making your life miserable will disappear.

 

Are All Debts Discharged in Chapter 7?

You may have heard that you can extinguish all of your debt completely in one fell swoop if you file a Chapter 7 bankruptcy. In many cases, most of your debt can be discharged through a successful Chapter 7 filing, and all debts could potentially be discharged depending on the nature of the encumbrances. However, there are some debts that can never be discharged through bankruptcy.

 

For the most part, tax debts are not dischargeable. Tax liens and property taxes that have been assessed within a year of your bankruptcy filing date cannot be discharged.  If you are an employer, taxes that you are required to pay on behalf of your employees, like payroll taxes, can’t be discharged. Plus, sales taxes that have been paid to you by customers that you are supposed to pass along the government are not dischargeable. Though taxes are usually non-dischargeable, when very specific circumstances exist, it is possible to discharge some income tax debts.

 

If you are required to pay spousal support or alimony, the bankruptcy filing will do nothing to shield you from your responsibilities. The same thing is true for child support or any debts that you owe to your spouse that came about due to a dissolution of marriage. Any legal fees that you may have incurred during a child custody or child support matter would not be dischargeable. If you have financial obligations as a result of a judgment against you after a drunk driving accident that caused an injury, the debt will not be discharged in bankruptcy. You can see a complete list of non-dischargeable debts if you visit this page on the Cornell University Law School website.

 

The debts that we have been looking at simply cannot be discharged, but there can also be procedural barriers that prevent discharges when they could have otherwise been granted. You have to fill out detailed financial disclosure forms when you file for bankruptcy, and if anything is done incorrectly or dishonestly, discharges can be denied. You also have to complete a debtor education course to qualify for a discharge.

 

Set Up a Complimentary Bankruptcy Case Evaluation

 

A ready legal resource is just a phone call away if you would like to explore the debt relief avenues that may be available to you. We have locations in many metropolitan areas in Oregon, including Albany, Medford, and Eugene, and we also have offices that serve the Tri-Cities and Vancouver in Washington. To schedule an appointment, send us a message through the contact page on this website.