What is Bankruptcy featured image

Top 10 Most Common Bankruptcy Questions

Below is a list of the Top 10 Most Common Bankruptcy Questions. Please take the time to read through it as you may find it useful. DISCLAIMER: We are not lawyers and are not giving legal advice. Before filing bankruptcy, talk to a lawyer in your location.

1) Does Bankruptcy Clear Debt?

In general, bankruptcy clears out most unsecured debt. Unsecured means the loan is not backed up by a guarantor or asset. Unsecured debt can include medical bills, overdue utility payments, credit cards, personal loans, and certain contracts, like gym memberships. Secured debt includes purchases on a secured credit card and large purchases like homes and cars.

Federal student loans are unsecured but typically cannot be wiped out in bankruptcy. Child support, alimony, and most tax debt are also not included.

2) How Much Debt is Needed to File Bankruptcy?

For Chapter 7, there is no minimum amount of debt. It depends on your individual situation. The court will look at whether you are able to repay debt outside bankruptcy, if creditors are willing to work out a repayment agreement, and what types of debt you have.

For Chapter 13, you can not have more than $1,184,200 in secured debt or $394,725 in unsecured debt. These numbers are adjusted periodically.

3) Should I Declare Bankruptcy or Seek Debt Settlement?

This depends on your specific case. In debt settlement, you and your creditors agree on a lesser amount to be paid than what is owed. Bankruptcy erases most of your debt depending on what type of debt it is, and which bankruptcy you filed. Bankruptcy can also be very expensive, largely due to the legal fees. Not to mention, there is a pretty bad stigma that comes along with it that nobody wants to be associated with.

Both methods may negatively impact your credit score. Debt settlement is not a public record but missed payments could stay on your credit report up to seven years, while a bankruptcy is public record and can show up to 10 years. With debt settlement, you may be required to stop making credit card payments before the creditor will consider working with you. Once you have paid off the agreed upon (settled) amount, your credit report will show the account was paid off, but for less than what was originally due. As you pay off your debts and use any new credit carefully, your credit score should start to improve. Rebuilding your credit rating takes both the careful use of credit and on-time payments. With care, you could start to see improvements in a fairly short period of time.

Pacific Debt offers a FREE Consultation to anyone looking at debt settlement options. Our Debt Relief Program is designed to try to get you out of debt in two to four years.

4) How Often Can You File Bankruptcy?

As a general rule:

Chapter 7 then Chapter 7 –  You must wait eight years from the date you filed the first case.

Chapter 13 then Chapter 13 – You can’t get another discharge for two years, but you can file a second as soon as the first case is closed.

Chapter 7 then Chapter 13 – Commonly referred to as a Chapter 20 bankruptcy. You must wait a minimum of four years.

Chapter 13 then Chapter 7 – You must wait up to six years from first filing date unless you have paid off all unsecured debts or made a “best effort” to repay at least 70%.

For more information on how often you can file a bankruptcy or more information on the bankruptcy basics, check out National Bankruptcy.

5) What Happens When You File Bankruptcy?

In a Chapter 7 bankruptcy, your previous debts are usually wiped out, along with your good credit history. You have the opportunity to rebuild your credit. In Chapter 13, you repay your debts for a reduced amount over four to six years. In both cases, the bankruptcy will stay on your credit report for up to ten years.

6) Can You File Bankruptcy on Medical Bills?

Medical bills are considered unsecured debt and can be easily wiped out in most cases. In a Chapter 7 bankruptcy, you must first pass a means test. There Is no limit to the amount of medical debt.

In a Chapter 13 bankruptcy, your debt can’t exceed the debt limits. You repay the bills based on income and expenses, but usually not the full amount.

7) How Long Does a Bankruptcy Stay on a Credit Report?

A bankruptcy can stay on your credit report for up to ten years.

8) Can I be Approved for Credit Cards After Bankruptcy?

Yes. Depending on the credit card company, you may apply for both secured and unsecured cards. With a secured card, you must have a certain amount of money on hold with the credit card company to ensure the bill will be paid. You may have to meet fairly stringent requirements to apply for an unsecured credit card.

