A Checklist of Information for Your Bankruptcy Consultation

Being prepared for your bankruptcy consultation is the key to success

Overcome with debt and feeling the frustration of today’s economy often the thought of filing for bankruptcy starts to seem like a viable option. Anyone thinking about filing will want to do some research and think about their options. If you reach the point that you think filing for bankruptcy is your best option you will want to plan a bankruptcy consultation with an attorney or a bankruptcy specialist. You will cover a large amount of information during a consultation so you want to have all the information they need at your fingertips. This bankruptcy consultation will help you understand the journey that you are about to embark on.

Use the following check list before you make a bankruptcy consultation appointment with a bankruptcy specialist.

List of debts.

  • You should make a simple list of every debt you owe, including mortgage and car payoff balances, loans, credit cards, overdrafts, bounced checks, loans from friends or family, medical bills or any other debt you might owe. The name of the creditor and the amount owed is the basic information you need for your consultation.

Bills.

  • As you go through your bills to put the list together for your consultation, you should gather your bills together since they will eventually be needed if you file bankruptcy. Put the bills into an envelope, bag or box. You don’t have to bring them to the consultation, but they will be needed if you go forward with filing a bankruptcy case.

Income records.

  • If you get a paystub from a job, you should bring your most recent paystub or your most typical/average paystub if your pay varies. Under the new law, we will need some documentation of all your incomes for the last six months so if you have them, bring it. If you work for yourself, don’t get a paystub, or don’t have the information, please bring whatever records you have that will show what you have made over the last six months so you can decide on your options.

Legal documents.

  • If you were sued, have a foreclosure against you, were divorced with a separation agreement, or have any other legal documents that you think might be important, you should bring them with you to the consultation.

Car values.

  • Get a printout for ALL vehicles you own or are titled in your name, whether they are paid for or you are making payments. Please print the page from The National Automobile Dealers Association www.NADA.com and bring it with you.

House/land value.

  • If you own a house or other land, it is helpful to have a good idea of the value that you could sell it for. You should probably know this anyway. Appraisals for refinancing are often higher than true market value so you should not rely on those, but if you have had any recent appraisals, bring that too. Look in your neighborhood to see what similar houses/land is listed and selling price. Speak to realtors that are selling in your area. You can look online for comparative sales to get a general idea.

During your bankruptcy consultation you will go over your financial situation. The consultant will review your finances to determine if filing for bankruptcy is the best option for your situation. They will also explain the bankruptcy process to you during this visit. Filing for bankruptcy is a very involved process and it can take several months to complete. They will want to make sure that you are committed to completing the process and that you actually want to do it. You will be told about the filing requirements, the means test, the creditors meeting and the eventual discharge of your debt. Being prepared for this meeting is the key to a successful bankruptcy consultation and a smooth process when filing for bankruptcy.

Credit Cards After Bankruptcy

…and what you need to know before you apply for one.

credit card

Photo Credit: adamr

You have filed for bankruptcy. Now you are trying to rebuild your damaged credit. So the question remains: should you apply for a new credit card? Upon first thought, the answer might be a resounding “NO!” But in reality, opening a credit card after bankruptcy can actually be a smart move. Credit card users who pay off their full balance each month can quickly build up good credit. The key is to be smart in your usage habits.

If you do opt to open a new credit card post-bankruptcy, only make purchases with it that you would otherwise make with cash or your debit card. In other words, view a credit card as another method of payment for things you can afford. If you could not afford to buy the item with cash or the money on your debit card, don’t purchase it. This will keep you from accumulating too high a balance and getting nailed on high interest charges.

But what if credit card debt was the reason you filed for bankruptcy in the first place? It might be a little scary to go right out and apply for another card. That doesn’t mean it’s completely out of the question. One way to give yourself a bit of a safety net is to wait until you have two months’ salary saved up before you even apply for a card. This will give you a little bit of a buffer and will allow you to easily pay off your balance each month.

