Explaining the New Bankruptcy Discharge Process for Student Loan Borrowers

Person adding up student loan debt on calculator

Over 42.8 million Americans have student loans, making it one of the most common forms of debt in the United States. While the amount of student loan debt has increased in recent years, it remains one of the most challenging types of debt to discharge through bankruptcy. However, the Department of Education recently reformed its policies to make the discharge process easier and more accessible to student loan borrowers. In this guide, we’ll explain everything you need to know about the new bankruptcy discharge process for student loans. 

Adversary Proceedings and “Undue Hardship”

In order to be considered for student loan discharge, individuals must initiate a separate lawsuit within their bankruptcy case called an “adversary proceeding”. During this process, the debtor is essentially suing the student loan lender. To do so, however, the debtor must demonstrate that he or she is experiencing “undue hardship” as a result of the loans.

Prior to these policy changes “undue hardship” was an undefined term in the bankruptcy code, which made it challenging for courts to judge each case by universal standards – leaving a lot of room for interpretation. 

In the past, most courts used something called the “Brunner Test” to determine who qualified for student loan discharge. This test was originally created in a 1987 court case during which a woman attempted to discharge her student loans less than a year after earning her degree. The goal of the test was to deter individuals from rushing into bankruptcy immediately after graduating, and it includes three questions:

  • Have you made a good-faith effort to repay the loans?
  • Are you unable to maintain a minimal standard of living while making the payments?
  • Is your financial situation likely to persist?

If the answer to each of these questions is “yes” and is supported by extensive evidence, then the loans can be discharged. 

On the surface, this may seem like a great system for discharging student debt. However, adversary proceedings are lengthy and costly, and they often weren’t successful because the requirements to pass the Brunner Test were still highly variable. Over time the test became increasingly difficult to pass, and many legal experts think it is now close to impossible to have loans discharged through this method.

How New Policy Changes Make Student Loan Discharge More Accessible

Debtors are still required to initiate an adversary proceeding within their bankruptcy case in order to be considered for student loan discharge.  The recent policy changes will ease the process by:

  • Setting clear standards for what is considered “undue hardship”: The current process uses arbitrary methods to review evidence and determine whether the debtor is experiencing undue hardship. According to the Department of Justice’s recent press release, the new process will include a thorough review of the debtor’s financial situation against concrete standards. These standards will be based on data provided by the Department of Education, along with other information that could contribute to undue hardship. This will ensure each debtor is judged fairly, without room for subjectivity.
  • Allowing for partial discharge if appropriate: Historically, student loans were either completely discharged or left entirely intact. The new policy changes allow for partial discharges depending on the debtor’s financial situation, which will make relief more accessible to those who are struggling with student loans. 

Considering Bankruptcy?

If you are overwhelmed with debt and need relief, don’t hesitate to contact the knowledgeable bankruptcy attorneys at OlsenDaines. Whether you’re dealing with significant student loans or other types of debt, we can assess your situation and help you determine the best course of action to regain financial stability. With over 40 years of experience serving individuals and businesses throughout the state of Oregon, we know how to help you with everything from foreclosures to creditor harassment. Whatever you’re facing, we can help. Just give us a call today to schedule your free legal consultation.

New Updates to Student Loan Forgiveness

White piggy bank with a graduation cap resting on top of a binder of paperwork

Student debt can be overwhelming. If you have a high balance or have been making payments for years, then it may feel like your loans will never come to an end. Recently, the US Department of Education made updates to its policies that will make it easier for individuals to overcome their student loan debt.

Some of the largest changes to their policies will make loan forgiveness more accessible to individuals on an Income-Driven Repayment Plan, which could offer relief to thousands of students across the country. To take advantage of these new updates to student loan forgiveness, it’s important to understand how they work and who qualifies.

What Is an Income-Driven Repayment Plan?

