Bankruptcy FAQ

Will I lose my retirement accounts or payments from social security?
Usually when retirement accounts are not considered property of an estate and aren’t taken into consideration as assets you should not lose them. Any pensions that become “interest” to the Trustee will be paid to the Court even if the payment upon retirement is after the discharge is ordered. Social Security benefits are protected from assignment or compensating for debts. These benefits cannot be used to pay for the debts owed in a bankruptcy. If you have set up an account specifically for depositing social security payments and your deposits and the paid amount are the same, the benefits are certain and would be protected.

Will I lose my home if I file a bankruptcy?
In some cases the home is sold to pay creditors money owed. In this type of situation you are given time to make other living arrangements. In other situations you are able to remain in your home but during the course of your bankruptcy the “beneficial interest” in the property is transferred to the Trustee. Your husband, wife, partner, a relative or friend may be able to buy your beneficial interest in the home. This will stop the Official Receiver or trustee from selling your home later. Some factors may impact your ability to keep your home, for example filing a Chapter 13 may offer more protection in saving your home.

How long does a bankruptcy stay on my record?
Bankruptcy can be seen on your record for up to ten years, but not in all cases. Sometimes you can work on your credit even with the bankruptcy on your record. There are secured lines of credit that will allow you to start improving your credit and eventually you will better your credit rating and it won’t matter that your bankruptcy shows on the report because you have proven to lenders that you are able to maintain a line of credit.
Can I do anything to remove a bankruptcy from my credit?
No. You may file an explanation with the credit reporting agencies to briefly describe the events resulting in your bankruptcy. If an account is reported inaccurately, you can request the record be updated to reflect the actual situation. You will need to send proof with your request. You may apply for a reversal or annulment of the bankruptcy if it was wrongfully filed. There are requirements for this but an example of use would be if a creditor filed bankruptcy against you for debts that you are not responsible for.

When can I apply for credit again?
You can apply for credit under strict supervision by the Trustee in some cases before you are even discharged. But, normally it is suggested that you wait until you are discharged and financially stable before you apply for credit. There are many reasons for this the main one being that you do not want to have to file for bankruptcy again. The process of applying for credit during your bankruptcy term would involve disclosing your status and large amounts of paperwork to both the Court and the creditor. You will need to be patient and really work hard to re-establish credit. It will take some time.

Can a “credit repair” company really save me from bankruptcy?
Yes, in some cases a credit repair company can save you from the need to file bankruptcy. If you can make a structured plan and execute payments through this service you may indeed be able to overcome your financial struggle. In some cases the debt can be negotiated and a percentage of it may even be written off by the creditor. The creditors are normally willing to work with you because they would rather be paid a portion of the debt owed than take the chance of losing it all if you were to file for bankruptcy. There are always pros and cons to any of the options available for debt relief. You will have to way out the options and make that decision. A credit repair company will have fees and costs involved and will most likely have their own set of guidelines that you will have to follow. They can usually set up one loan payment with a fixed interest rate. So this can save you money you would have spent in interest over the term of your original agreements. This too could take a couple of years to pay down but if you are patient and make the payments you will achieve your goal of financial freedom. These programs may still be viewed badly by creditors when you apply for new credit. They sometimes view the use of credit repair companies the same as filing bankruptcy. Always check the credibility of the company you choose to work with. There are a lot of services available to give you advice but be safe because there are scams out there that can hurt you.

If I take help of a Credit Counselor, would it be sensible than I go bankrupt?
Yes. These days, there are several banks that offer "secured" credit cards. A debtor can put up a certain amount of money in a bank account to guarantee payment. Generally, the debtor is allowed a credit limit which is equal to the deposited security. The credit limit is increased when a debtor manages to proves his or her debt paying capability. After two years of bankruptcy discharge, a debtor becomes eligible for mortgage loans. And you enjoy the same privilege on loan terms that others enjoy who haven’t filed bankruptcy.

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