Life after bankruptcy–the fresh start

Life after bankruptcy–the fresh start

Clients always ask about what their lives will be like “after bankruptcy.” This question usually comes up before we filed the petition–and that’s the way it should be.

You deserve to know what to expect from your creditors, your boss, the IRS, once you’ve pulled the trigger on filing. (Run from attorneys who are vague about the specifics, or who are too focused on getting your attorney fee to talk to you about life after filing.

The most important reason to file is that you will get a fresh start as provided by the bankruptcy code and the court. What does fresh start mean? It means that all of the debts and liabilities that you bring into my office are erased once you are discharged. From the time we file you will no longer be obligated to pay unsecured credit card type debts.

Those 29% interest monthly minimum payments to Chase, AMEX, Citi, Best Buy? buh-bye.

Getting a fresh start also means:

  • That creditors who call you repeatably to extract money from you will stop calling because they’ll be scared that I will sue them in federal court on your behalf.
  • That any pending lawsuits regarding your debt will stop dead in their tracks.
  • That your wages will not be garnished–and if they’re being garnished, the garnishment will stop immediately.
  • That any judgments and liens against your exempt property may be removed by me as part of your case.
  • That your car will not be repossessed–and that you will have a bit of time to decide if you’re keeping or surrendering the car.
  • That some of your past years IRS tax debt may be discharged* (the asterisk means you’ll need me to look at your situation before I can predict what may happen, and I can never guarantee outcomes.)
  • That in most cases, you’ll be able to keep your house (provided you’re current on the mortgage in Chapter 7, or that your Chapter 13 plan catches up missed months).
  • That you can opt to surrender your house and wait for foreclosure. The act of filing bankruptcy will buy you some time to figure out your next move–not too long, but some time.
  • That I might strip the security interest your 2nd mortgage holder has in your property in Chapter 13. That means after you’re discharged, your 2nd mortgage is gone.

And getting a fresh start also means:

  • That your credit reports will show that you’ve filed bankruptcy for as long as 10 years. If 10 years makes you cringe remember that dings on your credit report stay for 7 years–and that your creditors can sue you for as long as 6 years in Georgia. Pick your number.
  • That you won’t have credit cards at your disposal for the near future (if ever). You creditors monitor the bankruptcy court system to see who has filed–they routinely cancel cards for those in bankruptcy. Yes, this is true for zero-balance cards too.
  • That you’ll be rebuilding your credit score by continuing to make on-time minimum payments to the property you retain. You can obtain a secured card, or you can go debit/check card. I will explain the pluses and minus of each.
  • That current and future employers may discover that you’ve filed bankruptcy. It is illegal to fire you solely because you’ve filed bankruptcy. No, they don’t get a letter from the court (unless you’ve filed an electronic deduction order for your chapter 13 plan payments). But believe me when I tell you that an employer can pick another reason as a pretext for firing you. They can use any pretext for firing you for some other real reason too. This is a risk you must understand and accept.
  • That you will likely have to sign reaffirmation agreements for vehicles you intend to take with you through Chapter 7.
  • That you must stay current on your mortgage if you intend to keep your house.
  • That your bank may seize the money in your checking or savings account if you also owe the bank money. There is a way to avoid this–I’ll explain our strategy.
  • That this magic only applies to pre-petition debt. The door opens, we go through it, the door shuts. If things get worse down the road, you cannot file Chapter 7 again for 8 years. Another bankruptcy before then is going to be via Chapter 13.

And it also means that you need help from an attorney who has the experience and ability to guide you down this path (that would be me). Please be careful where you step.