Debt Settlement Process

1. Stopping Creditor Harassment

- By law, once the collectors know you’re represented by an attorney, they may no longer continue to contact you directly.

- From the outset, we send letters to your creditors informing them we represent you and to direct any communication to us only.

2. Validating the Debt

- Having your debt validated lets you know who you are dealing with and how much you owe.  Debt validation is a crucial step because it may halt the collection process if the collector is unable to obtain verification on your debt. However, in most cases adequate verification is obtained and the collection process continues.

- Once the amount of your debt has been validated, we will analyze any defenses you may have and begin the process of negotiating a large reduction in the debt.

3. Negotiating the Debt

- After your attorney has helped you determine an amount you can afford to pay, they will begin negotiation with your creditors. During the negotiations, which can take anywhere from 6 months to 36 months, depending on the amount of debt and creditors you owe, you will have time to save up money to use towards settlement.

- In many circumstances, it is in your creditor’s best interest to negotiate your debt down. This is because when you declare bankruptcy (if you qualify) your unsecured debt is usually discharged, leaving the creditors with nothing. By negotiating a lower settlement amount, the creditor is able to recover at least some part of their investment in your loan.

4. Settling the Debt

- At the beginning of the settlement process, we will work with you to establish a savings plan based on your ability to pay. As mentioned above, you will have time during the negotiations to save up for a settlement.

- Unlike debt management plans where you make a monthly payment that is disbursed to your creditors, in a debt settlement your money is deposited into an account to be accumulated until the negotiated amount is reached and your creditors receive a lump sum settlement.

I am currently in a Chapter 7 bankruptcy

Q. My bankruptcy case has been filed. Now what can I expect?

A. There are two things that you will have to do after the bankruptcy case is filed in order to receive a discharge of your debts. One of the things that you have to do is attend a hearing in front of an attorney that works for the Bankruptcy Court called a Trustee. This meeting is called a “Meeting of Creditors” or a “Section 341 Meeting”. This meeting is scheduled by the court about six weeks after your case is filed. You will need to bring your valid Social Security card and Driver’s License to the Section 341 meeting. The meeting takes approximately five minutes and you will be questioned to ensure you were truthful on everything we submitted to the court.

The other thing you will have to do after filing is complete the Debtor Education Course, also known as a Financial Management Course, which will give you fundamental financial knowledge that will help you make the most of the fresh start that you receive from bankruptcy. The class must be completed no later than 45 days after your first scheduled Meeting of Creditors. After you have attended your Section 341 Meeting and completed the Debtor Education Course, you can expect your Discharge Order in the mail, within two months, from the Bankruptcy Court stating that your case is over and the debts have been forgiven.

Q. Are there any restrictions while I’m in the bankruptcy?

A. You cannot use or obtain credit while you’re in the bankruptcy and you cannot sell or transfer property without the court’s written permission while you’re in the bankruptcy. Also, you must notify your attorney if you receive or become entitled to a lump sum of money, such as an inheritance or lottery winnings.

Q. I am giving up my house in my bankruptcy. How long until I have to move out?

A. Now that you are in bankruptcy, your mortgage company will have to ask the bankruptcy court for permission to continue with foreclosure or a Sheriff’s Sale. Usually this extra step adds about one month onto the usual six to eight months that it takes from the date that a mortgage company starts foreclosure proceedings until the former owner has to move out. This can vary depending on the situation. Be aware that until a Sheriff’s Sale is completed, you are still responsible for basic maintenance on the property such as grass cutting and snow removal.

Q. I am no longer receiving statements for my mortgage and/or car loan and/or I can no longer pay online. Why is this?

A.  Federal law prohibits your creditors from trying to collect money from you once you enter into a bankruptcy. Even though you intend on keeping your house and/or car and continuing to pay for it, some lenders stop sending statements and restrict the ways that you are able to make a payment in order to protect themselves from being accused of trying to collect a debt. If you contact the mortgage or car loan companies once the bankruptcy is over, they will sometimes agree to resume sending you statements or taking the money directly out of your bank account. Sometimes they do not, so remember to make the payments timely every month.

