The pressure of the economic crisis is being felt across the nation and increasing the chances that those who are hanging on for dear life to what they have in reserves and are still managing to pay their bills, to consider bankruptcy as an option should they lose their jobs. Among the major causes of bankruptcy today we have loss of employment, which can often lead to an increase in credit card debt. The looming economy is certainly no shy contributor to the pinch all consumers are feeling today.

Some may wonder, why can’t people just pay their bills? Often those who are more fortunate are quick to pass judgment against those who have filed or are in danger of filing bankruptcy. There’s certainly a disconnect in the perception of economic status across all classes. No one ever plans for this, there are just too many special circumstances around each person who files bankruptcy that leads them this way.

Major Causes of Bankruptcy

Unemployment - All throughout 2008 businesses began slowing down and plans for expanding were halted, particularly for the bigger companies. Local business in every town across the country were hit first, overall causing massive layoffs.

Foreclosures and Balloon Mortgages – In previous posts we discussed how these types of loans were a major cause of bankruptcy for many since the housing market begain its collapse. Many who managed to hang on and continue paying their mortages for the last year are starting to follow the path that millions of others have taken to relieve themselves of the burden of these subprime mortgage loans.

Medical Expenses – This particularly applies to those who are unemployed, if savings is able to get families by on living expenses and minor costs, medical expenses would certainly put a significant burden on the financial stability of the unemployed.

Divorce - The rate of divorce has always been high in the U.S. the current enconomy is perhaps a major cause of divorce rates in 2008 going into 2009. Because divorces often involve common property and debt, filers often find themselves in need of filing bankruptcy to rid themselves of bad debt and start all over.

Other less obvious causes of bankruptcy may include, having your identity stolen and not being able to resolve the crime, it’s rare but it does happen. Risky investments, such as over hyped stocks and foreign trust funds etc.

How can bankruptcy help me in this Economy?

Regardless of the state of the economy, if your debts are keeping you up and you’re simply not able to sustain a comfortable living, you may very well need to consider this option. Only a qualified attorney can determine for you whether you qualify to file and discharge your debts.

The current economy gives everyone the impression that worse days are ahead, it’s only natural to assume the worst, but carrying your debts along into worse economic times will only prove disastrous for you. When you’re no longer able to pay your bills, if you have not filed for bankruptcy protection your creditors are legally allowed to come after you. Once collections agencies begin harrasing you, you’ll know that it’s time seek protection under bankruptcy.

Whatever the causes of your financial burdens are, bankruptcy protection is a right extended to all US citizens by the federal goverment and it is a bailout that has helped millions of people get a second chance in their finances.

Going bankrupt is very common these days, most everyone knows or has heard of someone who’s had the misfortune of filing bankruptcy. There is a long list of reasons for this, however the most prominent are loss of job, unexpected medical bills, becoming disabled and of course the housing market crash which inevitably left a great number of home owners with high interest rate loans they could no longer afford. Desperate times cause many people burdened by overwhelming debt to commit fraud while filing bankruptcy, by not reporting all assets or disclosing their true financial state.

Personal bankruptcy is a way for a citizen to legally find relief from debt, these are the rights that have been extended to all Americans by the Federal government. However within these laws also exist specific qualifications rules, which can not guarantee that all who are ridden with debt will be able to benefit from these bankruptcy laws. Causing some to get creative or seek advice from the wrong sources about how to get around the system and appear to be going bankrupt.

This of course has serious consequences, since almost always, the fraud will be detected and stopped before the case is dismissed.

Those who are legitimately going bankrupt have some options when dealing with their debts and debt collectors. Despite the benefits the filers gain from filing bankruptcy, they often remain wary of the effects that personal bankruptcy leaves on their records, which lasts from 7 to 10 years. During this time potential filers may not realize that bankruptcy is in fact a good option, so they may follow the wrong advice and opt for debt consolidation instead in order to avoid bankruptcy, this is not necessarily a good option in most cases.

Debt consolidation can make sense in some cases, if the debt is mostly unsecured, meaning mostly credit card debt, this typically makes you a good candidate for debt consolidation if you’re still able to make your payments on time. However debt consolidation is not a comparable option to filing bankruptcy. The benefits of filing bankruptcy far outweigh those of debt consolidation for a few reasons.

When you being to accumulate debt, not only unsecured debt, but secured loans, mortgage debt, personal debts etc. Your ability to pay all these debts suffers severely when you lose your job or your main source of income disappears. Even in situations like this you may be hear the advice of debt consolidation specialists that grouping all your bills into one is a good idea. It is not.

Going bankrupt means losing the ability to pay your creditors at all, not necessarily struggling to pay them each month. Both are good reasons to file bankruptcy, however neither is a good reason to simply opt for debt consolidation and the reason why is that under bankruptcy you have certain legal rights that no debt consolidation agency can extend to you. Such as the power of the automatic stay, which provides a shield of protection from creditors, meaning no one can harass you and try to collect from you while you’re in the process of discharging your debts.