Income-driven repayment (IDR) plans are designed to help individuals who have student loan payments that are disproportionately high compared to their income. These plans calculate your required payments based on how much you earn annually rather than how much you owe. As a result, your payments could be lower and much more affordable than standard repayment options. Consumers may qualify for one of these four types of IDR plans:

  • Pay As You Earn (PAYE): Takes monthly payments at 10% of your discretionary income without exceeding what you would normally pay with a Standard Repayment Plan.
  • Revised Pay As You Earn (REPAYE): Takes monthly payments at 10% of your discretionary income.
  • Income-Based Repayment (IBR): Takes monthly payments at 10-15% of your discretionary income based on what you borrow, without exceeding what you would normally pay on a 10-year standard repayment plan.
  • Income-Contingent Repayment (ICR): Takes monthly payments at 20% of your discretionary income, or the amount you would pay over a 12-year fixed payment plan – whichever is less.

Problems with IDR and Student Loan Forgiveness

Most individuals on an IDR can qualify for student loan forgiveness after making consistent payments over 20-25 years. However, there are some challenges associated with IDR plans that could block consumers from having their loans forgiven, even if they qualify. The two main obstacles to having your loans forgiven on an IDR plan are:

  • Progress tracking: To have your student loans forgiven, you must make a certain amount of qualifying payments over the course of 20 to 25 years. One of the largest challenges associated with IDR and student loan forgiveness is progress tracking. Lack of documentation makes it difficult or impossible for consumers to tell when student loans are due to be forgiven.
  • Forbearance steering: IDR plans and student loan forgiveness can be hugely beneficial to consumers, but they are not ideal for loan providers. For this reason, many servicers broke the Education Department’s rules by pushing consumers toward forbearance – or payment pauses – rather than educating them about IDR options. These pauses are not a long-term solution and can allow your balance to grow even more. Not only that, but they also do not count toward student loan forgiveness requirements.

Updates to Student Loan Forgiveness Policies

The Education Department recognizes the issues associated with IDR plans and loan forgiveness. For this reason, it recently announced policy changes that will make student loan forgiveness more accessible to borrowers. These policy updates include:

  • Counting certain long-term forbearances toward IDR forgiveness: To account for previous instances of forbearance steering, the Education Department will make a one-time adjustment to retroactively count long-term forbearances toward forgiveness. This will include a 12-month limit for a single stretch of forbearance, and a 36-month limit for cumulative pauses.
  • Increasing oversight on service providers’ use of forbearance: In order to prevent future forbearance steering, the Education Department will work with the Consumer Financial Protection Bureau to monitor and regularly audit each loan provider’s use of forbearance.
  • Performing a one-time revision of IDR payments to remedy inaccuracies: Past documentation inaccuracies could prevent qualifying consumers from having their loans forgiven. To remedy these previous mistakes, the Federal Student Aid (FSA) will perform a one-time revision that will retroactively count any months in which borrowers made payments toward IDR.
  • Upheaving the IDR tracking system for better documentation: To permanently fix the IDR payment counting system and prevent future mistakes, the Federal Student Aid office (FSA) will begin displaying IDR payment counts on each consumer’s Student Aid account. This will simplify the counting and tracking process, while showing consumers exactly how close they are to loan forgiveness.

Do FFELP Loans Qualify?

Federal Family Education Loan Program (FFELP) student loans are privately owned but federally backed. Most loans taken out prior to 2010 are FFELP loans, though your service provider can help you determine which type of loan you have if you aren’t certain.

Though FFELP loans can benefit from these updates to student loan forgiveness, consumers must apply to consolidate any commercially held loans into a Direct Loan to qualify. If you want to take advantage of the new IDR fixes, you need to apply for loan consolidation by January 1, 2023.

Get Help With Your Student Debt

If you’re struggling with student debt, now is the time to take action! While it may feel intimidating to navigate all of the Education Department’s student loan policies, you don’t have to manage it all on your own. At OlsenDaines, it’s our goal to help eliminate the stress of debt so you can regain control over your finances. With over 40 years of experience serving Oregon residents, our debt relief attorneys know the intricacies of local and federal laws. We know what it takes to help you get the best outcomes possible, so you can get one step closer to a life without debt. To get help with debt relief, schedule your free legal consultation today!

How Does Bankruptcy Impact My Credit Score?

A woman sitting a desk looks into the distance deep in thought

No one sets out with the goal of one day declaring bankruptcy. Everyone wants to be financially stable and independent, but unexpected challenges can arise and result in large amounts of debt. If you find yourself in that situation and you’re considering bankruptcy, you probably have many questions about the possible effects. One of the most common is, “how does bankruptcy affect my credit score?” Keep reading to find out.