Q. I forgot to include a creditor on my bankruptcy. Is it too late to add the creditor?

A. As long as the debt was incurred before your case is filed, it can be added into the bankruptcy. Call your attorney to let him or her know that a creditor needs to be added as soon as you discover the oversight.

Q. How long until my case is over?

A. The average Chapter 7 bankruptcy case lasts four to six months. You will know that your case is over whenever you get your Discharge Order in the mail from the Court stating that your case is closed and your debts are discharged. The average Chapter 13 case ranges from thirty to sixty months, plus the time it takes for the Court to administratively close the case.

Q. Which debts will the bankruptcy not get rid of?

A. You are still responsible for mortgage payments or rent (if you are keeping the home), car payments (if you are keeping the car), utility bills that you incur after the case is filed, all student loans, taxes (unless you were specifically told by your attorney that these would be discharged), court fines, all obligations under a Family Court Order and criminal restitution.

Q. How long will the bankruptcy show on my credit report?

A. Chapter 7 bankruptcy will show on your credit report for ten years from the date that your case was filed. A Chapter 13 bankruptcy will show on your credit report for seven to ten years from the date that your case was filed. However, you can begin to rebuild your credit as soon as your case is over.

Q. There is a debt showing up on my credit report that should have been discharged in the bankruptcy. What should I do?

A. You can contact the creditor in question or go through the credit reporting agency’s dispute resolution process.

Q. Can I ever file for bankruptcy again?

A. If you filed for a Chapter 7 bankruptcy previously, you must wait eight years from the filing date of the bankruptcy in order to file another Chapter 7 bankruptcy. If eight years has not elapsed, a Chapter 13 bankruptcy may be a good option for you. If you previously filed a Chapter 13 bankruptcy, there is no restriction as to when you can file another bankruptcy.

Q. Will filing for bankruptcy affect my ability to co-sign on my child’s student loans?

A. There is a provision of the Bankruptcy Code that makes it illegal for student loan providers to discriminate against you due to the fact that you’ve filed for bankruptcy. However, the student loan provider must still qualify you based on their own criteria. You must obtain the Court’s written permission if you wish to obtain or co-sign a student loan. The Court will generally grant that permission.

Q. Will I be able to rebuild my credit after my case is over?

A. The answer is a resounding “Yes” according to our past clients with whom we have been in contact with. It still requires some work on your part.  It is not a bad idea to get a small credit card that you use a little bit each month and then pay off the balance before the month is over and you accrue any interest charges. The goal is to show consistent payments without carrying balances.

I am currently in a Chapter 13 bankruptcy

Q. My bankruptcy case has been filed. Now what can I expect?

A. Now that your bankruptcy has been filed, your creditors are no longer allowed to try to collect any debts from you. Your first payment to the Bankruptcy Court is due one month after your case is filed. Your attorney and paralegal should have discussed with you how those payments are to be made. You will have to attend a Meeting of Creditors about a month and a half to two months after your case is filed. This is a hearing that occurs in front of an attorney that works for the Bankruptcy Court. You will need to bring your valid social security card and driver’s license or Passport with you along with proof that your first Chapter 13 Plan payment has been made. The purpose of this meeting is to make sure that you were truthful on everything you submitted to the bankruptcy court and that your bankruptcy plan is adequate to pay all of your creditors that must be paid. Your creditors will have until about six months after your case is filed in order to submit what is called a “proof of claim” to the court. The proof of claim states the amount that you owed to the creditor as of the date the case was filed. An additional meeting, called a Conciliation Conference, will be held on your case about three months after the Meeting of Creditors. You do not have to attend this meeting. An attorney from the Beacon Law Firm will attend the meeting for you. The purpose of this meeting is to make sure that the numbers that we submitted to the court are similar to those submitted by your creditors and to make sure that you are still on track to pay everyone that must be paid. As long as everything goes well at this meeting, the only thing left for you to do is keep making your payments to the Bankruptcy Court and let your attorney know if your situation changes.

