Lehman Brothers Holdings, Inc. has just filed the biggest bankruptcy filing in history of this country.
The 158-year-old firm, which has 25,000 employees survived the railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management just a decade ago, was forced to filed a Chapter 11 bankruptcy petition with the U.S. Bankruptcy Court in Manhattan today.
The collapse of Lehman will likely have huge impact on other companies and individuals who relied on Lehman for financing.
How It May Affect You
Because Lehman financed many home mortgages, most banks will likely cut back on their lending to consumers for personal credit and mortgages.We can also expect a slow down in mortgage rates being slashed, however most likely rates will not increase.
While going through the process of Chapter 13 bankruptcy is certainly no picnic, it is actually not quite as bad as many people believe if they don’t understand the whole process.
Chapter 13 is different from Chapter 7 in that it is a long term process that does not involve liquidation, and therefore is not as drastic.
During the three to five years that your Chapter 13 may last, it is pretty likely that you will find yourself in need of a new vehicle - but don’t despair because your credit is bad.
Many people in Chapter 13 can and do qualify for vehicle loans on credit, and this is permitted under Chapter 13 regulations in all states. Here’s some advice while you are going about securing this credit.
Understand that your credit rating has been reduced . Any time you declare Chapter 13, it is a matter of public record and will be counted against your credit record. This means that you can’t expect to be driving around in a new Mercedes, but it doesn’t mean that you have to go without a new vehicle. Many dealerships, loan companies, and manufacturers have loan programs designed for people currently in Chapter 13, although you will have to demonstrate that you have kept your payment plans up to date for at least two years.
Contact your Chapter 13 trustee . In order to be able to apply for credit on a vehicle, you need the permission of your Chapter 13 trustee. This is required by law so make sure you notify him or her no matter how you apply for that credit!
Find a co-signer . The problem with many types of loans is that if you are in Chapter 13 you can expect to pay some exorbitant interest rates; it’s how companies cover themselves in the event of a default. You can avoid that type of interest by finding someone who can co-sign on a loan for you. Just make sure that you keep making the payments, or they will be responsible for any default!
Look at non-conventional loans . Most people will turn straight to the bank or the dealer when they are looking for credit on a car loan, but these are not the only places to get credit. There are many companies out there, and some individuals, who can extend credit to people in Chapter 13 for the purchase of a vehicle. Make sure to do your research so you know the company is on the up and up. Again, be prepared to pay extra interest.
The key thing to remember with Chapter 13 and credit for a car is that first of all, you have to notify the case trustee. Second, make sure that you make your payments in full and on time, or you can set the whole process back by months and probably make things worse for yourself as well!
Every once in a while life throws someone a curve ball, or they might make ill-informed decisions. Sometimes it is easy to get out of the kind of messes that these situations create - other times, it will take a lot of work.
Bankruptcy is one of life’s curveballs that is not easily dealt with. If you take a really good look at the world we live in today, you will see that it basically revolves around credit.
There is almost no one who pays cash straight out for their car or their home. Even everyday items such as television and shopping are increasingly charged on credit instead of being rung up free and clear.
As a result, more and more people are finding that bankruptcy is their only option.
In this article we are going to specifically talk about long-term strategies that will help you have a better chance at getting credit post-bankruptcy for the two most important big credit items: a car or a home.
Have a Strategy
The most important part of looking toward the future after a bankruptcy (we are assuming a discharge of the bankruptcy in this article, for advice on getting credit while in Chapter 13 take a look at some of our other articles) is being able to see things in terms of consequences and rewards in the long term.
What this means is that once your bankruptcy has been discharged, you will have to make a commitment to rebuilding your credit if you ever hope to get good terms on any loan, and easily qualify for a loan, in the future.
You need to start by analyzing what went wrong last time. How did you end up going bankrupt, and how can you prevent it the future. After that, there are a couple of easy steps to take.
Make a budget . Know what you are going to spend, why, and when.