If you do decide to open a card, try to go six consecutive months paying off the full balance. If you can do that, continue using the card to reestablish your credit. But if you have even one month where you spend more than you can pay back, stop using the card. You likely have not altered your spending habits from before the bankruptcy and are likely to fall into debt again. Get out before you become so far over your head that you are back in the same position you were in before the bankruptcy.

If you feel you are ready for the financial responsibility of a credit card, don’t just apply for any card. A secured credit card is a great way to go if you’re just recovering from bankruptcy. A secured card means you will be required to put down a security deposit with the card issuer before you can receive the card. You will also want to choose one that sends monthly reports of your payment history to all three major credit reporting agencies so that you can be sure you are actually rebuilding your credit.

Prepaid cards keep you from charging more than you can pay off, but they won’t help increase your credit scores. You can still use them though to help you stick to a spending budget. Just make sure you have a credit card that you make the minimum amount of purchases possible each month so that you can pay it off in full and rebuild that credit.

When using your credit cards, keep your monthly balances low. Whatever your spending limit is, keep your monthly spending to no more than 10% to 15% of that amount. Avoid charging your card up to its limit, no matter what. This type of spending causes people to charge more than they can afford and wind up back in debt.

On a final note, if you do decide to get a new credit card, make sure you wait until after your bankruptcy has been discharged. Do not apply for one beforehand. Taking on additional credit while you are still completing a bankruptcy could jeopardize your case.

 

Back-To-School Shopping and Bankruptcy

5 tips back-to-school shopping tips that won’t break the bank

back-to-school

Photo Credit: papaija2008

Ah, sweet summer is still upon us! Days filled with BBQ, camping, sunshine… and back-to-school? That’s right, back to school shopping is right around the corner. Every year schools issue the back-to-school list and parents flock to big box stores to fill up their carts with paper, pencils and clothing.

While back-to-school is always an exciting time for your children, you may be dealing with the stress of bankruptcy and having to add this expense onto your already tight budget. Back to school shopping doesn’t have to break the bank though. Follow these tips for a sure fire way to keep in budget and enjoying the last little bit of summer!

Tip #1 – Start early.

We all know those back to school lists are coming each year and after your first shopping list, you already have a pretty good idea on what your child is going to need. As simple as it sounds, it is probably one of the best moves you can make – start your shopping early. You can actually start planning ahead for next year too. While stores like Target and Walmart offer some great deals during this time of the year, towards the end of their back-to-school season, prices will be slashed. This is a perfect opportunity for you to start stocking up on those required items like pens, paper, and markers.

Tip #2 – Take inventory.

Chances are you already have some items on your back-to-school list. Use this time as a time to organize and take inventory of what your child already has. Items such as rulers and binders can be passed on from year to year. You can also get creative and choose a plain binder for your child to use, but dress it up with a FREE printable online. Not only will it allow your child to have a fun binder, but it can be changed throughout the year depending on your child’s preferences.

Tip #3 – Create a budget…and stick to it.

Money is most likely tight if you are going through a bankruptcy. It is important to set aside a budget and stick to it. Do your research and find out how much items will cost using your back-to-school shopping list as a guide. Pinching pennies is okay here , especially when it comes to pencils and paper. Pinching pennies could mean choosing the plain pencils over the glow-in-the-dark ones or scouting out deals on cheap paper. Things to include in your budget: school supplies, shoes, clothing items, sports items if your child plays a sport, lunch box, etc. This is also a great opportunity to teach your children about budgeting. Have them sit down with you and work on the budget together.

Tip #4 – Shop on tax free day.

August 2 – 4 is official known as Tax-Free Holiday weekend here in Tennessee (for your state, check here). Take this opportunity to save a few extra dollars by planning your school shopping on these days. Items that are tax free are school supplies, computers, and clothing. While there is a price limit on these items, saving every extra penny can help during this time. The great thing about the TN Tax Free Holiday is it includes items sold via mail, telephone, e-mail and the internet if you order and pay during the tax free period.

