Credit Card Company Suing You? How to Respond

Maybe you have been living paycheck to paycheck and use a credit card like so many others. Maybe some event like a medical problem or a job loss occurred, sending you into financial turmoil. Now the debts have piled up, and creditors have been calling to demand payment. Suddenly you find yourself being served with summons for a lawsuit by the credit card company. Calm down. Before you start considering bankruptcy options, see what you can do about the lawsuit.

First of all, take the lawsuit seriously. It is something that can have major consequences and requires your urgent attention. There is a deadline by when you have to respond to the suit. If you do not meet that deadline, the court will enter a default judgment against you, awarding the credit card company access to means such as garnishing your wages, placing a lien on your house or a levy on your bank account to collect whatever they claim you owe them. In some extreme cases, the court may even order a ‘bench warrant’ or a ‘writ of attachment’ against you if you miss a date. Such an order means the court can now order your arrest. So, don’t ignore the summons and file a response by the deadline.

Go through the credit card company’s claim thoroughly. If you need more time to do so, you can file a Motion for Extension of Time – it should get you about a month extra to prepare your response.

Ensure that you actually owe the debt that the company is claiming you owe. Also check whether the statute of limitations hasn’t already passed on the debt. Make sure that the company has attached all relevant documents to prove the agreement between you and the company, and to prove the sum they claim you owe. If the company has overlooked any of these details, you can file a Motion to Dismiss the lawsuit.

In case you file a Motion to Dismiss and it is rejected by the court, you need to produce your answer. Go through Federal laws like the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. If your creditor has violated provisions of either of these Acts, they actually become liable to pay you a fine. So if you can find any violations, you can bring them to the negotiating table.

In the end, the negotiating table is the best place for you to work on the debt with the creditor. By now, they must have understood that you aren’t just going to roll over because they filed a suit; they are  going to have to fight it, which will cost them more money as well. They also know that you have bankruptcy options that can shatter their chances of recovering anything.

Prepare all documents relevant to your financial condition including your wage slip, any medical bills, your saving and loan accounts, etc. Take them to your creditor and show them what you can afford to pay and what kind of regular payments plan can you work with. You can even ask the court to arbitrate between the two of you.

Settle the lawsuit. It is in the best interests of both the parties. Just make sure you get whatever is agreed upon in writing. This is important in case you ever need to produce documentary evidence in the future. Honor the new agreement and pay off your debt; it would be a shame to end up back in court.

Chapter 13 Bankruptcy Dismissal

Once you end up filing for bankruptcy, there are only two ways out: a discharge or a dismissal. A chapter 13 bankruptcy involves getting into a repayment plan that takes your current income into consideration and restructures your debts to be paid over the course of three to five years, while allowing you to retain your property. You make regular payments to the court-appointed trustee who deals with your creditors, and if you follow through on the agreed plan, you get a discharge leaving you debt-free.

However, circumstances might arise that land you into a dismissal instead. A dismissal can be bad news as it removes the protection of the automatic stay, restores all rights of your creditors, and reactivates all unpaid loans, interest, and fees payments that were voided by the court. For example, if you used to pay $500 per month towards a loan before filing for bankruptcy, and that payment got reduced to $300 per month under your bankruptcy plan, a delinquency of $200 a month has been building. The creditor can now claim all that amount and add interest and late payment charges on it. This can leave you in a worse condition than before your filing, especially if you were a few years into your plan.

A bankruptcy dismissal may be voluntary or involuntary. A reason for a voluntary dismissal might be finding out after filing for bankruptcy that the court won’t allow a loan that you want discharged to be written off. Or it might be that you may have found a higher paying job, enabling you to pay off your debts without going through bankruptcy – this will help in salvaging the credit score. A voluntary dismissal can be had by consulting with your chapter 13 trustee and filing a formal request with the bankruptcy court.

An involuntary dismissal, on the other hand, lands on your chapter 13 case if you fail to fulfill the court’s requirements. There might be a problem with your paperwork – you might have overlooked filing some document or signing one. Or you might have fallen behind on your payments to the trustee. You are given a grace period to catch up the first time you miss a payment, but if you can’t, the trustee is authorized to file for dismissal.