Stick to it! Stick to that budget no matter what. Most of us get in financial trouble with our wants, not our needs, so make sure you are only spending where you need to.
Never miss a payment . Never miss a payment on credit cards, your rent, your car loan when you get it, or anything else. Every payment is a mark in your favor when it is received on time, and will help you re-build your credit score.
In another article we will take a look at the specifics when it comes to receiving credit for a car or home loan after a bankruptcy, but for now the main point is this: rebuild your credit over the long term.
Once you are able to do this, your bankruptcy won’t haunt your future.
In a separate article we took a look at the importance of long term planning when it came to recovering from bankruptcy in order to qualify for a car or home loan.
In this article, we are going to take a look at some specific time frames so you have an idea of what to expect when it comes to your ability to purchase a car or home (and almost everyone needs credit to do this today!).
Obtaining Credit for a Car
In most cases, you will find that even though your credit score is still fairly low, you can gain credit for a vehicle almost immediately after your bankruptcy is discharged.
In fact, there are companies who specialize in providing loans to people considered high credit risks, and that includes car dealers. All you have to do is some research to find out who and where they are.
Now, just because obtaining this credit is possible does not mean that it is easy. Everything comes with a price, and the price for a successful credit application for a car loan after a bankruptcy is guaranteed to be high interest rates.
Don’t expect to find dealers who offer 0% financing to you; in fact, the credit that you are advanced is likely to come with some stiff interest terms.
This can be pretty hard to swallow, but once again it is important to take the long view.
While you are may pay through the nose in interest (at least initially), every payment you make will go towards rebuilding your credit score. Every time your rating goes higher, you have the chance to get a loan from a source which will charge less interest.
Keep checking around even though you have secured credit; you will eventually be able to secure loans from companies and dealers who offer better interest terms. Take the loan and pay off the higher interest one, and keep doing this until you are back to low interest rates.
Obtaining Credit for a House or Apartment
Obtaining credit for the purchase of a home or an apartment for a person who has declared bankruptcy is a little bit more difficult, simply because houses are a higher risk in terms of price than vehicles.
Even the most flexible (again, read higher interest!) mortgage lenders will want to see two years of clean credit history since your bankruptcy filing was discharged. Default on any payments on anything during this period, or even a late payment, may hurt your chances at getting that loan.
Of course, companies are not the only place to look when it comes to getting credit for a car or home loan after bankruptcy, although for many individuals they may be the only viable ones.
You can also seek to obtain credit from friends or family through an outright or co-signed loan - but remember that defaulting could have lifelong consequences.
Make no mistake about it - if you are currently in Chapter 13 and are looking for a mortgage, you are in a bit of trouble. Most companies will probably tell you to take a hike once they realize the situation, and there is no way that you can hide your situation from them.
Difficulty does not equal impossibility however; in this article we will provide you with some tips for getting credit for a home loan while you’re in Chapter 13 Bankruptcy.
Sell your current home . Remember, Chapter 13 involves a written plan and by following this plan you will eventually pay off your creditors. You don’t have to sell your property in order to pay off the debts, there is no liquidation involved.
Moreover, your creditors can make no attempt to gain money from you outside of the bankruptcy court; you are probably much freer than you realized.
Since you still have assets, it makes sense to make them work for you. If you are lucky enough to already own a home, you can sell it and use the equity as a down payment on a new home.
This should be a sign to most lenders that although you are in a Chapter 13 Bankruptcy, you can still handle a mortgage.
Explore different lending sources . Of course, if you don’t already own a home getting credit will be really difficult. During the introduction we stated that most companies will tell you to take a hike when you are in Chapter 13 and are looking for a home loan - but that doesn’t mean everyone will.
The first place to start is with friends and family; they might be able to extend you some credit for a house purchase. Failing this, look around at different lending companies.
Not all will say no; some specialize in this type of situation and will extend you the credit you need.
Find a co-signer . There are other options when it comes to family and friends beyond the actual lending of money.