Tip #5 – Hit up the bargain stores.

While stores like Target, Walmart, and Old Navy have good deals during back-to-school shopping, it doesn’t hurt to shop at some of the bargain stores, such as the Dollar Tree. Here you can find plain school supplies – and the craft necessities to jazz them up with your child.

Wherever you are at in the bankruptcy process, if you have kids, with a little planning and creativity, you can make this a special time for them. If you have the money, set aside a little for something special they really have their eye on or even just a special treat while you are out shopping. The time spent preparing can be a great bonding experience and learning opportunity for your children. Make the most of this time!

Bankruptcy: 12 Things You Need To Know

What you need to know before you file bankruptcy

bankruptcy

Photo Credit: Stuart Miles / FreeDigitalPhotos.net

1. The Difference Between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

If you are an individual filing for bankruptcy (in other words, you are filing bankruptcy on your own behalf, not on behalf of a business you own), you have two filing options. You can file a Chapter 7, which allows you to walk away from debts entirely. This option is used by those whose debts are so high or income so low that after basic expenses they don’t have extra income for a payment plan. You can also file a Chapter 13, which allows you to draft a plan to repay all or part of the debts over three to five years.

2. You Will Not Lose Your Assets

Filing bankruptcy, whether a Chapter 7 or a Chapter 13, will not force you to give up all your possessions. You keep your personal property, such as clothes, electronics, household furnishings and other exempt assets. In some cases, you might even be able to retain larger items like your house and cars during bankruptcy. These exceptions depend on your state laws, the type of bankruptcy you file, and your financial situation.

3. Your Assets are Important in Determining Which Bankruptcy Option to File

If you were out of work and behind on making your house payments, but can now meet your monthly mortgage obligations, then a Chapter 13 might be your best option. If you don’t own a home, but are struggling with medical bills, then Chapter 7 might be a better choice. The best thing to do is write down the assets that are important to you. When you talk with an attorney, go through the list and find out how both a Chapter 7 and a Chapter 13 bankruptcy would impact each item.

4. You Have to Qualify for a Chapter 7 Bankruptcy

Before you can file for Chapter 7 bankruptcy, you have to show proof that you are unable to repay your debts. This is done though your proof of income and expenses.

5. Where You Live Matters

When it comes to which assets you can keep when filing bankruptcy, rules vary widely by state. Income and expense limits used for determining whether you qualify for a Chapter 7 bankruptcy will also vary by location.

6. Bankruptcy Should Only Be Filed as the Result of Major Life Events

People should only turn to bankruptcy as a solution when they have had major life events that significantly reduced their income, increase their bills or both. Such events can include divorce, unemployment and crippling medical bills.

7. Bankruptcy will Cost

Total costs of filing for bankruptcy will vary depending on your attorney and location. But you should know that a Chapter 7 bankruptcy can run $1,500 to $2,500, while a Chapter 13 bankruptcy can run $2,000 to $4,000. With a Chapter 13 bankruptcy, you can include bankruptcy costs in your plan and pay them over three to five years. With Chapter 7 bankruptcy, that’s not an option.

8. Bankruptcy Goes on Your Credit History

A bankruptcy will stay on your credit history for approximately 7 – 10 years. The good news is, however, the older that bankruptcy is, the less power it has to scare lenders and impact your credit score. Most people can rebuild credit much sooner than this.

9. It May Not Actually Affect Your Credit

While filing for bankruptcy will show on your credit history, it may not have as much impact on your credit. For example, if you’ve had financial problems such as chronic late and missed payments, charge-offs, etc., you might not notice much of a change in your score at all. A lot depends on your credit activity before filing.

10. Bankruptcy is Public Record

If you file, Chapter 7 or Chapter 13, it is a matter of public record. The days of posting bankruptcies in the local newspapers are long gone, however, because this information is public record, it can still be accessed if taken the time to look for it.

