How To Decide if a Bankruptcy is Right For You
When most of my clients come in to see me for their initial consultation, they want answers on how to get their finances under control. They want to know how filing a bankruptcy will affect them and their financial future. Here, I will answer the questions and concerns that I hear most often.
"How can I prevent losing my home in foreclosure and what if my property taxes have been sold?"Most of our clients come in when they have already fallen behind on the mortgage payments and either a foreclosure has been filed, or one is imminent. In 90% of the cases, we can stop the foreclosure by filing a Chapter 13 and getting the client up to 5 years to catch up on the mortgage arrears, i.e., missed mortgage payments. I have often heard from clients that they are under the misguided belief that if their property taxes are late, or have been sold, that they cannot file a Chapter 13. This is NOT THE CASE. A Chapter 13 can not only stop the foreclosure and get you caught up on the mortgage, but we can also "cure" property taxes that have already been sold to a tax purchaser. Chapter 13 provides extraordinary relief, especially if saving your home is the goal. Essentially, we must be able to propose a plan in good faith, and as long as you have income that is sufficiently stable, we can put together a feasible plan over a 60 month period that protects you, and your home and all of your other assets for the entire life of the plan. The plan can last as long as 60 months (5 years). After learning that they will be able to stop the foreclosure, save their home, and get their property taxes cured through the Chapter 13 plan, inevitably, clients will ask about whether they will at some point be able to modify their mortgage loan, at a later date. The answer to that is.., generally, yes. There is nothing about being in a Chapter 13 which prevents you from modifying your mortgage loan even while you are in an active Chapter 13 plan. The modified loan will need to be approved by the court, and in most cases, as long as the terms of the modification are reasonable, the modifications are approved by the court.
In many cases, the clients' situation is not as dire as they think it is, and we can get things right back on track for them in a matter of weeks.
"I need to file a Chapter 13, or a 7, but I don't want to lose my car or include my car.."This is a very common concern for most people when they are considering whether to file any case under the Bankruptcy Code. Here is the truth.. if you are behind on your car payments, and you want to keep your car, you are likely going to be better suited to a Chapter 13. In a Chapter 13 we can put your car into the plan, allowing you to KEEP your car, and if you purchased the car more than 910 days before you filed a Chapter 13, we will most likely be able to have you KEEP your car AND pay less for it! This is called a "cramdown" and an experienced attorney will know how to include the car in your Chapter 13 so that not only do you keep your car, you get to pay a lot less for it and at a much lower interest rate.
Lately, thanks to the aggressive tactics of the City of Chicago in collecting on parking tickets, we have seen a lot of clients who have had "the boot" placed on their car and their license suspended. The filing of the Chapter 13 will get your car released from the impound, and, provided your license has been suspended for unpaid parking tickets as opposed to moving violations, i.e., speeding tickets, the Chapter 13 filing will allow the Secretary of State to rescind the suspension of your license.
By law, all debts must be listed in your Chapter 7 or Chapter 13, and we will help you decide if you will save more money by keeping your car payment in the plan, or outside the plan.
If you are NOT behind on your car payments, and you have not built up too much equity in your car, and you wish to get rid of all of your debts, while keeping your car, it is very likely you will be able to file a Chapter 7, wipe out all of your other debts, and KEEP your car. There is even an option to "redeem" the vehicle in a Chapter 7, which allows you to pay the value of the car, instead of what is actually owed on the financing contract. I just recently had a client who owed over $25,000 on a car that was only valued at $6,000. She filed a Chapter 7 and wanted to keep her car, and we filed a motion to redeem the vehicle for the $6,000 stated value. The motion to redeem was granted by the court. That client saved almost $20,000 on her vehicle! Talk about a fresh start!
If you are behind on your car payments, and interested and eligible for a Chapter 7, but you want to keep your car, then we will advise you to get current on your car before filing a Chapter 7. After the Chapter 7 is filed, you will have the option to keep your car either through a reaffirmation agreement, or by continuing to make voluntary payments under the contract. In short, if the goal is to keep your car, we will find the best way for our clients to do so.
"Will I be able to get credit/a mortgage after filing a Chapter 7 or a Chapter 13?"There are so many variables, in answering this question. Having said that, the answer to this question is almost always, yes, you will be able to obtain credit and even a mortgage after having filed a Chapter 7 or a Chapter 13, in most cases, but with a couple of caveats. In most cases, someone who has filed a Chapter 7 will not have much trouble getting financing for a car, getting credit cards, and even unsecured loans after their Chapter 7 is discharged. You will probably need to wait two years from the date of your discharge if you want to get an FHA guaranteed mortgage and buy a home. We offer an exceptional credit score improvement program, called The 720 Credit Score Program to our clients. The 720 program gives the client all the tools they need to get their FICO score into great shape after they have received a discharge of their debts. This program does not make "pie in the sky" promises, but rather gives you precise, step by step directions on how to get back into the 720 FICO range. That is the range where you become eligible for low interest mortgages. loans, etc., and it is an integral part of getting our clients on the road to financial success.