You may be able to get the credit you need to buy through the help of a co-signer. This will mean that the individual who agrees to co-sign will be responsible for the debt should you default.
Remember that being in Chapter 13 is a long process, usually from 3 to 5 years. That is plenty of time to clean up your act and put a new plan in place, one which will allow you to apply for and be able to pay loans on a house.
The most important part of the process will be shaping a plan by which you can ensure creditors that you are once again a safe person to extend credit to.
Copell , Texas is a lovely place to work, live, and to do business in - but if you have to file for bankruptcy, then you will probably be too tense to notice anything else.
Here are a few bankruptcy FAQ’s –and their answers – to put your mind at ease.
Is My Financial Future Finished Due To Bankruptcy?
No, of course not!
Filing for bankruptcy is just the first step to admitting that you have some financial problems. On the contrary, filing for bankruptcy will show that you are willing to make tough decisions and get your finances back on track.
Let the bankruptcy attorneys at Allmand and Lee put their 20 years’ combined experience to work for you today.
How Will It Get My Creditors Off My Back?
Once you file for bankruptcy, you get an automatic stay on any recovery process that your creditors might have initiated, be it calling you at home or work, or harassing you with threatening phone calls.
Which Chapter Is Suitable For Me?
You can try filing under chapter 7, in which all your non-exempt assets will be disposed of by a trustee appointed by the court in order to pay off your creditors.
The remaining amount could then be discharged or canceled - and you could start your new financial life within around 4 months. You can lose substantial assets in this move, but you can get out of your debt much faster.
You will, however need to pass the “Means Test” - where your income will be compared to the average income of a similar household in Texas. If your income is lower than the average median income, then you be allowed to file under chapter 7.
If you do not qualify to file under Chapter 7, then you might have to file under Chapter 13. In Chapter 13, your debts will be restructured and a new repayment plan will be devised to clear all your debt within a timeframe of 3 to 5 years.
You may also be able to hold on to almost all your assets by filing under this chapter.
Will I Be Debt Free If I File For Bankruptcy?
There are some debts, such as certain taxes, student loans, alimony, childcare, etc, which cannot be discharged in bankruptcy - and you will need to pay them off.
There may also be certain other debts that your creditors might prevent from getting discharged by petitioning the court.
Can I Get New Loans After My Bankruptcy?
Although your bankruptcy will stay on your record for the next 10 years, you will still be eligible for a new loan after a couple of years. You can try getting a secured credit card first and build up your credit by making your payments on time.
Over time, your credit score will be high enough to secure credit at normal interest rates.
The above FAQ’s should help you to contact the perfect bankruptcy attorney in Coppell. Doing so will ensure that your case is discharged in the shortest possible time, and will put you back on the road to financial recovery.
If you have undergone the pain of filing for bankruptcy under chapter 7 or 13 in Dallas, Texas, and have gotten a discharge in your bankruptcy case, then you can get a mortgage to buy a home.
However, you will find that the rules of the game have changed since you’ve filed for bankruptcy.
Here are some tips to help you get a mortgage.
Continue Paying Your Debts According To Schedule
If you filed for bankruptcy under chapter 13, and if you are still paying off your car loans on cars or other assets, then you should continue making your payments.
Take care as to not to miss any installments, since you will immediately draw attention to yourself as a bad credit risk.
Once your bankruptcy is discharged, then you will be eligible to apply for a new mortgage. However, if you have filed for bankruptcy under chapter 7, then you will need to wait for 2 years until you become eligible to apply.
Arrange For a Secured Credit Card
You will be able to arrange for a secured credit card by paying a suitable deposit. The main aim here is to spend money through the secured credit card instead of cash. You should pay the bill on time, since this will ensure that your credit rating keeps improving.
This strategy will pay off when you decide that it’s time to get a new mortgage. You can also try to get an unsecured credit card as time goes by, as this will also help to boost your credit rating.