11. Bankruptcy Doesn’t Protect Joint Account Holders

A bankruptcy dissolves your obligation to a creditor. It will not dissolve anyone else’s if they happen to hold responsibility for your debts. This can affect joint account holders or co-signers. Your bankruptcy makes that bill his or hers alone. This happens most often in divorces. If possible, pay off bills or have the obligations transferred into the name of one party or the other before finalizing a divorce.

12. You Will Be Required to Attend a Class on Bankruptcy

Before you can file a Chapter 7 or Chapter 13, you will be required to take a 90-minute credit counseling class. You will also have to take a second, two-hour class before your bankruptcy can be finalized. These classes are available in person, by phone or online and should cost no more than $50 per class. If you are receiving free or discounted legal services, or you’re living on Social Security disability payments, you can have the fees waived.

Bankruptcy and Rebuilding Your Credit Score

Rebuilding your credit after bankruptcy can be done!

bankruptcy

Photo Credit: Stuart Miles / FreeDigitalPhotos.net

While it may seem devastating, bankruptcy can allow for you to have a fresh start at your financial freedom. Recovering from bankruptcy does take time, diligence and patience – you don’t accrue debt overnight, so you cannot expect to fix it over night. Have hope though, many individuals who have declared bankruptcy have gone on to fix their credit scores and become financially successful. You too can overcome bankruptcy.

One of the main areas to focus on while recovering from bankruptcy is learning to manage your monthly bills. If you are not used to working on a budget, this can prove to be quite challenging, especially with the burden and stress of bankruptcy. Creating a budget is imperative to your future financial success and bankruptcy recovery. A budget can be time-consuming to initially set-up, but once you do the initial work ,the rest is easy. Some important categories that need to be included in your budget are:

  • Annual Expenses: car registration, taxes, HOA fees, and other yearly fees.
  • Monthly Expenses: mortgage/rent, insurance, gas, food, utilities, and other once a month expenses. Also include any payments that you must pay from your bankruptcy in this category.
  • Emergency Money: it is important to save some money in case of an emergency.
  • Retirement: don’t stop investing in your future. Allocate monthly earnings to your retirement account.
  • Savings: if you can, automatically put a portion of your monthly earnings into a saving account.

There are also many online tools, and mobile apps, that can help you create and manage a budget, getting you on track to recover from bankruptcy. Apps such as Mint, Manilla, and You Need A Budget are excellent, free resources to help you stay on track. Be diligent in paying your bills on time – a late payment could be reported on your credit score deterring all the effort you are putting into rebuilding it after bankruptcy. All of these apps allow you to set up reminders when bills are due so you can stay on top of your finances, which is part of the bankruptcy recovery process.

The next step you need to make post-bankruptcy is re-establishing your credit score. Ironic as it may seem, opening up a credit card is one of the best ways to help raise your credit score after taking a hit like bankruptcy. While this is one of the quickest ways to build up your credit, it can also be one of the most detrimental if not used properly. After bankruptcy, you may have to start with a secured credit card. A secured credit card is a credit card that allows you to put a cash payment down to “secure” your line of credit. The amount you put down is how much your line of credit will be. A word of caution must be given about opening up a credit card. You must be very careful about how you use this card. The point is to use it to build your credit, but do not use it beyond your means. Make a few purchases with it each month and then aim to pay it off in full each month. If you are careful and use your credit card properly, you will soon be eligible for non-secured cards. These cards typically have high interest rates, so being mindful of that is also suggested.

In addition to the budget and credit card, make sure you are keeping an eye on your credit score regularly. Check for inaccurate information. If you come across inaccurate information, write a letter of dispute to the agency asking for it to be removed. Here is more information on how to request the removal of inaccurate information from your credit report.

Bankruptcy can be a very stressful situation. You may need to seek out additional help in order for you to recover from bankruptcy and raise your credit score. The important thing to remember is that you CAN and WILL recover from bankruptcy. Your budget may be tight for a while and you may have to sacrifice some of the “wants” in your life, but in the end your goal is overall financial health and it will be worth every struggle you go through after bankruptcy.