Chapter 13 Bankruptcy and Your Credit Score

One common bankruptcy question is whether going through the process will negatively affect your credit score or not.  If you are filing for bankruptcy because you have been struggling with debt for some time, then your credit score is probably not going to change too much do to filing.  However, if you are filing for bankruptcy and you do have a high credit score, the score may take a small dive due to filing.  

During a Chapter 13 you are generally not allowed to take on any new credit, but once your case is discharged, you are able to start regaining your credit score, though you may have to pay a higher interest than usual for the first few years. After the discharge, you will be able to get your credit score back up to where it was.

For more information on how Chapter 13 Bankruptcy can affect your credit score, please contact your local bankruptcy attorney.

Bankruptcy Timeline

                When is the best time to file for bankruptcy?  After a consultation, most attorneys allow for their clients to wait to file until they can pay the filing fee, which can be paid in installments.  Though some clients may want to file right away to stop foreclosures or make debts go away sooner, there is an advantage to the time given to the clients between the consultation and actually filing. 

                The gap between deciding to go forth with the bankruptcy and filing with the court allows for the client to have the time they need to both make the filing payments and to gather all the documents necessary to proceed with the bankruptcy.  This time gap also allows for the client and attorney to work through all of the questions that the trustee or judge may have for the client once the bankruptcy goes through.  

                For more questions regarding the timeline of filing for bankruptcy, please contact your local bankruptcy attorney.

Bankruptcy And Retirement

Is my retirement fund protected?  Most of the time, yes, your retirement funds are protected. However, there are a few exceptions. Such as, if part of your retirement plan is having funds from the account being paid to you as income, then the courts view it as regular income and it may be subject to assist with payments toward the creditors you owe. 

IRA and Roth IRA accounts are mostly exempt from the bankruptcy, as well.  The amount within the retirement funds that will remain untouched by the bankruptcy is limited to $1,362,800 per person. This amount is for all retirement plans combined, not per plan/account.  The excess can be taken to pay back your creditors to get you out of your bankruptcy sooner.  Though these limitations do exist, they are not common, and vary by state. They also depend on which chapter of bankruptcy you file under, and most of the time retirement funds are exempt from creditors. 

For more information about how bankruptcy can affect your retirement, contact your local bankruptcy attorney.           

Bankruptcy: Do I Qualify?

Qualifying for bankruptcy is not as complicated as one may think.  In order to know whether a person qualifies or not, the attorney will gather a client’s information, such as bank statements, pay stubs, and bills, then use the information gathered to calculate a Means Test.  If you pass the test, then you qualify for bankruptcy. 

So what does the Means Test entail?  For a Chapter 7 Bankruptcy, the means test compares a client’s average income for a six-month period preceding your bankruptcy against the average income of a similar household in your state.  If your income is below the median, you qualify for a Chapter 7 Bankruptcy.