Q. Are there any restrictions while I’m in the bankruptcy?

A. You cannot use or obtain credit while you’re in the bankruptcy and you cannot sell or transfer property while you’re in the bankruptcy unless you get Court’s written approval first. If you have any questions, contact your attorney. Also, you must contact your attorney if you have any large decreases in income, large increases in expenses or come into a large amount of money.

Q. What bills am I responsible for paying on my own during the bankruptcy?

A. This can vary slightly from case to case, but a general list of bills you will still be responsible for includes: rent, utilities, insurances, current medical bills and taxes that are not deducted from your pay or escrowed into your mortgage.

Q. Will anything change with the way that I file my tax returns?

A. No. There are no additional forms that need to be filled out and in virtually all cases you will get to keep your tax refund.

Q. I am giving up my house in the bankruptcy. How long until I have to move out?

A. Now that you are in bankruptcy, your mortgage company will have to ask the bankruptcy court for permission to continue with foreclosure or a sheriff’s sale. Usually this extra step adds about a month onto the usual six to eight months that it takes from the date that a mortgage company starts foreclosure proceedings until the former owner has to move out. Be aware that your are responsible for basic maintenance on the property, such as grass cutting and snow removal, until the house is sold at sheriff’s sale.

Q. I forgot to include a creditor on my bankruptcy. Is it too late to add something?

A. As long as the debt was incurred before your case is filed, it can be added into the bankruptcy. Call your attorney to let him or her know that a creditor needs to be added as soon as you discover the oversight.

Q. My wage attachment doesn’t seem to add up correctly. Is there something wrong?

A. If you feel that your wage attachment is not correctly computed, it is very likely that you get paid every two weeks. You must remember that getting paid bi-weekly will result in you getting 26 pays over the course of a year. Two months out of the year you will get an extra pay. That pay is also attached. In order to figure out how much should come out of each pay, we calculate how much has to be paid into the plan over the course of a year (monthly plan payment x 12) and then divide that number by the number of pay checks you will receive in a year.

Q. Is there any way I can keep track of what is happening to the money I send to the Trustee?

A. The trustee will send out a report once a year showing how the money has been distributed. That report might be difficult to interpret.

Q. I can’t afford my Chapter 13 payments anymore. Is there something that can be done?

A. In some cases, if your income has gone down or your expenses have gone up from the date your case was filed, your payment can be reduced. You must contact your attorney to discuss any Chapter 13 Plan payment changes.

Q. Will filing for bankruptcy affect my ability to co-sign for my child’s student loans?

A. You cannot obtain financing during your bankruptcy, including co-signing for a student loan, unless you get court approval first. It is best if a family member or close friend can co-sign for the student loan while you are in the bankruptcy. If that is not possible, contact your attorney regarding court approval for you to be a co-signer. Once the bankruptcy is over, you can obtain a loan without court approval. There is a provision of the Bankruptcy Code that makes it illegal for student loan companies to discriminate against you due to the fact that you’ve filed for bankruptcy. However, the student loan company must still qualify you based on their own criteria.

Situations that may arise that will require you contact your attorney include, but are not limited to:

• You have had a significant decrease in income to the point that it is affecting your ability to make your plan payments.
• You have had an increase in living expenses.
• You are the recipient of an inheritance, lottery winning or other large sum of money.
• You have retained another attorney for any reason. For example: divorce, personal injury, worker’s compensation.
• You want to sell your house or car.
• You want to obtain financing for any reason, including purchasing a vehicle.
• You have moved or changed telephone numbers.

Q. How long will it show on my credit report that I’ve filed for Chapter 13 bankruptcy?

A. Your Chapter 13 bankruptcy is on your credit report for seven years after the filing date, but you can begin rebuilding your credit as soon as your case is over.

Chapter 7: Common Client Concerns

Will I ever get credit again?