If you receive a notice that says your bankruptcy is up for dismissal and you don’t want that to happen, you need to move quickly – you have very limited time before the dismissal is finalized. Start with finding out the exact reason for the dismissal. You will find the reason on the notice, but if it’s not there, go inquire about it at the court. Then make amends – submit the missing document or pony up the missed installments. Then file a Motion to Reconsider with the court and your bankruptcy may be reinstated. If your Motion to Reconsider is denied, you can appeal it, and will then have to present your case to U.S. District Court judge or Bankruptcy Appellate Panel .

If the dismissal is occurring because of some filing by your creditors, you will have to contest their claim in court.

In case your bankruptcy does get dismissed, you can file for another one after a period of 180 days. But remember that this filing for bankruptcy will be a new one and you will need to pay the fees, take the credit counseling, submit all the documents, and file a new repayment plan all over again.

Bankruptcy and Buying a Home – 3 Benefits to Buying a Home after Bankruptcy

Bankruptcy can be a breath of fresh air on one hand and a lung full of smoke on the other. Life after bankruptcy means you will be debt free and you will be able to start all over again but with a looming bankruptcy in your financial records for another 10 years it may not be the easiest time of your life.

If you want to purchase a home after declaring bankruptcy you actually can do so. You will have to be honest form the get go and provide the true information about the credit ratings you have. Since you no longer owe the debts that caused you to declare bankruptcy you can review your credit. At the beginning they may decline you because of your previous debt but showing that they are all gone can make a big difference.

Where can you find this information? First you want to get your credit profile from the major credit bureaus. This should be easy to obtain. If you see a report that states that you still have a balance you need to have that sorted out right away. Go back to the company or lawyer that helped you to go through with the bankruptcy filing and bring it to their attention.

After you have the right information you should formulate a letter to your creditor where you will ask them to alter the list. You can use a credit repair kit or a credit repair service if you can afford to.

Once you have that in hand you can now find a mortgage company that specializes in offering mortgages to persons who are trying to better theirlife after bankruptcy. These lenders can approve a loan even within a day of your bankruptcy file has been discharged. There will be different packages and terms for you as you have a bankruptcy on file than for others but all is good once you understand the terms and are in agreement with them.

When purchasing a home after bankruptcy the one thing you will definitely need is a down payment no matter how small it is. If you have a good amount to use for your down payment you may have a great chance of the bank financing the rest. If you don’t have any money or just a little to use for the down payment and that is posing a problem you could find down payment assistance in your area or you could borrow from friends or family who are willing to give you a loan.

Down to the three benefits – what are they?

1. This can increase your credit score. Once you are approved and get your mortgage and your house and pay your bill on time each month then your credit ratings will start climbing. If you keep it up you could even refinance your home for a lower interest rate sooner than you think.

1. You can gain equity on your home. If you were renting you would still be making monthly payments and those would be going to someone else’s pocket, this is a great way to invest in yourself and your future.

1. It can help with debt consolidation. How? – By taking out an equity loan.

There you have it how to make your life after bankruptcy a better one by buying a home.

Financial Stress Is The Number One Cause of Divorce

The time and effort that couples spend working on their financial goals leading up to marriage will have a marked impact on their futures. Even married couples that have a long courtship do not usually discuss their financial duties or develop a detailed financial plan. Because solid marriages require the cooperation and commitment of both individuals, even the most well meaning spouses can find themselves in post divorce bankruptcy proceedings.

When two parties decide to make a lifetime commitment, every aspect of their lives are joined – including finances. Although most families consist of  two breadwinners, there is usually one person that is primarily responsible for supporting the household. A shift in financial responsibility can the very foundation of a married couple, leading to money related issues mounting stress. The effects of bankruptcy on couples that are considering divorce can be detrimental. One spouse may blame the other for the bulk of their financial woes, which makes recovery even more difficult.

Whether you initiated the divorce or were blind-sided by your spouse, it is important to assess your current financial status before making any major decisions. Not only are divorces expense, they can also take years to be completed. As married couples tend to draw money from joint and individual bank accounts, buy property deeded in the name of only one party and spend money without the consent of another, it will take time to figure out whom is responsible for the greater portion of the marital debt.

If you have divorced due to bankruptcy and want to create bright financial future, you will need to establish clear goals. Although you may still be dealing with your ex-spouse’s debts, there are ways that you can reduce the negative effects of bankruptcy. Hiring an attorney to review your finances will give you both the confidence and the legal standing that you need to secure your assets. Divorce settlements can be modified and support agreements can be amended at virtually anytime.

