Bankruptcy Law, Debt Relief

How Long Does Bankruptcy Stay on Your Credit Report?

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One of the biggest concerns consumers have when it comes to filing for bankruptcy is how long will the bankruptcy remain on their credit report. While a bankruptcy does hurt a person’s credit score, the effect it has depends on several different factors. Ultimately, it depends on the type of bankruptcy being filed and the financial habits exercised by the consumer after the case is over.

Chapter 7

A Chapter 7 bankruptcy case will stay on a consumer’s credit report for ten years from the date of filing. A Chapter 7 bankruptcy case is also known has a liquidation bankruptcy. This form of bankruptcy is normally used by people who have defaulted on their financial obligations and fall below a certain income threshold.

In a Chapter 7 bankruptcy case, the bankruptcy trustee has the authority to liquidate the borrower’s nonexempt assets and use them to pay down qualifying debts. The remaining debts, which are mostly unsecured ones, are discharged. Chapter 7 forgives debts including credit card debts, medical bills and unsecured personal loans. Certain debts, including taxes, criminal fines, child support, spousal support, and student loans, are not discharged usually in a Chapter 7 case. Not all consumers can pursue a Chapter 7 case, however. They must first pass a means test to ensure that their income and asset-to-debt ratios satisfy the requirement to file for Chapter 7 bankruptcy.

A consumer’s credit score can drop by as much as 200 points after filing for Chapter 7 bankruptcy. However, the alternative can be much worse if bankruptcy is not filed and the consumers ends up with multiple defaults and collections on his or her record. By exercising good financial habits over time, a person’s credit score can certainly be rebuilt.

Bankruptcy Law

What are the Credit Counseling Requirements in Bankruptcy?

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Whenever a person files for Chapter 7 or Chapter 13 bankruptcy, he or she must submit proof that a credit counseling course from a nonprofit credit counseling agency was successfully completed. The purpose of this course is to help the filer determine whether he or she can pay his or her debt outside of bankruptcy and provide proper financial guidance to prevent an additional bankruptcy filing in the future.

What Is Required?

According to the Federal Trade Commission (FTC), all bankruptcy filers must take an approved credit counseling course prior to filing. The U.S. Department of Justice’s U.S. Trustee Program keeps a list of approved programs if filers are not sure where to go. Proof of completing a program must be submitted before the bankruptcy case can proceed further. In fact, this proof must be submitted within 180 days prior to filing for bankruptcy. The filer will normally walk away from the credit counseling program with a repayment plan, if a plan is realistic, although nothing in the FTC rules requires the filer to follow that specific plan.

Credit Card Debt, Debt Relief, Medical Debt

How to Handle Debt in Retirement

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For many Americans, including those entering retirement, being in debt is a way of life. According to numbers published by the Transamerica Center for Retirement Studies, four in every 10 retirees report getting out of debt as a top priority. Many of them are struggling to the point where bankruptcy is their only way out. In fact, the Consumer Bankruptcy Project reports that one in every seven bankruptcy filers is over the age of 65.

One of the reasons why seniors are struggling financially has to do with living on a fixed income. All it takes is for one medical crisis to strike to set them back significantly in their financial goals. The hopes of entering retirement debt free can be difficult for those carrying large amounts of credit card debt and student loan debt. It also does not help that larger companies cut back or even took away pensions for American workers who pinned their hopes of retirement on these plans.

Bankruptcy Law, student loan debt

How to Handle Zombie Student Loan Debt

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Student loan debt has been known to haunt borrowers for years, if not decades, after that first loan is issued. Many borrowers find themselves on payment plans that can least up to 25 years. To them, a student loan is like a mortgage without the benefit of having the house to live in. Once the debt is paid in full, the last thing that person wants to think about again is that loan. However, for many borrowers, that debt never seems to go away and often comes back in the form of zombie debt.