Yes.  Most recover credit within a year and a half. Bankruptcy can be on your credit report for ten years. However, so are all the late payments, judgments, repossessions, foreclosures and the like. Bankruptcy clears the slate, and permits a person to move forward. Your credit report is only one of the factors taken into account in evaluating a person for a loan. A key factor is the amount of existing debt the person still owes and shows up on the credit report. Remember, however, that getting new credit lines to continue living on debt is not the answer. Learn to manage your finances, and borrow only when the expected return will exceed the total cost of the debt.\

Will I lose my job?

No. The law prohibits discrimination against a person for having filed bankruptcy. If there is any impact it’s because of a finding of personal financial irresponsibility, not because of the bankruptcy by itself, which is often a result of events beyond the person's control such as divorce, a job lay-off, illness, etc. Even then, losing employment because of personal financial irresponsibility is limited to the rare job that absolutely requires that in the holder of that position. Often, it’s your performance on the job, not what you do in your personal life.

Will my employer find out?

No. The filing is a public record in the court, but the information has to be actively sought out. As stated above, it is prohibited as grounds for employment discrimination.

Will I be turned down for a job in the future?

No. See answer above.

Will I lose my security clearance?

Probably not. But this is a question that should be checked in in your particular situation, the type of clearance you have, and your employer. However, generally the bankruptcy  itself is not the issue. The issue could be the person’s inability to manage his personal finances, if that is a factor. Our firm has had clients who have had to file and continue to work for sensitive governmental agencies, such as the FBI and Transportation Safety Administration (TSA).

Will it affect my immigration status?

No. The bankruptcy  itself does not have an impact. Bankruptcy provides relief from debt, but is not a “public benefit” in the sense of directly providing cash or subsidized support for living expenses long-term from a governmental source.

Will I get rid of all my debts?

Yes. Generally, the debts of a typical consumer debtor are mostly of the types that are fully discharged, such as credit cards, judgments, deficiency judgments for debts remaining from foreclosure or repossession. There a few types that cannot, or are difficult to discharge, such as student loans (which can only be discharged upon a showing of extreme hardship by the debtor), governmental fines, debts stemming from some offenses society deems should not be released in bankruptcy, such as malicious acts of the debtor, or loans procured by fraud, and some types of taxes. Note, however, that the bankruptcy court gives you a forum in which to ask a judge to determine whether the debts are of the nondischargeable type.

Can I deal with my tax debts in bankruptcy?

Yes. Bankruptcy can completely discharge some taxes, all penalties, and generally provide a means to pay what cannot be discharged in an interest-free payment plan, as well as provide a forum to determine the amount or contest the tax liability. Each situation, however, needs to be examined carefully to see what relief may be available.

What are the chances I will NOT be approved?

None. The main exception is if you lie to the court on what you present in your filing regarding your assets, liabilities, and financial affairs. A motion can be filed to order a dismissal of your case with a prohibition to re-filing for a stated time period, or a lawsuit within the bankruptcy  asking for denial of discharge of a specific debt. In some cases, criminal charges can be brought. Remember that your conversation with your lawyer is protected for disclosure. You can be candid and frank. Doing otherwise, will place your case, and you, at risk.

I am waiting for approval of a loan modification. Will it be affected?

No. The present federal government regulations for the Obama-plan loan modification program (HAMP) bars lenders from disqualifying HAMP loan modification applicants because of bankruptcy. Our firm’s experience has been that some improve the chances for a modification during and after bankruptcy, probably because the overall debt-to-income ratio improves.

Will someone from the court come to my house?

No. Again, this is very rare. The only time that it may happen is if the court-appointed administrator in Chapter 7 needs to send over a realtor, or an appraiser, to value the home, or property, in the rare instance that the debtor has non-exempt property. This issue would be anticipated beforehand. Any visit would be coordinated with your attorney.

Chapter 13: Common Client Concerns

In Chapter 13  the debtor, in his plan, proposes a payment to the court determined in part upon his income, and on what he proposes to do in his plan to restructure his finances. Chapter 13 raises its own set of common questions:

What if I get a raise during the time I am in the plan?