Are you wondering how much money you are spending on credit card interest? Our credit card calculator can help you figure out exactly how much money you’re paying on interest and principal each year.

9) Is Buying a House After Bankruptcy Possible?

Yes, within certain guidelines. After Chapter 7, you must wait two years for an FHA or VA loan, and four years for a conventional loan. After Chapter 13, the wait time is roughly halved. Often, you will have to show a 12-month consecutive record of on-time payments and have the court’s permission.

Check out our recently published article on How to buy a house with bad credit.

10) How Long Does It Take to File Bankruptcy?

It takes roughly three to six months to file and receive a discharge. In Chapter 13, the repayment time may take three to five years to finish paying existing debts.

Our Debt Specialists can help you explore your alternatives to bankruptcy, including debt consolidation and debt settlement options.

FREE CONSULTATION

Disclaimer – We are not lawyers and we are not giving legal advice. These are merely some bankruptcy options and information. Consult an attorney who specializes in bankruptcy law BEFORE you do anything.

5 ways to get debt relief from credit cards

5 Ways to Get Debt Relief from Credit Cards

Credit card debt is a problem for many Americans. For many people keeping up with monthly credit card payments is increasingly difficult. Causes vary. An illness, job loss, low income, or poor spending habits may be at the root. Spending more than you earn is very easy to do, especially with the convenience of a credit card.

If you cannot make your monthly credit card payments, act immediately! It’s easy to get caught up in increasing debt. You may not be able to break free without the help of a debt relief professional.

What types of debt relief help are available? We’ll discuss some options that may help you pay off debt. Hopefully, you can use these options to pay off your debt and start enjoying a debt free life.

What is Debt Relief?

Debt relief can come in the form of debt settlement which is the ability to negotiate or settle, your loan amount with the creditor. You may be able to lower the interest rate or even eliminate your entire debt.

Your situation is unique, and no one method fits everyone. Explore your options carefully and pick the one that makes the most sense for your situation.

Get a Free Consultation and find out how our Debt Settlement Program can start helping you live a debt free life today!

What Are My Debt Relief Options?

  1. Make Your Monthly Payments – Use our Credit Card Interest Rate Calculator to see exactly how much you’ll be paying on interest and principal.
  2. Debt Settlement – negotiate a lower balance on your debt amount
  3. Debt Consolidation – taking out a loan to pay off other debts
  4. Debt Management – working with a credit counseling agency
  5. Bankruptcy – a legal remedy to settling out of debt. Make sure to consult a lawyer in your area for more information

The last four options come with credit consequences on your Fico score. However, not paying your debt on time may also result in negative credit consequences. The biggest benefit of paying off your debt is that you will be able to rebuild your credit later. You can improve your credit score with effort and learn better money management skills.   

There are several types of debt that cannot be eliminated or settled. These include child support, student loans, and other secure loans.

What Do Debt Relief Companies Do?

Debt relief companies negotiate on your behalf with your creditors to help settle your debts. The debt specialists have worked with thousands of creditors. They know which creditors are willing to work out solutions and which are completely unwilling to settle.

Debt specialists know state and federal laws that govern lawsuits, collections, and statutes of limitation. Your debt specialist will guide you through each step of the process. The credit repair program takes two to four years and you’ll be in contact with your debt specialist at least once a month.

Once your debt is relieved, a reputable credit repair company will help you repair your credit rating. A good credit score makes it easier to buy a car, get a mortgage or even get better rates on credit cards and loans.

Steps Debt Relief Companies Take

  1. Your debt specialist will access your free annual credit report from Equifax, TransUnion, and Experian. You are entitled to one report each year, but they can be confusing. A debt specialist will guide you through the report.
  2. A debt specialist will go through your budget with you to see how much you can afford to pay each month
  3. Your debt specialist will work with your creditors to help settle your debts. They may be able to lower interest rates, settle on a lower amount, or even get the entire debt erased.

Who’s the Best Debt Relief Company For Me?

Pacific Debt, Inc has an excellent track record with credit repair. In business since 2002, they are in downtown San Diego. Pacific Debt has earned an A+ rating from the Better Business Bureau and is a BBB Accredited Business. They have settled over $200 million dollars in consumer debt. BestCompany.com ranks them as one of the best debt settlement companies.

