Can Bankruptcy Help Improve Your Credit Score?

August 9, 2016

Bankruptcy is rarely a positive credit event.  However, it is important to understand that in certain circumstances, filing for bankruptcy can actually help to improve an already damaged credit score within a relatively short amount of time.  In some cases, it is much easier to improve your credit score after filing a bankruptcy than it would be to try to improve the score without the bankruptcy.  In order to understand the relationship between your credit score and the effect of bankruptcy, it is important to understand some of the basic aspects of how your credit score is determined.

Debt

Multiple factors go into calculating a credit score.  These factors include payment history, debt to income ratio, amount of credit used, and the type of debt incurred. The following is a brief description of these categories in order to help explain why they are important when establishing your score.

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910 Rule

July 19, 2016

If your vehicle is worth less than you owe, or you are paying excessive interest, cramming down a car loan in Chapter 13 bankruptcy can reduce your balance and cut your payment. Only Chapter 13 debtors receive the benefit of “cramming down” their car loan.

Keys

Bad car loans can be devastating financially, and all too often they are a major factor in a debtor filing for bankruptcy. However, it is not only debtors with bad car loans who benefit from Chapter 13 cram downs. Unexpected depreciation of a vehicle’s value and high interest rates will quickly place almost anyone underwater on a car loan.

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Dischargeable Income Taxes in Bankruptcy

July 8, 2016

It is frequently assumed that any back federal, state, and local income taxes you may owe are not dischargeable when you file for bankruptcy; this however is far from the truth. When filing for bankruptcy some, if not all, back income taxes may be dischargeable. Below we have simplified the requirements that must be satisfied in order to discharge your back income taxes.

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In order for your back income taxes to be dischargeable, all aspects of the 3/2/240 rule must be met.  The 3/2/240 rule states that your back income taxes must have been due more than three years before filing for bankruptcy, you must have filed your tax return two years or more prior to filing bankruptcy, and your back income taxes must have been evaluated at least 240 days before filing for bankruptcy. In order to understand this rule in greater detail, we have broken down each requirement further.

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Bankruptcy and Divorce

June 23, 2016

 

HandFiling for divorce is never an easy decision; couple that with financial trouble and the circumstances can become even more daunting. It can be confusing deciding between filing for bankruptcy before or after your divorce. Below are some key factors to keep in mind when considering the right time for you to file for bankruptcy. 

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6 More Bankruptcy Myths

June 9, 2016

1. There is a minimum amount of debt required to file for bankruptcy

  • Bankruptcy laws have not set any minimums on the amount of debt needed in order to qualify for bankruptcy. If your debt is beyond your ability to pay, you can opt to file for bankruptcy, however, if your debt exceeds certain amounts, you may  be required to file a certain type of bankruptcy.

2. You will not be able to file for bankruptcy if you work a “good paying” job

  • Just like there are no limits on the minimum debt required to file for bankruptcy there are also no income limits on who can file for bankruptcy. The amount of money you have left over to pay your creditors after subtracting allowable expenses does determine the type of bankruptcy you can file. This is referred to as disposable income.

3. If you are married both spouses must file for bankruptcy

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7 Bankruptcy Myths

June 6, 2016

1. It is extremely difficult to file for bankruptcy

  • Under the changes in the law it can be extremely difficult to file for bankruptcy on your own. There are many new requirements that did not exist prior to 2005. However having an experienced bankruptcy attorney on your side will help you navigate the process, and alleviate any confusion or stress you may have.

2. Everyone will know you’ve filed for bankruptcy

  • Unless you are a large corporation and the filing is covered by the media chances are extremely good that the only your creditors will be made aware of your filing.

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