Bankruptcy Reader

By Priya Jestin, Staff Writer

Obtaining credit after bankruptcy seems to be a big worry with most people who decide to file for bankruptcy. Some people even want to retain their original credit cards after bankruptcy. While the wisdom of this decision is in question, it is something that can definitely be done. Once all your credit cards are listed on the Bankruptcy Petition, you can usually reaffirm a couple of your cards. All you need to do is agree to repay the amount that you owed to that particular creditor.

However, this is not the only and definitely not the best option to obtain credit. Quite a few banks offer secured credit cards nowadays. With a secured card, your credit limit is based on the amount of money you hold in the bank offering the card.

Moreover, you may be surprised to know that once you’ve filed for bankruptcy, creditors will queue up for your account. There are three reasons for this enthusiasm:

• First all of your dischargeable debts get wiped away with bankruptcy,
• Secondly, you now have more disposable income to pay the new debts.
• Finally, once you’ve filed for bankruptcy, you cannot do so again for at least another six years. This means you cannot wipe out your creditors’ debts during this period.

I don’t know how many of you watch Oprah (Winfrey), but I am a regular. I cannot do without my daily dose of Oprah and when I’m forced to miss her program, I ensure I have it taped. I’m sure there are quite a few of you who think you’ve clicked into an Oprah fan’s blog. Well, don’t worry, this is the credit card blog and yes we are still discussing credit cards and not Oprah’s hairstyle or clothes or where she’s off to next. So, let be get back to where I was: I was watching some of my taped programs and I found one of Oprah interviewing Maria Shriver (Arnold Schwarznegger’s wife). She was talking about how she managed her two daughters and how she refused to give in to all their demands.

One of the demands was that the girls wanted their own phone lines and that they wanted television sets in their own rooms. Well, not too much to ask for a teen, right? Well, so the fact that Maria refused was interesting. It seems she didn’t want the children to all be in their own rooms watching their own programs and not talking to each other. And the phone line, well she wanted to keep a watchful eye on her teens.

Whatever her reason, it got me thinking — there are so many of us who take these things for granted. I mean, things like a second phone line was something I took for granted. What we don’t realize is that it’s these small things that add up to create a huge debt. That extra TV, those lovely pairs and pairs of shoes to match every dress, every mood, those clothes… the list is endless. If a person like Maria, who could have everything money could buy, refuses to toe the line, we too can. A little self-control, a little restraint and we would be happier people. As Oprah said later in the show, the things you own don’t make you happy, it’s the relationships you maintain.

Did you know that a Chapter 13 bankruptcy is also called a wage earner’s plan? That’s because it allows individuals with regular income to develop a plan to repay all or part of their debts. Uscourts.gov reports:

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time.

Read more: Bankruptcy Basics

Personal finance is something not all of us are comfortable with. Most Americans are a pampered lot and are very used to the easy and unlimited access to credit. So asking an American to control his/ her expenditure is like asking a toddler to give away his only Popsicle. That’s just not possible you see. I know that wasn’t too funny or fair. But let’s be honest — how many of us have seriously budgeted our income and expenditure and provided for some savings? Why the silence?

So you see, I wasn’t too far from the truth after all. Anyways, since personal finance is such a tedious chore, things tend to snowball out of control. When you are in college, you think you’ll take that student loan, and then once you have a job, you’ll get your finances on track. Then you get married and then come the children… all along, your finances are waiting for you to straighten out the mess. And by the time we get down to checking and budgeting, we realize we are too far-gone and probably our only option is to declare bankruptcy. This way, we can at least save the roof over our heads. But it need not be that way.

According to finance writer Jane Bryant Quinn, the best way to keep your finances under control is — Keep it simple and automate if possible. This includes using services such as online banking and putting in place an automatic savings plan for your retirement. Ensure that you buy financial products directly from companies whenever possible and try to avoid brokers or planners.

Is your former spouse’s financial misdemeanors haunting you? This is a familiar story: One of the spouses makes a mess of the finances and then the family is forced to go into personal bankruptcy to save assets like their home. Now if you are divorced and you have the house, then you are probably paying the mortgage on the home. But if you don’t yet have the house in your name, and the bankruptcy prevents you from taking another loan, you may be in a bit of a soup. So how do you ensure that the house for which you are paying will indeed be yours at a later date?
If your ex-spouse still has the title to the property, then you should get a quit claim deed from him/her. This will show that s/he has relinquished all ownership right to the property to you.