What is a Credit Score?

Let’s begin with the basics. A credit score, or FICO® score, is a number between 300 and 850 that attempts to reflect the significant financial decisions you’ve made. Your credit score drops, for example, when you default or make a late payment on a debt. Whereas an established pattern of making payments on time will increase it. Three companies – Equifax, Experian, and TransUnion – track and assign your credit score, and it can have a significant impact on your ability to do everything from borrowing money to getting a job.

What Factors Affect Your Credit Score?

Credit card payments, mortgage payments and rent payments are three types of debt that will have the largest impact on your credit score. The rules around another common type of debt – medical debt – are currently changing, thanks to pressure from the Consumer Financial Protection Bureau. 

There has long been debate about whether or not medical debt should affect credit scores. This is because few people actually choose to take on medical debt, and those that are forced to usually have no idea how much their treatments will end up costing. If this has previously caused issues on your credit report, read up on how the overhauled rules on medical debt might affect you.

Can Bankruptcy Permanently Ruin Your Credit?

Bankruptcy is one of the single largest events that can affect your credit score, and the immediate impact of bankruptcy is substantial. A person with previously solid credit (700+) will see their credit score drop by about 200 points. A below-average to average credit score won’t drop as much. That’s one important factor to keep in mind. If your credit score is good, you will be penalized more heavily than if your credit score is average or worse.

The good news is that the effect is not permanent. In fact, you can start rebuilding credit immediately after bankruptcy is filed. The process takes some time, but financial institutions offer products like secured credit cards and credit-builder loans that can help. Just be sure to make your payments regularly and on time and practice smart spending habits. Financial institutions will look favorably on your efforts to rebuild credit even if you have a bankruptcy on your record.

The effects of bankruptcy can be different, depending on the type of bankruptcy. These are the three most common types of bankruptcy for individuals in the US.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as “liquidation,” is the most common type of bankruptcy in the United States. A liquidation plan is created, the individual’s nonexempt property gets sold and the proceeds are used to service existing debts. A judge then orders all remaining debts to be discharged. Chapter 7 Bankruptcy can affect your credit score for up to ten years.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is mostly filed by businesses because under federal law, this is the only bankruptcy option allowed for LLCs, corporations and partnerships. While individuals may file for Chatper 11 bankruptcy as well, it’s less common because Chapter 11 is typically more costly, complex and risky than filing for Chapter 7 or 13. Chapter 11 Bankruptcy can also affect your credit score for up to ten years.

Chapter 13 Bankruptcy

Also called “reorganization,” Chapter 13 bankruptcy allows individuals to repay creditors over a period of three to five years. The benefit is additional time to pay off debts and the chance to renegotiate settlements which typically means the individual has to pay far less than the original debt. Chapter 13 Bankruptcy can affect your credit score for up to seven years.

Is Bankruptcy Right For You?

Imagine Person A and Person B both have $30,000 in debt and are considering bankruptcy. 

The difference is that Person A has a credit score of 750 whereas Person B has a credit score of 550. Both will have $30,000 debt discharged if they declare Chapter 7 Bankruptcy, but the cost for Person A is significantly higher than for Person B. 

That’s because Person A will lose about 200 points to their credit score; Person B will only lose about 100 points. Person A’s new credit score will be ~550; Person B’s new score will be ~450.

Obviously, it’s more worth it for Person B to declare bankruptcy, but it might also be worth it for Person A too. It’s up to you to assess your circumstances and decide if bankruptcy is the tool that will best position you to move forward financially. 

But you don’t have to make the decision alone. In fact, you shouldn’t make this decision alone. Gather as much information as you can, then consult an experienced bankruptcy attorney so you can be sure you understand all of the ramifications of your decision.

There’s no shame in declaring bankruptcy, and it’s not the end of the world for your personal finances. It’s a powerful tool you have at your disposal in the event that your debt burden becomes unmanageable, and if you commit to rebuilding your credit afterward, it can be one of the best financial decisions you’ll ever make.

Debt Snowball vs Debt Avalanche

Wooden blocks spelling out the word "debt"

Eliminating debt can feel like an overwhelming task – especially without the right plan in place. Thankfully, there are many different repayment strategies that you can choose in order to begin rapidly paying off your balance. Two of the most popular and effective debt repayment plans are known as the “snowball” and “avalanche” methods. While these tactics are similar, they have some key differences that can help you decide which strategy is best for you.