There are some individuals that are able to walk away virtually unscathed after a divorce where finances are considered. On the other hand, any person that leaves a marriage with few or no debts will likely receive very little in return. A prenuptial agreement may preclude you from benefiting financially from your former spouse, however, not all pre-marital legal agreements are binding. Receiving support for your children, or splitting the mortgage note may be necessary if your circumstances have changed since first marrying.

The effects of bankruptcy can be felt both before and after a marriage has ended. While it is unrealistic to think that you will be able to get over your divorce immediately, you can make more sound financial decisions. Scheduling meetings, attending mediation and negotiating a divorce settlement can emotionally drain you if you do not formulate a definitive plan. Decide exactly what you want to do after your divorce is finalized, then consult with your lawyer. It will soon become apparent as to what is feasible and what issues you will need to compromise on.

Top Ten Reasons People File for Bankruptcy

Those who end up in the bankruptcy process do not do so lightly. Bankruptcy comes with a lot of hardship and is the last resort after a lot of financial trouble. Those who go into bankruptcy usually end up losing a majority of their properties in exchange for wiping out their debts.

So what makes people file for bankruptcy? Here are the top 10 reasons:

1. Medical bills

An illness or an accident can leave one with huge bills and they aren’t always fully covered by insurance. Expensive doctor consultations, tests and treatments can easily drain out life-savings and push people into huge debt to meet the medical costs besides their usual bills, all while one is unable to work.

In such a situation, entering the bankruptcy process becomes the best option. In fact, a Harvard University study indicated that medical expenses are the biggest cause of personal bankruptcies.

2. Loss of income

One depends on their income to pay their bills, and any loss of it – in the form of job loss or cutback in number of hours – can be a devastating blow to finances. It can be exceptionally hurtful to high-wage earners because finding another job that pays as well can be a time consuming process. And losing a job also means one loses any medical insurance their employer provided.

3. Out of control spending

In today’s world where access to credit is easy and desirable things are many, credit card bills and installment debt can quickly spiral to dizzying heights. If one tries to offset them by consolidating via a mortgage, chances of losing the home also shoot up. The bankruptcy process becomes preferable as creditors hound one for payments.

4. Divorce

A divorce directly translates into attorney fees, alimony and child support payments, and division of assets. Add to that the mental strain that might affect one’s ability to work, and it’s not surprising that divorces lead to personal bankruptcy.

5. Disasters

Disasters like earthquakes or hurricanes, or fire or thefts – anything that is not covered by insurance and involves a significant loss of assets – can lead to financial ruin and force people into bankruptcy.

6. Predatory lending

From mortgages that are far above the value of homes to spiking interest rates and minimum payments, many consumers have had to enter the bankruptcy process after they were careless about the loans they took.

7. Lawsuits

Litigation over credit cards or car accidents or something else can turn into huge damages claims over and above the legal fees that has to be borne. Bankruptcy can become a solution as it stops any lawsuits.

8. Student loan burden

In case one doesn’t land a good enough job after completing their studies with the help of student loans, the payments can negatively influence finances. Though student loans aren’t wiped out in a bankruptcy discharge, they can be restructured to become more manageable.

9. Small business failure

A small business is usually started by one’s own funds and is directly tied to personal finances. A failure not only means a loss of what was invested, but can also lead to creditors looking to collect from one’s personal property, leaving bankruptcy as the only option.

10. Speculative losses

Trading actively in stock, forex, commodity or other such markets exposes one’s funds to a number of risks. Sudden movements in these markets can turn into a jackpot or a catastrophe. If one does not keep control of their speculative activities, they may find themselves in the middle of the bankruptcy process.

YOUR CREDIT REPORT AFTER BANKRUPTCY – WHAT TO LOOK FOR

Insolvency or bankruptcy is the legal term used when an individual publically and legally proclaims his incapability to pay off his debts to his creditors. By announcing his inaptitude to disperse his debts, the debtor initiates a legal proceeding in which his assets are sealed for the reimbursement of creditors’ claims through which most of the debts are paid off.

The biggest disadvantage of declaring the bankruptcy is that it makes it impossible for the debtor to borrow again in his times of need. In some jurisdictions, after several years, in most cases it is seven years and sometimes it is ten years, the debt and the bankruptcy charge is removed. But meanwhile the post bankruptcy credit report will show your bankruptcy charges and will affect your credit history.