Generally a plan payment can be modified post-confirmation only where there has been an “unanticipated, substantial” change in the debtor’s finances. There is no exact dollar figure of what that means, but it can safely be stated that normal year-to-year raises will not trigger a payment increase.

What if I need a loan to replace my car?

The debtor needs to seek court approval. But generally, if the request is necessary, reasonable, and will improve the debtor’s performance in the plan, for example, a car loan to get a modest vehicle that will provide transportation to and from work, the courts will permit the debtor to take out new debt.

Will my employer find out?

In almost all cases, the court will require an order to the employer to deduct payments directly from wages. However, it goes to the payroll department, not your supervisor. Again, you’re protected from employment discrimination. In fifteen years of bankruptcy  practice, we have yet to see a client lose his job for exercising his legal rights.

What are some of the common mistakes to avoid?

Often, debtors come to the bankruptcy lawyer's office after already having made costly mistakes that could easily have been avoided, including:

• Borrowing against a home to pay down credit cards. Now the debtor has turned what, in many cases, was unsecured debt, which could have been wiped out completely, into secured debt that the debtor must pay off or lose the house. Worst yet are predatory loans where the payments are so onerous as to make foreclosure almost a certainty.
• Borrowing against a 401K plan. The debtor takes a loan out against a 401K plan and then finds he can't make the payments. If the debtor defaults, a distribution of the full loan proceeds will be declared for that tax year. The debtor will now have a tax liability (that cannot be discharged) equaling about a third to a half of the loan taken out to pay debt that was probably dischargeable in the first place.
• Moving debt around to take advantage of low-interest credit card offers. If the debtor files bankruptcy within a short time after this transfer, lenders left "holding the bag" often move in court to block the discharge claiming fraud for incurring the debt when the debtor knew he would not be able to pay it back.
• Playing the "ostrich." Unable to face his or her financial problems, the debtor avoids getting help. For persons with back tax debts, the delay permits interest on priority taxes (that you must pay off) to build and also gives the IRS time to file a tax lien, again making what may have been a dischargeable tax debt into secured debt the debtor must now pay off.
• Getting help from the "one trick pony." When shopping for help, pay attention to 1) the range of solutions, and 2) the effectiveness of the solutions the debt professional offers. Ask questions.
• Credit counselors. How much of my debt will be completely wiped out? Will I have to pay income taxes for the debt that is wiped out? (You probably will, especially if the creditor reports "cancellation of debt" income for you to the IRS.) How much will I have to pay in total? How many months will it take to be debt free? How much total principal and how much total interest will I pay? Will my interest rates go up?
• Accountants and enrolled agents. For debtors with tax debts, be aware that neither one of them can offer the bankruptcy option unless they have a license to practice law. Usually they will offer only an offer in compromise, which may not be the best option for your case, or an installment agreement which is almost no relief at all. Ask: Would this tax debt be dischargeable in bankruptcy? Are you making a guarantee that my offer will be approved? What amount will be accepted as an approved offer by the IRS? How long will it take? As for an installment agreement, it's just that: Pay over time while interest and penalty charges continue to grow.

How long does it take?

Our firm can prepare a complete filing within a week, and an emergency bankruptcy filing within an hour to invoke the automatic stay and stop debt enforcement action immediately. (Note: Credit counseling has to be performed before the filing or the case will be rejected by the court. This can be done on-line.) Also, generally, all fees and costs are due before the filing is submitted to the court.

Meeting with the Trustee –  What to Expect

Every bankruptcy is administered by a trustee. The trustee's main task is to sell nonexempt property to repay general unsecured creditors. The trustee also looks for bankruptcy fraud, makes sure your paperwork is accurate, and conducts an investigation into your property and your finances. The trustee does much of this fact finding in the meeting of creditors (sometimes called the 341 hearing). The meeting of creditors is so named because your creditors may also appear and ask you questions, although most won't.