Most forms of debt are limited by a statute of limitations, which governs how long a creditor can sue the borrower for the debt. Federal student loans were once governed by a six-year statute of limitations until 1991 when that statute of limitations was lifted. Now they are technically collectible indefinitely. Private student loans, however, are still limited by statute.

Bankruptcy Law, Credit, Credit Card Debt

Steps to Remove Judgments and Collections from your Credit Report

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Every consumer should review his or her credit report at least once a year to confirm that there are no inaccuracies.  Lenders look to a person’s credit score to determine whether he or she is a lending risk. The lower the score, the harder it will be for that person to obtain financing.  It can also affect the interest rate on the loan.

Certain actions, such as a judgment against the consumer or a collections action, can negatively impact a person’s credit score. However, if a consumer does have judgments or collections actions on his or her report, it is possible to have this information removed.

Debt Relief, student loan debt, Student Loans

FTC Takes Legal Action Against Corrupt Student Loan Debt Relief Companies

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The case comes as a warning to student loan borrowers struggling with their debt and company’s looking to profit from it. The Federal Trade Commission is cracking down on two student loan debt relief operations and the financing company that assisted them. The complaint is alleging the companies charged illegal upfront fees, led consumers to believe the fees would go towards reducing their loan balances, and falsely promised to permanently lower and even eliminate their balances.

The FTC has also charged the companies with locking its customers into high-interest loans and paying their fees without making required disclosures. This caused their customers to sink further into debt.

Bankruptcy Law, Debt Relief

More than 50% of Americans Have Raided Their Retirement Savings Early

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When someone is facing a difficult financial situation, it can be tempting to pull money from whatever resources are readily available. Many consumers feel they have no choice but to dip into their retirement savings to pay for financial emergencies or unexpected expenses. In fact, according to a recent study published by Magnify Money, more than half of all Americans have withdrawn money from their retirement savings early.

Twenty-three percent of those surveyed stated that they did so to pay off debt. Another 17 percent used this money to put a down payment on a home, while 11 percent used the money to pay for education costs. Nine percent surveyed reported using money from their retirement savings to pay down medical debt.

Bankruptcy Law

How Long Does the Bankruptcy Automatic Stay Remain in Effect?

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One of the benefits of filing for bankruptcy is the automatic stay and the protections it offers filers who are facing a multitude of collection calls from their creditors. It can also protect a person from lawsuits, wage garnishment, repossession, and losing valuable property.  As soon as the bankruptcy petition is filed, the automatic stay goes into effect. After this point, creditors and debt collectors are legally barred from attempting to collect on any debt owed by the filer.

The automatic stay will remain in effect throughout the duration of the bankruptcy case from filing to discharge. However, certain factors can affect the automatic stay and how long it remains in effect.

Bankruptcy Law, Medical Debt

University of Virginia Health System Sues Patients, Putting Liens on Homes and Seizing Paychecks

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Medical debt remains the leading cause of bankruptcy in America. Thousands of patients at University of Virginia Health Systems (UVA) have seen the devastating consequences of past due medical debt.

Over the course of six years ending in June 2018, the University of Virginia Health System sued former patients over 36,000 times for a sum of over $106 million. The hospital has seized wages and bank accounts of former patients and have put liens on homes and property. This information comes from a Kaiser Health News study, which reviewed UVA Health System’s court records, hospital files, and interviewed hospital officials, as well as former patients.

Bankruptcy Law, Medical Debt

What Happens When You Fail to Pay a Hospital Bill?

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Countless Americans struggle to pay for their medical expenses every year. It only takes one major medical crisis to set a person back thousands of dollars. If that person does not have adequate savings for emergency expenses, it can be very easy for that medical bill to turn up past-due and fall into collections. This situation is an all-too common occurrence for many Americans.

An estimated 43 million American consumers reportedly carry some amount of unpaid medical debt. It is also reported that half of all debt listed on American consumer credit reports is from medical expenses, according to a 2014 Consumer Financial Protection Bureau (CFPB) study.