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Houston Bankruptcy Blog

How to repair credit properly after a bankruptcy

Filing for bankruptcy could be an effective way to help a Texas resident get control over their finances. However, it can also have an impact on a person's credit score. While it is possible to repair a credit score, the only way to do so is by spending time making payments and taking other steps to overcome past mistakes.

Those who choose to work with a credit repair company may be told about something called file segregation. It involves creating a brand new identity. This strategy is purported to make it easier to rebuild credit instantly. However, the truth is that it could result in prison time. This is because taking steps such as signing up for an employer identification number (EIN) is considered to be fraud if an individual isn't planning on starting a business.

FDCPA grants debtors rights when contacted by collectors

Although Texas consumers who are falling behind on payments might feel powerless when confronted by debt collection agencies, the Fair Debt Collection Practices Act places limits on the behavior of these companies. This federal law establishes that collectors cannot act in an abusive manner toward people.

Most sources of debt fall under the protection of the act, including mortgages, auto loans, credit cards, and medical bills. The law does not apply to actions that original creditors might take to contact people who have failed to pay, but third-party collection agencies must adhere to the terms of the FDCPA. Debt buyers and attorneys also fall under the purview of the law.

Chapter 7 bankruptcy's impact on medical debt

Chapter 7 is, by far, the most common type of bankruptcy individuals file for. According to data, 794,960 total bankruptcy filings took place between January 1st, 2016 and December 31st, 2016. Out of all those filings, 490,365 were Chapter 7. 

Chapter 7 bankruptcy comes with numerous benefits to people who need to get out from under debt. Before deciding which bankruptcy to file for, you need to look at your debts and determine which one will help you the most. In the event you have a ton of medical debt you will be unable to pay off during your lifetime, then Chapter 7 bankruptcy can assist you. 

When a creditor violates an automatic stay

In most cases, Texas consumers who file for bankruptcy receive immediate protection from creditors trying to collect debts. Usually, courts issue an automatic stay when a bankruptcy case is filed. This court order prevents collection actions while the bankruptcy case is in progress. Bankruptcy law holds creditors accountable if they willfully violate the stay.

During the first one or two weeks after filing a case, creditors might continue to contact debtors simply by mistake. These communications generally represent innocent errors by entities that were not aware of the bankruptcy filing. A week might pass before court notices reach creditors in the mail. When debtors receive calls from creditors during this early phase of the bankruptcy, they should provide their court case numbers and inform them about the automatic stay. People also have the right to inform creditors directly as soon as they receive their automatic stays. This move could be especially important when repossession or foreclosure threatens someone's property.

Understanding whether Chapter 7 is the right choice

When people in Houston struggle with excessive amounts of personal debt, they may turn to bankruptcy to find a new path to financial freedom. There are several factors that can help people determine whether filing for a Chapter 7 bankruptcy is the best option for their situation or if they should consider Chapter 13 or another approach.

People should look at their situation to help make their decisions about filing for Chapter 7 bankruptcy. In the first place, they should work to make sure that they will eliminate enough debt to make the choice worthwhile; for example, student loan debt is generally ineligible for discharge. They should also check to see whether they are at risk for wage garnishment or repossession if they do not file for bankruptcy.

Qualifying for Chapter 13 bankruptcy

Filing for bankruptcy isn't an easy decision for anyone in Texas considering this option to manage debt. Once it's decided to explore options with Chapter 13, many people have questions about the details associated with this approach to bankruptcy. With income, there is no limit for filing, nor is there a limit to how much debt someone can have. However, there are limits with secured and unsecured debt: $394,725 and $1,184,200, respectively.

It doesn't matter where someone's income comes from when filing for Chapter 13 bankruptcy as long as there is an honest desire to make arrangements to pay down debt; income sources will need to be disclosed within two weeks of filing. Debtors are also required to provide proof that they filed their state and federal income taxes for the past four years. Failure to do so could result in a delay or dismissal.

About Chapter 7

Bankruptcy may be an option for Texas residents who have significant debt that they are unable to pay. One type of bankruptcy, Chapter 7, is the most frequently filed bankruptcy.

Chapter 7 bankruptcy is known as a liquidation bankruptcy because it uses the proceeds from the sale of secured property to pay back creditors. Compared to a Chapter 13 bankruptcy, which takes three to five years to complete, a Chapter 7 bankruptcy can be discharged in just three to six months. For people who may be in need of a new vehicle, the majority of lenders or banks will not sell or lease a vehicle to Chapter 7 filers until after their bankruptcy has been discharged.

Benefit your business with a chapter 7 bankruptcy

Though once a taboo topic, bankruptcy is now receiving recognition as the tool that it is meant to be. In many cases, it can aid people in gaining the fresh financial start they need.

In particular, a Chapter 7 bankruptcy can be helpful for entrepreneurs. For those considering this option, there are a few important factors to be aware of in order to gain the full benefit of the bankruptcy process.

Debt impacts every age group

The acceptance of debt as commonplace in everyday life seems to be a new reality for many Texas residents. According to recent studies, individual debt continues to rise among nearly every age group in the country. An analysis of what kind of debt and how much debt is being acquired by different age groups paints a revealing picture.

Some financial experts have claimed that not all types of debt are equal. While it may be a stretch to categorize any debt as "good," there are without doubt better reasons to acquire certain debts than others. Mortgage debt, for instance, is often quite acceptable for most property owners. In addition, student loans can be the pathway to a higher paying career but often come with a steep price. However, student loans also comprise the largest single category of debt in the country, recently passing mortgage debt for No. 1 on the list.

Bankruptcy and car loans

Many car owners in Texas face auto repossession when they fall behind on payments. Some consider filing a Chapter 13 bankruptcy to stop a lender from repossessing their vehicle. Before filing for bankruptcy, however, there are several other options to consider.

In many cases, lenders are willing to work with a person who is behind on their loan to avoid the costs of repossession. It may be possible to request a deferment or a change in a payment due date. Loan modification may be an option for debtors who are in good standing with their lender.