Do I Have Other Options for Secured Debts Other than Reaffirmation?

You may be able to keep the collateral on a secured debt by paying the creditor in a lump sum the amount the item is worth rather than what you owe on the loan.  This is your right under the bankruptcy law to “redeem” the collateral.

Redeeming collateral can save you hundreds of dollars.  Because furniture, appliances, and other household goods go down in value quickly once they are used, you may redeem them for less than their original cost or what you owe on the account.

You may have another option if the creditor did not loan you the money to buy the collateral, like when a creditor takes a lien on household goods you already have.  You may be able to ask the court to “avoid” this kind of lien. This will make the debt unsecured.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Should I Reaffirm a Debt?

If you are thinking about reaffirming, the first question should always be whether you can afford the monthly payments.  Reaffirming any debt means that you are agreeing to make the payments every month, and to face the consequences if you don’t.  The reaffirmation agreement must include information about your income and expenses and your signed statement that you can afford the payments.

If you have any doubts whether you can afford the payments, do not reaffirm.  Caution is always a good idea when you are giving up your right to have a debt canceled.

Before reaffirming, always consider your other options.  For example, instead of reaffirming a car loan you can’t afford, can you get by with a less costly used car for a while?

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Do I Have to Reaffirm the Same Terms?

No.  A reaffirmation is a new contract between you and the lender.  You should try to get the creditor to agree to better terms such as a lower monthly payment or interest rate.  You can also try to negotiate a reduction in the amount you owe.  The lender may refuse but it is always worth a try.  The lender must give you disclosures on the reaffirmation agreement about the original credit terms, and any new terms you and the lender agree on must also be listed.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Beware of Tax Refund Loans

Tax refund anticipation loans

Some tax return preparers offer to provide an “instant” tax refund by arranging for loans based on the expected refund.  The loan is for a very short period of time between when the return is filed and when you would expect to get your refund.  Like other short-term loans, the fees may seem small but amount to an annual interest rate of 200 percent or more.  It is best to patient and wait for the refund.

Source: Using Credit Wisely After Bankruptcy Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Can I Change My Mind After I Reaffirm a Debt?

Yes.  You can cancel any reaffirmation agreement for sixty days after it is filed with the court.  You can also cancel at any time before your discharge order.  To cancel a reaffirmation agreement, you must notify the creditor in writing.  You do not have to give a reason.  Once you have canceled, the creditor must return any payments you made on the agreement.

Also, remember that a reaffirmation agreement has to be in writing, has to be signed by your lawyer or approved by the judge, and has to be made before your bankruptcy is over.  Any other reaffirmation agreement is not valid.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Do I Have to Reaffirm Any Debts?

No.  Reaffirmation is always optional.  It is not required by bankruptcy law or any other law.  If a creditor tries to pressure you to reaffirm, remember you can always say no.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

What Is Reaffirmation?

Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to “reaffirm” a debt.  If you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy.  If you reaffirm, the debt is not canceled by bankruptcy.  If you fall behind on a reaffirmed debt, you can get collection calls, be sued, and possibly have your pay attached or other property taken.

Reaffirming a debt is a serious matter.  You should never agree to a reaffirmation without a very good reason.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

Do I Still Owe Secured Debts (Mortgages, Car Loans) After Bankruptcy?

Yes and No.  The term “secured debt” applies when you give the lender a mortgage, deed of trust, or lien on property as collateral for a loan.  The most common types of secured debts are home mortgages and car loans.  The treatment of secured debts after bankruptcy can be confusing.

Bankruptcy cancels your personal legal obligation to pay a debt, even a secured debt.  This means the secured creditor can’t sue you after a bankruptcy to collect the money you owe.

But, and this is a big “but,” the creditor can still take back their collateral if you don’t pay the debt.  For example, if you are behind on a car loan or home mortgage, [Read more…]

Which Debts Do I Still Owe After Bankruptcy?

When your bankruptcy is completed, many of your debts are “discharged.”  This means they are canceled and you are no longer legally obligated to pay them.

However, certain types of debts are NOT discharged in bankruptcy.  The following debts are among the debts that generally may not be canceled by bankruptcy:

* Alimony, maintenance, or support for a spouse or children.

* Student loans.  Almost no student loans are canceled by bankruptcy.  But [Read more…]

How Long Will Bankruptcy Stay on My Credit Report?

The results of your bankruptcy case will be part of your credit record for ten (10) years.  The ten years are counted from the date you filed your bankruptcy.

This does not mean you can’t get a house, a car, a loan, or a credit card for ten years.  In fact, you can probably get credit even before your bankruptcy is over!  The question is, how much interest and fees will you have to pay?  And, can you afford your monthly payments, so you don’t begin a new cycle of painful financial problems.

Debts discharged in your bankruptcy should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt.  Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult to get credit.  You should check your credit report after your bankruptcy discharge and file a dispute with the credit reporting agency if this information is not correct.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

What Else Should I Know About Filing Bankruptcy?

Utility services–Public utilities, such as the electric company, can not refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Discrimination–An employer or government agency can not discriminate against you because you have filed for bankruptcy. Government agencies and private entities involved in student loan programs also can not discriminate against you based on a bankruptcy filing.

Driver’s license–If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers–If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.  If you file under chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Will Bankruptcy Affect My Credit?

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse.

The fact that you’ve filed a bankruptcy can appear on your credit record for ten years from the date your case was filed. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

If you decide to file bankruptcy, remember that debts discharged in your bankruptcy should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt. Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult or costly to get credit. You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

What Else Must I Do to Complete My Case?

After your case is filed, you must complete an approved course in personal finances.  This course will take approximately two hours to complete.

Many of the course providers give you a choice to take the course in-person at a designated location, over the Internet (usually by watching a video), or over the telephone.

Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust.

In a chapter 7 case, you should sign up for the course soon after your case is filed.  If you file a chapter 13 case, you should ask your attorney when you should take the course.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Will I Have to Go to Bankruptcy Court?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come.  Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear at a hearing.  In a chapter 13 case, you may also have to appear at a hearing when the judge decides whether your plan should be approved.  If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions.  Bankruptcy will not normally wipe out:

  • Money owed for child support or alimony;
  • Most fines and penalties owed to government agencies;
  • Most taxes and debts incurred to pay taxes which can not be discharged;
  • Student loans, unless you can prove to the court that repaying them will be an “undue hardship”;
  • Debts not listed on your bankruptcy petition;
  • Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
  • Debts resulting from “willful and malicious” harm;
  • Debts incurred by driving while intoxicated;
  • Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Can I Own Anything After Bankruptcy?

Yes!  Many people believe they can not own anything for a period of time after filing for bankruptcy.  This is not true.  You can keep your exempt property and anything you obtain after the bankruptcy is filed.  However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.