What is the Snowball Method?

With the debt snowball method, you pay off debts in order of smallest to largest balances. By putting the majority of your money toward loans with smaller balances and making minimum payments to all other debts, you can swiftly cut through your debts. This method is popular because it is easy to implement and provides quick results, which is great for building momentum and motivation.

What is the Avalanche Method?

In the debt avalanche method, you pay off loans based on interest rates. By targeting loans with higher interest rates first while making minimum payments to any other debts, you can quickly pay off debt while cutting down on the amount of interest you pay over time.

Though this tactic is great for eliminating debt quickly and with the least amount of interest, it is a little more difficult to implement and keep up with. The debt avalanche method also produces slower short-term results, which may be challenging for individuals who struggle with motivation.

Which Debt Repayment Method is Best?

Unfortunately, there is no “one-size-fits-all” plan when it comes to debt payment plans. It all comes down to which plan you can feasibly implement and keep up with – after all, no plan is useful if you won’t be able to stick to it. To help you determine which tactic may be better for you, here are some pros and cons of both debt repayment strategies:

Debt Avalanche

  • Eliminates debt faster
  • Reduces total interest paid
  • More difficult to implement
  • Takes more time to see results

Debt Snowball

  • Produces results quickly
  • Builds motivation and momentum
  • Takes more time to eliminate debt
  • Requires you to pay more interest

When to File for Bankruptcy

If you have a mountain of debt that you are struggling to pay, these repayment strategies may still feel too overwhelming. In some cases, filing for bankruptcy is the best way to take control of your financial situation. Here are some signs that you should file for bankruptcy:

  • You’re at risk of foreclosure
  • Your liabilities exceed your income
  • You don’t have any savings
  • You’ve already tried negotiating

Get Legal Help Today

Don’t let your life become bogged down by unmanageable debt. If you’re struggling to make ends meet because of debt, it may be time to contact a legal expert who can help you assess your options. That’s where the trusted attorneys at OlsenDaines can help. Our team has over 40 years of experience serving Oregon and Washington, and we strive to make it easy for you to get back on your feet. To get started, schedule a free legal consultation today.

 

How Much Do Bankruptcy Lawyers Charge?

Bankruptcy attorney discussing a case with clients in office

If debt has become an insurmountable problem for you, then filing for bankruptcy may be the best way to get back on your feet. However, the idea of spending money on an attorney may not sound very appealing if you’re already struggling financially. Knowing your options will help you make an informed decision so you can determine the best course of action for your situation. To help you get started, here’s a breakdown of how much bankruptcy lawyers charge and what you can expect when working with one.

How Much Do Bankruptcy Lawyers Cost?

While all experienced attorneys are expensive, a bankruptcy lawyer will likely be the least expensive attorney you will ever hire. Chapter 7 attorney fees typically run between $1,000 and $2,000. Meanwhile, Chapter 13 fees generally range from $3,000 to $6,000.

If you aren’t sure which type of bankruptcy you should choose, our skilled attorneys are here to help! With 40 years of experience helping individuals and businesses throughout the state of Oregon, we know the ins and outs of bankruptcy laws and can seamlessly guide you through the process.

Can I File Bankruptcy Without a Lawyer?

Though bankruptcy lawyers are less expensive than other attorneys, the fees can still feel overwhelming. For that reason, many people wonder if they even need the help of an attorney.

While it is possible to file for bankruptcy without a lawyer, doing so could become complicated and expensive. Filing for bankruptcy is an intensive process that can easily become overwhelming, and mistakes along the way could cost you. An experienced debt relief attorney will relieve stress by making the process simple, all while ensuring you get the best outcomes possible.

Will I Have to Pay a Bankruptcy Lawyer Up Front?

Depending on which chapter of bankruptcy you are filing for, you may not need to pay all of your attorney fees up front. While Chapter 7 typically requires you to pay your fees in full before filing, Chapter 13 often allows you to pay in installments as a part of your repayment plan.