Post bankruptcy credit report is the first document that you should look for after receiving the bankruptcy release documents. It is important that the post bankruptcy credit report is accurate in all the details.  If you do not check the credit report immediately and later find out that it had some mistakes then it would take a long time and a lengthy procedure to get the report corrected.

The following are some fine points that you should check if they are correct in the post bankruptcy credit report or not:

• The date when the bankruptcy was filed

• The date when the bankruptcy was discharged
• All the creditors showing a $0 balance
• A claim from the creditors indicating that they were included in the bankruptcy with $0.00 remaining balance.
• There aren’t any profit or loss charges as they can reduce your overall credit score
• Your credit report may also show your late payments

The most important point is to consider and check is that your outstanding balance towards your creditor is nil. If any of your creditors who were included in the bankruptcy are showing a balance then it is very important to get this error corrected. You should contact creditors and ask them to correct and update the information in your credit report so that it reflects the true credit score. If an outstanding balance is shown for a creditor in your post bankruptcy credit report then it will decrease your credit score.

On the whole, the credit score of a person actually increases after filing for bankruptcy. The reason is very simple. When a person files for bankruptcy, all his liabilities are paid off by dispersing his assets and his credit report shows a discharge of profit and loss leaving behind a $00.00 balance.

Filing for the bankruptcy can be a crucial decision for an individual as this can affect their credit history and will remain a part of their credit reports for several years. But in the cases of most people the credit score after filing for bankruptcy is not as bad as expected. To begin with, if you had to file bankruptcy, the credit score wouldn’t be any good. So, your credit score might already be declining because of late or no payments of the debts. In fact for some people filing bankruptcy can be a starting point and from here they can start with $0.00 outstanding debts and as a result a better credit score.

Can you declare bankruptcy twice?

A bankruptcy is an extreme step taken after a lot of hardship. Many circumstances push people into personal bankruptcy – from lost jobs to medical costs which aren’t covered by insurance to events such as disasters etc.

Whatever the reason, getting a discharge from your major debt obligations under a bankruptcy is a fresh start at life, and one should use the lessons from past events to stay out of the red from then on. However, as noted, not all events are controllable and circumstances may arise to push you into bankruptcy again.

The law acknowledges this and, hence, allows you to declare bankruptcy twice, or even more times if need be. But there are term limits which bar you from getting a discharge again within specific time periods, and they depend on the kind of personal bankruptcy you went for the first time.

Personal bankruptcy

There are two kinds of personal bankruptcies – a chapter 7 filing, which is the most common form of bankruptcy, and a chapter 13 filing.

A discharge under a chapter 7 filing means that you will lose all your properties, except those that are exempt under the bankruptcy law, in exchange for wiping out a majority of your debts. This kind of discharge is also known as a ‘fresh start’ as it does play that part in the debtor’s life.

The second kind is a chapter 13 bankruptcy filing, which works towards restructuring your debts in such a way that makes it easier for you to meet them with your current resources and income. The restructuring is done with negotiations with your creditors and usually includes features such as cutting down your debt burden and increasing the time period over which you may pay it off.

Now, if your first personal bankruptcy filing was a chapter 7 and you successfully got a discharge, the law says you cannot get another chapter 7 discharge for 8 years, or a chapter 13 discharge for 4 years.

If your first discharge was under a chapter 13 filing, you are barred from getting a chapter 7 discharge for a period of 6 years, while you may get another chapter 13 discharge after 2 years.

You may, however, get another discharge after a successful chapter 13 filing before the term limits are up if you have completely paid off all the debts from the first filing, or if you have met at least 70 percent of the obligations and can prove in good faith that you cannot, even with your best efforts, pay any more.

Consider the impact 

Though there is no limit on how many times you can declare personal bankruptcy in your lifetime, you must consider its impact on your credit report. A chapter 7 filing will appear on your credit report for 10 years, while a chapter 13 filing will show for up to 7 years.

Bankruptcy protection is not a free ride – your filing might not be successful, and a chapter 7 discharge is hard to get since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced provisions that push you into a chapter 13 filing.

So, it is better to use the mandatory credit counseling you have to take for a bankruptcy filing and the fresh start you get from a discharge to build a better financial future.

Before filing for Chapter 7 bankruptcy

you must be fully aware of the options offered by this. Chapter 7 offers several advantages and also some disadvantages. So, you need to choose wisely whether Chapter 7 is the best solution for you.