Timing and Location of the Meeting of Creditors

1. The 341 meeting will be set for at least 21 days but no more than 40 days after the day you file your case. The hearing will be in a meeting room, often in a federal building, but not usually in a courtroom. There will not be a judge at the 341 meeting; the meeting is conducted by the trustee. The Trustee Will Review Your Case Before the 341 Hearing
2. The trustee's investigation begins as soon as you file your case, and the trustee will review your bankruptcy paperwork before your 341 meeting. The trustee will review all your debts, income, and expenses, as well as your Statement of Financial Affairs, which provides a brief history of your major financial transactions. The trustee will also review your previous federal tax returns and your pay stubs.

Before You Arrive

You must bring photo identification and proof of your Social Security number to the meeting. The trustee will not conduct the meeting if you do not have these items, so if you forget them or do not have them, you will have to return at a later date for a rescheduled meeting.

A good rule of thumb is to arrive early. Generally speaking, planning to arrive at the meeting 30 minutes ahead of time will allow you any extra time needed to find parking, navigate traffic or any other obstacle which might delay your meeting. You will also have time to review your documents with the attorney before appearing before the Trustee.

During the Meeting

When the Chapter 7 trustee calls your case, you will sit at a table with your attorney so the trustee can question you. If any of your creditors or their attorneys are in attendance, they will sit at the table with you. Your trustee will question you first.

It will begin with you being sworn in and some brief remarks by the Trustee. Your social security card and driver's license/state ID will verify your identity and the Trustee will embark upon a series of brief yes or no questions. The questions will generally cover whether or not you listed all of your assets and liabilities and if you have understood all of the information within your petition for bankruptcy. There may also be a few questions regarding your fee agreement with your attorney and if you have previously filed bankruptcy. It is important that you keep the answers to these questions to a brief yes or no. The Trustee is not looking for any long-winded explanation of each event, and long answers will likely disrupt the Trustee’s packed schedule of meetings.

It is also possible that some of your creditors may attend this meeting, and they do have the right to question you on certain topics. However, this is extremely unlikely as most creditors have nothing to gain from attending the meeting and would normally ask the same questions that a Trustee would.

After all of this is done, the Trustee may ask you to provide additional documents that he/she feels is necessary to confirm what has been stated in your petition and schedules. It will be your responsibility to produce these for the Trustee and your attorney as soon as possible. But when all of this is said and done, your meeting with the trustee will usually be through in about 10 minutes and you can proceed with your fresh start in life.

The trustee's questions will vary depending on the local rules of your bankruptcy court and the trustee's own custom. Typical topics of questioning include:

• why you are filing bankruptcy
• whether you have listed all your property in your schedules and whether you have listed accurate values
• whether you have repaid any of your creditors within the three months prior to your bankruptcy
• whether you have repaid any relatives or close friends in the last year
• whether you have sold or given away any property or transferred any money in the past several years
• whether you own or have ever owned a business
• how you determined the value of your property listed in your paperwork
• whether your income is accurate in your schedules and on your means test
• whether you have dependents
• whether you are married, divorced, separated, or single
• whether you owe child support, alimony, or any other domestic support, and
• whether your monthly expenses are necessary and reasonable.
• If the trustee has no further questions and there are no creditors present, the trustee will conclude the meeting. If there are creditors present, the trustee will allow them to ask you questions.

Ending the Meeting and Follow-Up

Once the trustee and creditors have finished asking you questions, the trustee will conclude the meeting. The trustee may continue the hearing at a later date if:

• the trustee needs more information
• you were missing documents, or
• the trustee requests that you amend your paperwork.

Requirements for Discharge

The court will grant a discharge if the debtor meets all of the following requirements:

1. The debtor has completed an approved Financial Management Course.
2. The debtor has not committed any of the following acts, either (1) in connection with his or her bankruptcy or (2) regarding another case concerning an insider within one year before the filing of the petition or during the case.