Don’t let fees hold you back from getting the help you need. At OlsenDaines, we offer free legal consultations where we can examine your situation and discuss payment options before charging you anything. Our firm has also made a commitment to value-based pricing so we can remain as affordable as possible; in most cases, we can be retained for as little as just $200.

How Can I Pay for a Bankruptcy Lawyer?

Many people wonder how they are supposed to afford a bankruptcy lawyer if they are already struggling to pay creditors. If you’re struggling to come up with the money for attorney fees, don’t panic – there may be some options available.

Since everybody’s situation is different, we strongly recommend starting with a free legal consultation. At OlsenDaines, one of our experienced attorneys will examine your case and discuss how we can help you afford our services.

Affordable Bankruptcy Attorneys in Oregon

The attorneys here at OlsenDaines decided to become bankruptcy lawyers for a very particular reason; we sincerely want to help our neighbors get back on track financially. It is gratifying to help our community thrive, which is why we strive to keep our services as affordable as possible by offering free consultations and value-based pricing. If you are looking for experienced and affordable bankruptcy attorneys, we have you covered. Just contact us today to schedule your free initial case evaluation.

Do You Still Owe Taxes if You File for Bankruptcy?

Bankruptcy petition in Oregon - OlsenDaines Debt Relief Lawyers

Filing for bankruptcy is one of the most effective ways to eliminate debt, save your home, and rebuild your financial security. It can also help you sleep easier at night knowing that you won’t have to worry about repossession or mounting bills. However, if you’re considering bankruptcy, it’s important to know what it does and does not cover – and that includes taxes.

How Do Taxes Work After Bankruptcy?

Many people overlook their tax situation when filing for bankruptcy, but it’s crucial to know what to expect before moving forward with your case. Your tax requirements will look different depending on which type of bankruptcy you are filing for. Here is a brief overview of how taxes work after filing for the two most common types of bankruptcy:

Chapter 7

This chapter of bankruptcy is meant to help those with lower income and fewer assets, and individuals must pass a “means test” in order to qualify. If granted chapter 7 bankruptcy, individuals will be assigned a trustee that will be responsible for reviewing your petition and seizing any nonexempt assets that can be sold to benefit your creditors.

Taxes are still a requirement even if you are granted chapter 7 bankruptcy. If you are unable to pay your taxes and accrue new debt, it can have a negative impact on your case and may even result in your case being dismissed. However, if you are expecting a tax refund but are granted chapter 7 bankruptcy, then you may need to turn the funds over to your trustee who will use them to pay your creditors.

Chapter 13

This chapter of bankruptcy is meant to help those with higher income and more assets, and it is often considered a “reorganization” of debt. Individuals who are granted chapter 13 bankruptcy will need to establish a monthly payment plan with their creditors to repay a portion of their debts.

Taxes are also still required if you are granted chapter 13 bankruptcy. If you owe more than you can pay, you may be able to set up a payment plan with the IRS lasting between three and five years. Meanwhile, if you receive tax refunds while in Chapter 13 you’ll usually be able to keep these refunds for your own benefit.

Can Bankruptcy Discharge Tax Debt?

Tax debt is considered “unsecured debt”, which means that it generally cannot be discharged even if you are granted bankruptcy. That said, if your tax debt meets a few specific criteria, you may be able to discharge it when filing for chapter 7 bankruptcy. Your debt may be considered for discharge if it meets these requirements:

  • The tax return filing was due three or more years ago.
  • The tax return filing was two or more years ago.
  • The tax assessment is at least 240 days old.
  • The tax return was not fraudulent.
  • The taxpayer did not attempt tax evasion.

Your Local Bankruptcy Attorneys

Filing for bankruptcy can be overwhelming, but you don’t have to navigate it all alone. The experienced bankruptcy attorneys at OlsenDaines are prepared to help get you through the process as quickly and easily as possible while answering all of your questions. We have proudly served Oregon and Washington residents for over 40 years, and we are ready to use our expertise to help you relieve your debt. To get started, schedule your free and no-obligation legal consultation with one of our attorneys today!

Does Debt Disappear After Bankruptcy?

Does debt disappear after filing for bankruptcy? Debt relief attorneys at OlsenDaines in Oregon State

If you’ve found yourself battling against a mountain of debt, you may be considering bankruptcy as a way to get back on your feet. After all, filing for bankruptcy can be an effective method for relieving debt and regaining control over your finances. But, should you file for bankruptcy, will all of your debt disappear?