Pacific Debt offers a free consultation. Their debt specialists will perform an in-depth analysis of your debt and advise you on your options. They ensure that you understand all options and all the program details. Depending on your financial situation, Pacific Debt works with you to be debt free in one to two years. The company does not make money unless your debt relief program works for you. You have nothing to lose and every to gain by contacting Pacific Debt for your free consultation.

Read real reviews from people who have used Pacific Debt to settle their credit.

A Certified Debt Counselor can help you from drowning in debt!

FREE CONSULTATION

Debt Settlement vs Bankruptcy

debt settlement pan to avoid bankruptcy

Debt Settlement vs Bankruptcy

Weighing The Pros and Cons

One of the most common things we hear from consumers is that they want to look into a debt settlement plan so they can avoid filing for bankruptcy. In many cases, a debt settlement strategy can be a great way to avoid bankruptcy. Sometimes, however, bankruptcy might actually be the best option. When looking for the best way out of debt it is important to compare Debt Settlement vs Bankruptcy and go with the solution that makes the most sense for your specific financial situation.

Since all consumer situations are unique and the bankruptcy laws in many states are different, you will need to meet with a bankruptcy attorney that is licensed in your state in order to gain a complete understanding of what a bankruptcy filing would look like for you.

Bankruptcy Ch. 7

Filing a Ch. 7 bankruptcy is basically like wiping the slate clean, discharging all your debts and starting over. It typically only lasts a few months and provides for the most immediate form of debt relief than any other option.

The bankruptcy can stay on your credit report for up to 10 years, but you should be able to rebuild your credit to the point where you can borrow money for consumer items within a few years. Bankruptcy reform laws passed in 2005 have made it harder for many consumers to qualify for a Ch. 7 however.

Now, depending on your income and your assets, if you file for bankruptcy you may not be eligible to file for a Ch. 7 and would be required to file a Ch. 13 instead. Since all states are different you will need to speak with a bankruptcy attorney about which chapter would be appropriate for you.

Bankruptcy Ch. 13

A Ch. 13 bankruptcy is a much different animal than a Ch. 7. With a Ch. 13 you will be on a repayment plan for the next 3 to 5 years and might even be required to pay your entire debt in full. The goal of the Ch. 13 is to protect you from creditors but put a repayment plan in place that will pay back as much of the debt as possible.

Ch. 13 plans typically have a high rate of default among consumers because the monthly payments that they are required to pay can be very high. Many consumers compare Ch. 13 bankruptcy plans to getting an allowance as a kid. Over the 3 to 5 year plan, you are told what you can afford, what you can’t, and how much of your money you have to live on. If you get a raise at work, that must be reported, and the bankruptcy court will decide if you get to keep any of that extra money or if it all must go to your creditors.

Except in rare circumstances, a Ch. 13 bankruptcy is one of the least desirable debt relief solutions.

Debt Settlement

If you can’t qualify for a Ch.7 bankruptcy or would prefer to pay back at least some of what you owe based on your ability, a debt settlement approach is a great strategy to consider. Debt settlement allows you the ability to negotiate with your creditors for a lower principle pay off amount.

Since you must be behind on your debts before your creditors will agree to accept a reduced payoff, a settlement does have a negative effect on your credit, although, in many cases, the credit report will not be damaged as long as with a bankruptcy.

Debt settlement strategies work best for consumers who want to avoid bankruptcy or at least want to try and pay back some of their debt on flexible terms without just walking away from it.  Having access to a reserve lump sum amount of money like a 401k or some other savings would be helpful, but isn’t necessary to successfully settle your debts.

As mentioned above, every consumer situation is unique and the best way to compare a Bankruptcy vs Debt Settlement is to contact a professional to review your situation and help you determine how either strategy may or may not work well for you.

To learn more about debt settlement, contact the professionals at Pacific Debt for a free Debt Reduction Estimate. Once we teach you about the settlement process, you can speak with a bankruptcy attorney and know for certain which option would be the best for you.

BACK
Free Consultation
close slider