Depending on which chapter you file, you may either fully discharge your debts or establish a repayment plan that allows you to repay your debts in a period of 3 to 5 years. In some cases your overall balances may be decreased or interest eliminated.

It’s not easy to accept that you’re going bankrupt but it needs to be clear to you that you have legal rights that can protect you from creditor harassment and if you can not make your payments anymore, then bankruptcy is something you need to consider. Start by contacting a lawyer in your area. Also remember that bankruptcy consultations should be free, so find a legal office that does not charge for this.

How does your credit look after bankruptcy?

After getting your bankruptcy discharge you need to prepare to tackle the task of making sure that credit entries in your credit report are not still showing delinquent accounts. Anything that should have been included in bankruptcy needs to be labeled as such. About 3 months after your bankruptcy discharge you need to take a close look at your credit report and fix any erroneous entries. These can cause trouble for you down the road qualifying for credit, loans, jobs etc.

You’ll be able to get your credit report from all three credit bureaus by visiting Annual Credit Report, everyone is entitled to a free credit report per year. When you get your report you are very likely to find accounts that have not been cleared after filing bankruptcy. It’s common for creditors not to bother to make these updates especially since they’re not getting paid, they’re certainly not interested in doing any favors. However, you must correct these errors yourself.

Repairing your credit report after filing bankruptcy

Ideally you’d want to wait from 3 to 6 months to get your credit reports and start spotting anything that should have been included in bankruptcy. If you find that accounts that should now be closed are still open and delinquent, then what you need to do is make a copy of your bankruptcy schedules and discharge documents and start a dispute with the credit reporting agencies (Transunion, Equifax and Experian). Your discharge papers are the key to get this resolved. This can also take sometime since the verification process is slow.

Hiring credit repair services will work better for anybody, it’s definitely a good option, just be ready to provide your bankruptcy documentation. Credit repair agencies are more effective at doing this, however you must take care to hire only a legitimate credit agency for this industry is filled with scams.

Bounce right back after bankruptcy

Repairing your credit is only one aspect of getting your financial life back on track. You have to now work a little harder to convince creditors that you’re still worthy of getting credit. Even after you get your credit entries corrected, you should know that your bankruptcy file will remain on your credit report for up to 10 years, however that big dark cloud can being to dissolve with positive credit entries that you should be striving to achieve.

There are several ways to regain control of your credit after filing bankruptcy, depending on what you want to accomplish, be it a mortgage, auto loan or a credit card. Your credit report must accurately report your financial history for you to begin rebuilding. Once you do that there many programs that offer bankruptcy credit cards, personal loans and mortgage loans after bankruptcy. Read the post on Getting a mortgage after bankruptcy for more info.

Buying a home after bankruptcy

This is more of a myth than most people realize, the fact is that it is definitely possible to get a mortgage loan after bankruptcy. Sure, getting to a stage in which lenders will consider you again is still a bit tough, but generally the belief is that since personal bankruptcy stays on your record for up to 10 years you have to wait that long to get a mortgage loan or consumer credit again. It’s not that way at all. Credit after bankruptcy is possible when you take back control of your personal finances by implementing rigorous changes for repairing and bringing your credit to a healthy state again after bankruptcy.

Getting the necessary credit for buying a home after bankruptcy just requires you to know how. It’s true that filing bankruptcy deals a devastating blow on your personal credit, but the effects of bankruptcy can be overcome with an aggressive campaign on your part for rebuilding your credit properly and legally. When you apply for a mortgage after bankruptcy, you need to make sure your lender has in front of them a solid record of consecutive positive entries in your credit report. This should include a reference from your current landlord and rental receipts that prove that you made your monthly rent payments on time for at least a year.

Cleaning up your credit report after bankruptcy

This is not an invitation to hire a credit repair agency and attempt to delete your bankruptcy record from your credit report. Remember that you only have the right to dispute true inaccuracies in your credit report, if all else is accurate disputing them with the help of an agency may prove expensive and ultimately useless.

If you really want to qualify for a mortgage loan after bankruptcy, it’s imperative that you clean up your credit report. Meaning that you need to get copies of your credit report from the three credit bureaus and study them side by side making sure that accounts that were discharged in bankruptcy are not still labeled “defaulted” “open” or “overdue”, even if your creditors are not collecting from you, these are the red flags that will keep you from getting a mortgage loan. If this is the case for you, start by using the dispute systems from the three credit bureaus. You should also have copies of your personal bankruptcy discharge papers ready to send to the bureaus if they require them.

Another good way to being ranging high enough for a mortgage after filing bankruptcy is to get a bankruptcy credit card or a secured credit card. You’re going to need two types of payment history to successfully rebuild your credit and they are “installment credit” and “revolving credit”. When you show installment accounts in your credit history these will include current mortgage loans, auto loans, student loans etc. Revolving credit is typically unsecured credit, however qualifying for unsecured credit after bankruptcy is a bit tough, so a secured credit can be a great option. With a secured credit card you will only be able to spend up to the credit limit set by the amount you deposit in the credit card account. So it’s a prepaid credit card basically and it may seem like a burden to send money to a credit card company so you can spend it later, but it’s an important step in qualifying for a mortgage loan again after filing bankruptcy.