Start Saving Money for the Downpayment
Once you have your other payments under control, you will need to start saving for the downpayment on your mortgage.
In most cases, borrowers have to arrange for a downpayment, which could be as high as 20% of the value of the mortgage.
If your credit rating has made a comeback due to timely payments on your secured or unsecured credit card, then there are many lenders who will be willing to extend credit to you.
Your initial interest rate may be a bit higher than usual; however, if you make the payments on time for 1 or more years, you could refinance to a lower rate.
Do Not Default On Your New Mortgage Payments
It is essential that you make your mortgage payments on time; otherwise, you could find yourself sliding down the same path that got you into trouble the first time.
By making your payments on time, you will also be ensuring that your credit rating climbs at a faster rate than before. Soon, your credit score could be quite high, and you will be able to get credit cards or loans at normal interest rates.
All is not lost when you file for bankruptcy in Dallas - but time and strict control over your finances can quickly get you back on track.
Many people are having difficulty in repaying their mortgage, car loans or credit card bills due to job loss or simply because they don’t make enough money. If this is the case for you, and if your creditors are hounding you for payments, then this could be the right time to file for bankruptcy.
However, depending on certain conditions, you will need to find out whether chapter 7 or chapter 13 is suitable for your case.
Read the factors mentioned below to make up your mind.
Conditions for Filing Chapter 7 Bankruptcy
If you have just lost a job or other source of income, and are sure that you will not be able to get another job or raise money through any other method in the near future, then you could file for bankruptcy under chapter 7.
If you have insufficient assets on hand, then chapter 7 bankruptcy may be right for you. You will, however, need to pass the ‘Means Test’ organized by the bankruptcy court - in which your gross income will be calculated for the previous 6 months and compared to the average median income of a similar sized family in your area.
If your income is lower and you have no other means of paying off your creditors, then you could qualify for filing bankruptcy under this chapter. In such a case, the court will appoint a trustee who will compile a list of all your non-exempt assets and sell them off in order to pay off your creditors.
The rest of your debt could be discharged (i.e., canceled by the court). However, as an individual, if you do not pass the means test, then you will have no choice but to file for bankruptcy under chapter 13.
Conditions for Filing under Chapter 13
If you are unable to file for bankruptcy under chapter 7 due to income restrictions, or if you have many debts that are not dischargeable under chapter 7, then you will have to file under chapter 13.
In this case, you will need to come up with a repayment plan to clear off your old debts within a span of 3 to 5 years. The court will have a look at your plan, along with your creditors. Once approved, you will need to abide by the new repayment plan.
Filing under this chapter will save most of your assets from being taken away by the court - and you will have a new chance to clear off your debts in a structured way. If you have found a lower paying job, or have other regular income, then this could be the chapter for you.
Most people first try to file for bankruptcy under chapter 7, since some of the debts could be discharged. Under chapter 7, most cases are settled in 4 months, as opposed to the 3 to 5 years that you would need to clear off your debts under chapter 13.
In a nutshell, you should know your financial position at the time of filing for bankruptcy. You should also look into how you can arrange to have a regular income for your restructured payment plan before you file for bankruptcy.
Your bankruptcy attorney can guide you as to which chapter will be more helpful in getting you financially stable in the long run.
If you find yourself owing a lot of money to your creditors, either by way of secured or unsecured loans, then you could file for bankruptcy - and start your financial life all over again.
Below are the steps that you will need to take in order to get your life back on track.
What Do I Do First?
Once you realize that there is now way out, and your creditors are after you to get their money back (which you do not have), then you should get in touch with an experienced bankruptcy attorney. They will first review your financial status, and then help you to file a petition in bankruptcy court.
You can file for bankruptcy under Chapter 7 or Chapter 13. In Chapter 7, your non-exempt assets can be disposed of by a trustee appointed by the court, and your creditors will be paid that money.
Your unsecured debts can be discharged under this chapter, and you will get a fresh lease of life in just 4 months.
Certain obligations such as alimony, child care, secured debts and certain taxes cannot be discharged.