The answer to that question is a little complicated. Though bankruptcy can help relieve many different kinds of debt, there are some kinds that will stick with you. If you are considering filing for bankruptcy, it’s important for you to know what kinds of debts are covered and which kinds are not.

What Debts Can Be Forgiven by Bankruptcy?

Bankruptcy can help you regain financial stability by relieving a wide variety of debts. Your exact amount of relief, however, will largely depend on your specific situation and what kind of bankruptcy you qualify for. If you aren’t sure which path would be best for you, a bankruptcy attorney can help you find a solution that relieves as much debt as possible.

Chapter 7

Chapter 7 bankruptcy is intended for individuals with a lower income and fewer nonessential assets. To qualify for this type, you have to pass a means test, which verifies your income. The types of debt that this chapter can cover include:

  • Medical bills
  • Overdue utility charges
  • Outstanding credit cards
  • Collection agency accounts
  • Lease agreement deficiencies
  • Checks written on insufficient funds

Chapter 13

Chapter 13 bankruptcy is intended for individuals with more disposable income and more nonessential assets. This type of bankruptcy is considered “reorganization”, where you will create a payment plan to repay secured debts – such as alimony, child support, and mortgage delinquencies.

Depending on your specific situation, other types of debt may be reduced, but that is not always the case. Chapter 13 bankruptcy can be tricky to navigate, so it is best to contact a skilled bankruptcy attorney to determine the best approach for debt relief.

What Debts Cannot Be Forgiven by Bankruptcy?

Though bankruptcy can absolve many kinds of debt, there are a few types that usually cannot be discharged. The types of debt that bankruptcy generally cannot cover are:

  • Student loans
  • Alimony and child support
  • Tax debts

While these debts are generally not forgiven through bankruptcy, each person’s situation is different. A knowledgeable and experienced bankruptcy attorney can examine your unique circumstances to help you relieve as much debt as possible.

Experienced Debt Relief Attorneys

Bankruptcy can be difficult to navigate, and without the right guidance, you may miss
opportunities to relieve debt. If you are considering filing for bankruptcy, contact the skilled bankruptcy attorneys at OlsenDaines in Washington and Oregon today. Our experienced lawyers understand the ins and outs of bankruptcy law, and they can help you get the best outcome possible for your situation. We can help you through any step of the process so you can regain financial security as easily and effectively as possible. Call us today to schedule your free legal consultation.

How to Avoid Debt This Holiday Season

How to avoid debt this holiday season in Salem OR - OlsenDaines bankruptcy attorneys

The reality of holiday debt usually doesn’t sink in until you get the bills or check accounts. Too much unpaid debt can cause your credit score to drop so we are sharing some tips to follow to avoid racking up holiday debt.

Pay in Cash When Possible

Statistics show 57% of Americans with credit card debt are willing to accrue more debt during the holidays. Gifts and décor commonly cause the most holiday debt, and since consumers rarely save for this, they charge for it.

Avoid this added debt by setting a little money aside each month to pay for gifts and holiday décor in cash. Leave your credit card at home to reduce the temptation to make spontaneous purchases, and use debit cards. Several studies have shown consumers spend less with cash, and it comes with less security risk.

Create a Budget and Make Lists

Decide how much you are going to spend, including travel, and ensure it doesn’t prevent you from making necessary payments. Make a list of things you need, a list for gifts, stick by it, and cross them off as you go.

Consider having some gifts be homemade, such as mixes in a jar, which you can often make for less than buying. If you are easily influenced by others, go shopping alone to avoid going over budget.

Use Credit Wisely

If you must use a credit card, try to stay within less than 20% of the limit, and don’t max them out. Set a budget the same as you would for cash, but check the remaining balance on the cards.

Use credit cards that give rewards for purchases and apply points you have already accumulated to gifts. Don’t be tempted to take out cash advances on your credit cards, because they often have high-interest rates.

Experts in Bankruptcy Law

With some careful planning, you can avoid falling into the holiday debt trap and you will enjoy the holidays better without the stress of debt.