Other tips for getting a mortgage loan after bankruptcy

As mentioned above, you would want to show installment accounts on your credit report, this will server as a great reference and increase your chances of becoming a better prospect to mortgage lenders. However, car payments and the interest rates attached to car loans are typically high if you’ve been bankrupt. You have to realize that in order to qualify a mortgage after bankruptcy, your debt to income ratio will be the deciding factor. The lender has to make sure that you have the needed income to make your monthly mortgage payments again and then some. So resist the urge to buy a new car and ignore the recommendations from auto loan companies that this is a good way to rebuild your credit. It is only if you have enough income to cover a mortgage loan after the fact, that you should consider financing an auto purchase.

Pay your monthly bills on time. You can not afford any more glitches or blemishes on your credit report. Being able to get credit after bankruptcy is all about continuous positive entries in your credit report and nothing else. This applies not only to your consumer debt accounts but your rent, utilities, and any other obligations you have. Mortgage lenders will be more inclined to dig a little deeper if you have filed bankruptcy and are trying to qualify for a mortgage again, so show a good trail of positive credit entries and life after bankruptcy will simply get easier as you begin to regain the trust of lenders again.

If you have been paying your bills on time and are ready to apply for a mortgage loan again, another reference that can give you some leverage in qualifying for that loan is to have a letter of credit from the non-traditional credit companies such as your utilities companies, hence the reason why you must always make these payments on time as well. You can include your cell phone company, your electrical and cable companies, it’s as simple as contacting them for a letter of credit and as long as you have a positive record with them, it should not be a problem.

Finally, you may also be required to give a larger down payment on your new home before you can qualify for the mortgage loan, this can be an obstacle if you don’t have 20 to 30 thousand worth of liquidity to finance your purchase. You may be give the advice to borrow the money from you 401k, IRA or other retirement account, which is not uncommon for buyers who want a mortgage loan after bankruptcy, but it’s a decision that you should consider carefully, since you may have to pay back the money you borrow from your retirement account, otherwise you’d have to cash it all out and pay the tax and penalties as well.

As the economy continues to be the main cause of concern for most Americans, people are starting to consider bankruptcy as way to find relief from their overwhelming debts. The real estate crash and the high price of fuel are only part of the reason, while credit card and other unsecured debts have contributed heavily to the current burden of debt many people live with today and have a tough time keeping up with. So it begs the question, should you take advantage of a free bankruptcy evaluation?

If you’re in financial stress, there are several reason why you should consider taking a free evaluation with a bankruptcy attorney, and one of the most important ones is that you need to accurately find out right now where you stand financially. A bankruptcy consultation can clear a lot of doubts about the process. It is during this initial consultation that your attorney can run the bankruptcy means test for you, this is the determining factor in whether first of all you qualify to file for bankruptcy or not, once that’s determined further calculations of the means test can specifically tell you which bankruptcy chapter you’re eligible for.

Other things that can be revealed and may surprise you to find out during this consultation is that there are certain debts that can not be discharged under any bankruptcy chapter. These include tax arrears, child support payments, judgments against you and student loans to name a few. This is a very important reason to consult with a professional bankruptcy attorney, since most people can not make this determination on their own. If your case consists of mostly these kinds of debts then it’s possible that bankruptcy protection is not possible for you, instead you may consider debt consolidation under a different type of service.

Filing chapter 7 vs chapter 13

If have you considered bankruptcy but are not familiar with how it really works, you may be under the impression that by filing bankruptcy you’ll end all your financial troubles. Again, this is the reason why a bankruptcy evaluation with an experienced attorney is necessary. As mentioned above, during your evaluation you will find out which chapter best suits you after your attorney runs the means test on your case. This will depend on whether the bulk of your debt is secured or unsecured debt and whether you have the necessary disposable income.

There are very significant differences between chapter 7 vs chapter 13 bankruptcy, mostly in that in chapter 7 bankruptcy you get to discharge your unsecured debts and in chapter 13 you simply rearrange your debts into more manageable terms of repayment. Under chapter 13 your debts can be reduced and as long as the bankruptcy court and trustee accept your new terms of repayment then you will get a discharge once the debts are paid off.

All of this information will be better explained by a bankruptcy attorney in your area, you do not need to struggle with learning the bankruptcy code and attempting to apply the laws to your case on your own. Even if you do not end up filing with the help of a bankruptcy firm, you will get a lot of insight into the process by taking advantage of a free bankruptcy evaluation. Many law firms offer free evaluations and one on one consultations so take the time to find a reputable firm and bring your case to be evaluated you’ll gain a wealth of knowledge in the process.

To take advantage of a free bankruptcy evaluation now, visit our bankruptcy services evaluation review page and fill out a simple online evaluation form, you’ll then be contacted by a bankruptcy attorney in your area to get your process under way.