Chapter 7 bankruptcy

is for individual person and this can be the last hope for those who are heavily debt and have no way without applying for bankruptcy.

Chapter 7 bankruptcy is entitled as Liquidation. Those who are at minus position Chapter 7 is for them. Using Chapter 7 they can get back to their life. This will eliminate all your debts. But the downside is that you will lose position of your entire asset. So it is best suitable for them who want a fresh start of their life. This will give you the chance to move forward without any burden of debt.

If you file for Chapter 7 bankruptcy, the bankruptcy trustee will sell your assets and distribute them to the creditors. That’s why it has been named as liquidation. The debtor may still retain some exempt property. Those who have huge assets should not file Chapter 7 as the court will confiscate their entire assets. The court will discharge such property and the creditor can no longer claim for them. Each state determines the list of exempt property and you can check for what you are allowed to keep in your state. On the other hand all the debts are not discharged under Chapter 7 bankruptcy. Debts like student loans, child support are not discharged and the debtor must pay them. This will also make a huge blow to your credit. But this could be the best choice as you can totally debt free and can give a fresh start to your life.

All the debtors can not apply for Chapter 7 bankruptcy. A debtor needs to take means test to determine whether he is eligible to file under Chapter 7. Under new rules the most important factor that determines ones credibility of filing under Chapter 7 is the gross income. Every state determines a threshold income and the debtor’s income must be less than that in order to qualify for Chapter 7 bankruptcy. chapter 7 bankruptcy

After you have filed Chapter 7 bankruptcy you need to start establishing your credit. Your credit will go to zero. So, you need to start chapter 7 bankruptcy work immediately after you have cleared all your bad debt. If you give enough consideration of chapter 7 bankruptcy you can qualify for credits in relatively short time.

Going through bankruptcy is a tedious and very disturbing process. It involves a lot of work, more than what you’ve previously imagined and it can have a lasting effect on your life and even your relationships. That is why it is important to make sure that when you actually file for bankruptcy, it is your ONLY remaining option. Based on Erica Sandberg’s 7-point checklist, here are a few tips to help you decide.

1. File for bankruptcy, only if you are NOT capable of paying for your debts. You cannot file for bankruptcy if you just want to escape from your liabilities. It does not work that way. And when the court finds out that you have been deceitful, especially in declaring your remaining assets, you will lose the protection offered by bankruptcy and you still end-up losing your properties.
2. If most of your debts are unsecured, bankruptcy is a good option. There is such a thing as “secured” debts wherein creditors are secured. Secured debts have collateral such as your car, you house or some other property, which the creditor can seize if you are not able to pay. Those kinds of debts are not cleared by filing for bankruptcy. If most of your debts are secured, there’s no point filing, as these are not covered by bankruptcy.ⁱⁱ Unsecured debts include credit card and medical bills, among others.
3. You have no better options. Before you file for bankruptcy, you are required to attend credit counseling. During which a counselor will discuss other options with you. These counselors are also able to contact companies and convince them to lower their interest rates and offer debt management plans that DO help you get out of debt.
4. You understand the consequences and you know that this will be better than if you do not file for bankruptcy. In bankruptcy, you have to go through many difficulties before you are finally FREE from your debts. It is a tough process where you need to deal with many papers and even when you are bankrupt, you are still required to pay for some fees: service fee for a lawyer, Debtor Education Courses, among others. You have to prepare yourself to face those kinds of stress and be sure that you will be able to handle them.

Remember that these are mere suggestions. There are professionals that can help you with your decision. The credit counselor can offer you the best help in finally deciding on whether to file for bankruptcy. What you need to remember is that when you are in deep debt. Bankruptcy is not your only option. You actually have other options that you need to explore. I understand that falling into deep debt or even facing lawsuits are very serious matters. But be careful not to jump into thoughtless decisions. Do not get too agitated in immediately deciding to file for bankruptcy when you have not even tried to find solutions. Bankruptcy is not easy. It takes an enormous amount of time and effort. If you don’t have to go through that kind of pressure, then DON’T.

Debtor Education Course

Filing bankruptcy?  If you are ready to take your 2nd bankruptcy course which is required by the federal law then AAA Bankruptcy Education can help. For $14.95 you will get your pre discharge bankruptcy certificate by email and can submit to the trustee for discharge of your bankruptcy.