We hope you have a great holiday season and if you need debt relief, consider OlsenDaines. We have offices all throughout Oregon and Washington with highly experienced bankruptcy attorneys ready to help! Just give us a call today to schedule a consultation. 

Should I Stop Paying Creditors If I’m Going to File for Bankruptcy?

Woman looking through bills. OlsenDaines, serving Oregon and Washington explains if you should stop paying creditors if you're going to file for bankruptcy.

If you’re choosing to file for bankruptcy, and you’re current on your debts, you may be asking yourself if you should stop paying creditors now.

Automatic Stay

The short answer is, no you shouldn’t stop paying creditors until you’ve officially filed. When you file for bankruptcy, the court will order an automatic stay which will prohibit lenders from making harassing collection calls, sending threatening letters, and trying to file lawsuits against you. But until then, they can continue to harass you so don’t be surprised if you suddenly stop making payments.

In most cases, the automatic stay remains in effect until your bankruptcy case is concluded. Keep in mind, it won’t stop every debt collector. Automatic stay orders will not halt child support, loans against your pension, or back taxes. And if you filed for bankruptcy in the previous year, the order will expire after 30 days.

  • Auto Loans: if you stop making payment on your auto loan, at some point the creditor will attempt to repossess your vehicle. If you want to keep the vehicle, you may want to continue making payments so you don’t run the risk of getting it repossessed.
  • Credit Cards: in most cases, people are fine not making their credit card payments, but you will likely be subjected to collection calls until you file for bankruptcy. If you just used a card before you realized you were going to file, you may want to continue to make payments. We recommend consulting with a bankruptcy attorney.
  • Home Loans: as with auto loans, if you stop making your mortgage payments, at some point the creditor will attempt to foreclose the home. If you want to keep it, you may want to continue making your monthly payments. Every case is different.

Bank Setoffs

If you’ve taken out loans through your bank or credit union and you’ve stopped making payments, they can institute a setoff. This allows them to withdraw money from one of your accounts to another to cover the loan payment. You may want to move your money around before missing a debt payment.

Experienced Bankruptcy Attorneys

Filing for bankruptcy can help you “start fresh” if you’re facing mounting debt and pressure from creditors. However, there are many missteps you should avoid in the months and weeks leading up to filing.

To ensure you reach your financial goals, it’s best to work with an experienced bankruptcy attorney. OlsenDaines has vast experience with bankruptcy. In fact, we’re the top bankruptcy filer in Oregon. We’ll help you navigate the process and get your life back on track. To schedule your free initial consultation, contact us today!

Life After Bankruptcy

Woman sitting on her sofa in relief, relaxing. OlsenDaines in Oregon and Washington talks about life after bankruptcy.

Filing for bankruptcy can provide you with relief if you’ve struggled with unmanageable debt but it also comes with some new challenges, such as dealing with a low credit score. The bankruptcy attorneys at OlsenDaines want you to start off strong after filing for bankruptcy, so follow these tips as you prepare for life after bankruptcy.

Think Positive

First of all, don’t be ashamed after filing for bankruptcy. We understand there’s a stigma involved with bankruptcy, which is mostly just misconceptions. Think positive, get back up, and try again. Many people and businesses have overcome bankruptcy and you will too.

Start Saving

Sit down and calculate your income and expenses. This will help you determine how much disposable income you have. After you’ve determined that figure, make it a point not to spend more than that every month.

Cut Down on Expenses

If you filed for Chapter 13 bankruptcy, you’ll repay secured debts through a court-managed payment plan. This means you’ll have to change your lifestyle a bit and you cannot take on a new car loan or credit card without the court’s permission first.

Rebuild Your Credit

Now that you’re starting off with a clean slate, you’ll want to rebuild your credit. Keep in mind, this is especially hard the first year following a bankruptcy filing. Apply for a secured credit card. Unlike a typical credit card, secure credit cards require a cash deposit. Pay off the balance each month and over time you’ll improve your credit score. OlsenDaines will set you up on a credit rebuilding program after filing bankruptcy.

Bankruptcy Experts

Any bankruptcy is difficult. Whether you’ve just finished discharging your debts or are thinking about declaring bankruptcy, OlsenDaines can help. We’ve been helping people throughout Oregon and Washington for over 40 years. Visit our website for more about bankruptcy and schedule your free bankruptcy consultation today!