• • Transferred, removed, destroyed, mutilated, or concealed property within a year before the filing of the case, or during the case, with the intent to hinder, delay, or defraud a creditor or the trustee.
  • Concealed, destroyed, mutilated, falsified, or failed to keep or preserve certain financial records.
  • Knowingly and fraudulently made a false oath, made a false claim, offered or received money for acting or not acting, or withheld certain information.
  • Failed to satisfactorily explain a loss or deficiency in assets.
  • Refused to obey a court order or testify (except under privilege against self incrimination where immunity was not granted).
  • The debtor has not received a discharge under Chapter 7 or 11 in a case commenced within 8 years before the filing of the petition in this case.
  • The debtor has not received a discharge under Chapter 12 or 13 in a case commenced within 6 years before the filing of the petition in this case.  This exception to discharge does not apply if at least 70% of all unsecured claims were paid in the Chapter 12 or 13 case.  (If less than 100% of such claims are paid, plan must also been proposed in good faith and have been the debtor's best efforts.)
  • The debtor has not waived the discharge (in writing, after the discharge, and approved by the court).
  • The debtor has not been convicted of or have pending proceedings concerning a felony, which demonstrates that the filing of the case was an abuse of the bankruptcy code.
  • The debtor not owe any debt arising from:

1. 1. 1. A violation of Federal or State securities laws or regulations.
      2. Fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any registered security.
      3. Any civil remedy for racketeering.
      4. Any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years.

Even if a discharge has been granted, the discharge may be revoked if:

1. The discharge was obtained through the fraud of the debtor.
2. The debtor acquired or became entitled to property which would be property of the estate, and failed to report, deliver or surrender such property to the trustee.
3. The debtor refused to obey a court order or testify (except under privilege against self incrimination where immunity was not granted).
4. The debtor failed to satisfactorily explain a material misstatement or a failure to make documents available in a U.S. Trustee audit.

Debts which are not discharged in Chapter 7

The discharge granted in a Chapter 7 case does not discharge any of the following debt:

1. Taxes.  Taxes will not be discharged if they meet any of the following parameters:
   1. Due within 3 years.  Taxes based on income or gross receipts for which a return (if required) was due within 3 years prior to the filing of the petition.  The date due includes any extensions, i.e., if the April 15 due date for income tax is extended to October 15 the later date will be used determining if the 3 year period has been passed.  The 3 year period may be extended by any time in a bankruptcy plus an additional 6 months.
   2. Assessed within 240 days.  Taxes assessed within 240 days prior to the filing of the petition. If an offer in compromise was pending, the 240 days will be extended by the days that it was pending, plus 30 days.  If a stay against collections was in effect under a prior bankruptcy, the 240 days will be extended for the time collection was stayed plus 90 days.
   3. Returns not filed or filed within 2 years.  Taxes for which returns (if required) were not filed or were filed within 2 years of the filing of the petition.
   4. Fraudulent returns and evaded taxes.  Taxes with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.
2. Tax penalties, fines, forfeitures.  Penalties for taxes not discharged (above), tax penalties regarding a transaction within 3 years of filing, and government fines and forfeitures are not discharged.
3. Debt incurred to pay taxes not discharged (above).
4. Debt obtained by fraud, false pretenses, or false financial statements.  Money, property, services, or an extension, renewal, or refinancing of credit obtained by (1) false pretenses, a false representation, or actual fraud, OR (2) a materially false written financial statement intended to deceive, on which the creditor relied.]
5. Debt incurred within 90 days before filing.  Consumer debt for luxury goods or services incurred within 90 days before filing of the petition, and totaling more than $550to a single creditor.
6. Cash advances within 70 days before filing.  Cash advances obtained within 70 days before filing of the petition, and which total more than $825from all creditors.
7. Debt not listed.  Debt not listed in time for the creditor to file a claim, or request a determination of discharge, unless the creditor had actual knowledge of the case.
8. Fraud, embezzlement, larceny. Debt for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.
9. Domestic support obligations.  Includes child support and spousal maintenance.
10. For willful and malicious injury.
11. Educational loans.  Educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit and other qualified educational loans are not discharged unless such exception from discharge would "impose an undue hardship on the debtor and the debtor's dependents."
12. For death or personal injury from DUI.  Includes operations of motor vehicle, vessel or aircraft and intoxication from alcohol, drug or other substance.
13. Debt from a previous bankruptcy where discharge was denied.  If a debtor was denied a discharge in a previous bankruptcy because the debtor transferred property, concealed records, made false statements, failed to explain losses, or disobeyed court orders, etc., debts which could have been listed in that bankruptcy will not be discharged.
14. Settlements, judgments, commitments regarding financial institutions.  Settlements and judgments regarding fraud or defalcation, or malicious or reckless failure to maintain commitments regarding certain financial institutions are not discharged.
15. Restitution.  Payments under orders of criminal restitution are not discharged.
16. Fines & penalties imposed under Federal election law.
17. Debt from a divorce or separation.  Debt other than support, owed to a spouse, former spouse, or child under a divorce decree, order, or separation agreement is not discharged. Note: A decree or agreement which obligates the debtor to pay all debt could result in no debt being discharged under a bankruptcy.
18. Homeowners association fees and assessments.  Such fees and assessments arising after the filing of a bankruptcy are not discharged.
19. Fees and cost imposed on prisoners by courts for filing cases, motions, complaints, or appeals.
20. Loans from pension, profit-sharing, and stock bonus plans.
21. Federal and state securities laws violations, settlements, and securities fraud, deceit and manipulation.