However if s/he refuses to give you a quit claim deed until the time at which you’re able to refinance, you may probably have to wait until such a time. Then, you can have him/ her execute the quit claim deed at the closing on your mortgage. These things can happen simultaneously.

Did you hear about the guy who got into jail for declaring bankruptcy? I can bet my last dollar you didn’t. So here’s his story: He (you can call him whatever you wish — Jack for instance) was badly off, his debts were huge and bankruptcy was probably the only way out for him. So what does Jack do? He goes right out and meets his attorney.

All fine up to now. But here’s where the problem begins. Jack decided to play smart and hid some information from his attorney. Well, he didn’t want to lose all his assets. But what happens then? The attorney advised Jack based upon information provided by him. But how long can you live a lie? There was a lot of legalese that followed, and I really don’t think you are interested in all of it. Suffice to say, Jack not only lost the assets he tried to protect, his bankruptcy case was denied, he had to pay fines, AND, he got to go to JAIL. Great isn’t it??

Why am I telling you this: Just so you don’t go out there and make a Jack (Ass) out of yourself.

I’ve been speaking on and off about the many myths that abound with regards to bankruptcy. Bankruptcy has a pretty bad reputation because of these baseless myths and you will realize that it is not so bad after all. I will deal with one myth today: that if you are married, both spouses have to file for bankruptcy.

This is not at all necessary. Sometimes it may so happen that only one spouse has a significant amount of debt in his/ her name. However if you have debts that you want to discharge and are both liable for, it is better that you file together. In such a case, if one of you doesn’t file, then a creditor could demand payment for the entire amount from the spouse who didn’t file.

Anybody who wants to have a home of his/her own knows the importance of maintaining a good credit score. For this you need to pay your bills on time, have a low debt to income ratio, etc. I know all this is easier said than done and bankruptcy is not something you will on yourself. A huge combination of factors is responsible for a person going bankrupt.

But can you give up the dream of a home just because you’ve gone bankrupt? So, if you’ve filed for bankruptcy, how does it affect your chances of getting a reasonable mortgage loan? There are several lenders who are eager to offer home mortgages to individuals with bad credit. These mortgages have a higher interest rate, which increases the monthly payment. Another question that needs answering is how long should you wait before you can buy a home? Hotlib.com reports:

Obtaining a home after filing for bankruptcy is feasible; nonetheless, individuals who have filed must adhere to specific stipulations. To obtain a mortgage after filing a chapter 7 or chapter 13, you must wait at least two years after the bankruptcy is discharged.

Read more: Buying A Home After Bankruptcy - How Long Should You Wait To Buy?

Bankruptcy is a pretty painful proposition. You have to wipe your board clean and start all over again. Of course if you are in dire financial straits, then it is probably the best decision you could make. But that is when you think with your mind. But does your heart feel okay with it? If you are like most others, you will feel the pain long after you’ve left the whole business behind you.

Bankruptcy creates an emotional upheaval in your life and forces you out of your world of make belief. Yes you are a middle class, upwardly mobile person who has nothing to fear. And yet, all it takes are a few wrong decisions to set you on a path that exhausts you emotionally and drains you mentally. Dailymail.co.uk reports:

By going bankrupt, people are freed of their debts but lose all control over their own finances. To repay creditors, all of their bank accounts can be emptied and their assets sold. We were totally unprepared. I had no idea what happens during a bankruptcy, but it seemed as if, overnight, our lives changed completely. Here is the story of one such woman. You may find that it echoes with yours or someone you know.

Read more:Bankruptcy cost me my marriage

Bad financial planning combined with an unexpected emergency — this is just the right recipe for a person to swirl down the debt abyss. Here’s a story that may sound distinctly familiar… it just may be your story! I know once you are down and out in debt, people love to tell you about what you did wrong. Yes, bankruptcy is painful and pretty depressing. But it is a reality, one that is not going away.

But do be honest with yourself — isn’t it better to file for bankruptcy than lie to your creditors? So, if you are in debt, have tried your best to work your way out of it, and still cannot seem to find the end of the tunnel, don’t hesitate to give up. I mean you don’t have to flog yourself when the government has made this provision for you.