In a Chapter 13 bankruptcy, you can reschedule your debt payments and pay off the balance within a period of 3 to 5 years.
Your bankruptcy attorney will submit a written plan to the court regarding your repayment schedule. The advantage of filing Chapter 13? It will let you remain in control of your financial life - and you will also retain possession of your assets.
If you realize that bankruptcy is a viable option for you, then time is of the essence.
What Will The Court Do?
If you are filing for bankruptcy under Chapter 7, the bankruptcy court will put you through a “means test”, in which your gross income for the six months prior to filing for bankruptcy is calculated and compared to the average median income of a similar sized family in your area.
If your income is lower than the median income, then you will qualify to file under chapter 7. If not, your bankruptcy attorney will need to file under Chapter 13. Once you have filed under the relevant chapter, the court will appoint a trustee.
The trustee will start compiling a list of all your non exempt assets, which will be disposed of in order to pay your creditors.
If you have filed for bankruptcy under Chapter 13, the trustee will arrange a meeting with your creditors and present your repayment plan.
Once that plan is approved, the trustee will also monitor your payments; it is essential that you do not go back on your written word.
What Happens After the Bankruptcy is Filed?
Once the court has approved the Chapter under which your bankruptcy case is filed, then you will need to follow the lead of your trustee.
If your bankruptcy attorney filed under Chapter 7, then the trustee will dispose of all your non-exempt assets and pay off your creditors. If you have filed for bankruptcy under Chapter 13, then you will need to ensure that you pay your debts in accordance with the new repayment plan.
You will need to keep an eye on your expenses in the coming 3 to 5 years as you get your financial matters back on track.
Needing to file for bankruptcy is no reason to be disheartened. View it as another chance given to you by the court to get your financial life back in order. After all, everyone is entitled to a second chance.
If you are facing financial difficulty and wish to file for bankruptcy, then you could file under either chapter 7 or chapter 13.
However, consumers are now required to pass a ‘means test’ in order to qualify for filing under chapter 7.
The new bankruptcy laws make it more imperative than ever for consumers to seek the services of a competent, knowledgeable bankruptcy attorney.
What Is Chapter 13 Bankruptcy?
If you are earning a decent income but have taken out a mortgage that is proving to be too large for you to handle financially, then filing for bankruptcy under Chapter 13 is a good option.
Filing under this chapter will help you save your assets from falling into your creditor’s hands.
Your bankruptcy attorney can help you to draft a repayment plan. This plan, which is usually drawn out over a period of 3 to 5 years, will then be presented to your creditors.
The court will appoint a trustee to manage your repayment schedule, and the trustee will collect the installments and pass payments on to your creditors.
Under Chapter 13 bankruptcy, you can work out a new repayment schedule with your creditors. This will put less stress on you financially, and will also satisfy your creditors about your seriousness to repay.
Any debts left over after the repayment period are discharged. Some debts, such as alimony, child support, student loans and some taxes cannot be discharged.
One of our knowledgeable bankruptcy attorneys will analyze your case and get back to you right away.
The Advantages of Filing Chapter 13 Bankruptcy
Once you file for bankruptcy under Chapter 13, your creditors will no longer be able to contact you at your home or office in an effort to collect. You get an ‘automatic stay’ from your creditors – this is the law.
Once your repayment schedule is approved by the bankruptcy court, you will continue to remain in control of your finances - and your life. You will now be able to repay your debt in a much more organized manner.
You will, however need to maintain the rescheduled payments; otherwise, your creditors will still be able to go after your assets if you have taken out a secured loan (i.e. a loan where you have submitted collateral such as your home or car).
The bankruptcy will stay on your credit record for a period of 10 years. However, in all likelihood, you will be able to get a new credit card – and probably even a mortgage - after just a few years.
If you don’t mind paying installments for 3 to 5 years in order to safeguard your assets, then filing for bankruptcy under Chapter 13 is a good option.