How to Repair Your Credit

Ok, you filed your bankruptcy and you received a discharge of all your debts, now what?

Bankruptcy should be a two step process, step one is to file the bankruptcy petition and obtain a discharge, and step two is to start rebuilding your credit. Once you filed your bankruptcy you may have received letters from all your credit cards saying that they are canceling your credit cards, even the credit cards that you were current on will cancel you.  Because credit means so much in America you want to begin rebuilding your credit as soon as possible.  Here are a few tips to help restore/rebuild your credit score:

Obtain a secured credit card

• A secured credit card is a credit card that is secured by the amount of a deposit you provide the lender.  For example, to get a $500 secured credit card you must deposit $500 with the lender and on the chance that you default on any charges, the credit card company can take your security as payment.
• Secured credit cards are one of the easiest and best ways to allow the debtor to rebuild their credit in a fast and efficient manner.

Companies that offer secure credit cards include

• Orchard Bank
• Citibank
• HSBC
• Bank of America
• Wells Fargo Bank
• US Bank

Obtain a low limit credit card

• Three months after your bankruptcy discharge you may receive and qualify for low limit unsecure credit cards.  These may be another way to rebuild your credit score.
• These credit cards may limit your spending balances to $500-$1000 a month and may have extremely high interest rates 25% or greater.
• If you think you can use and pay for an unsecured credit card on time then this is a great method to rebuild credit because every month you pay for your debts the credit card company will report to your credit bureaus.
• Failure to pay will allow the credit card companies to sure you and attempt to collect.  You will not have bankruptcy as an option again for many years (between four to eight years).

Continue to pay on reaffirmed debts

• If you reaffirmed a debt in your bankruptcy then the continued payment on the reaffirmed debt will  show up on your credit report as positive payments.

Pay all your regular house utility bills

• Paying your utility bills (electricity, power, cable, water, sewer, cell phone) that are in your name will show up on your credit reports as positive payments.

Vehicle Purchase

• If you are thinking of purchasing a vehicle, after you have filed for bankruptcy, then you may find it difficult to get approved right away.  Debtors who filed for bankruptcy have found that it takes them about one year after bankruptcy to obtain a vehicle loan.
• Co-signers
• If you have a co-signer (who has good credit) then you should easily be able to obtain a vehicle shortly after your bankruptcy is over.

Real Estate Purchases

• If you are thinking of purchasing a home, after filing for bankruptcy,  you can get approved for an FHA home loan if the following conditions are met:
• Two years after bankruptcy
• Credit score of 650 or higher
• 2.5% or more as a down payment