Just this week comedienne Amy Schumer posted this note to her Instagram “Today I bought my father’s farm back.” When Amy was nine her family filed for bankruptcy and lost the farm in the process. If you are struggling with bankruptcy or foreclosure, it’s important to remember that you can move on after it.
Amy Schumer and Moving Forward After Bankruptcy
While Amy Schumer’s story is a different one due to her fame and subsequent wealth, the ability to move forward after bankruptcy is not impossible. One of the biggest hesitations with filing for bankruptcy is the amount of time it takes to restore your life and your credit. But it’s important to remember that while the timelines might feel long, it is possible to recover and to recover in a much healthier financial position than you were prior to filing.
According to the Fair Credit Reporting Act, a bankruptcy will remain on a debtor’s credit for up to ten years after your filing date. A Chapter 13 bankruptcy is typically removed from a debtor’s credit report after seven years. Remember that these timelines are from the day you file your case, not the day it is discharged, which helps you get through it a little faster. Since most Chapter 13 bankruptcies last three to five years because of the repayment schedule, chances are a Chapter 13 will only appear on a credit report for another two to four years after completing it.
Move Forward Emotionally
There are a lot of emotions that go into filing for bankruptcy. It’s important to realize that bankruptcy is not the end of the world. In fact, it’s a way to move forward without the stress of creditors breathing down your back. Here are some tips for how to move forward.
Stop the Guilt Trip
It’s not uncommon for people to feel feelings of disappointment and failure when they declare bankruptcy. These are tough economic times. In 2010, U.S. personal bankruptcy filings rose by 9 percent. That translates to 1.53 million bankruptcy filings. According to a 2011 survey by FindLaw.com, one in eight adult Americans (13 percent of the population), consider filing for bankruptcy. You are not alone, so stop feeling guilty, or as if you have failed.
Stay Positive
Focusing on what you have – the ability to move forward can help you remain positive. In addition to this, surround yourself with positive people.
Pay Your Bills!
Chances are you’ve learned from your past wrong-turns when it comes to money. Now that you have a clean slate, you have the opportunity to remain diligent about your finances. That means paying bills on time, creating a budget, and monitoring spending. It might be a good decision to work with a financial advisor to get some tips on how to better manage your cash flow.
Use a Secured Credit Card
Bankruptcy can mean a hard hit to your credit. A secured credit card allows you to deposit an amount of money into a bank account, which acts as your credit limit, thus allowing you to pay down debts quickly and also rebuild your credit as you do it.
Hesitations About Filing Bankruptcy?
You might be hesitant about filing for bankruptcy, especially knowing how long it can take to recover. But bankruptcy can be a very good thing for a lot of reasons. Here are some instances when bankruptcy can be helpful:
Liabilities Are More Than Assets
Tayne advises on filing bankruptcy when consumers owe so much that their liabilities are far higher than the value of their assets. Why? Because in these cases, it can be impossible for a consumer to actually catch up to their debt.
“If income is far less than expenses, if there is no end in sight even if I help them cut their expenses, then bankruptcy might be the only option,” says Tayne. “If their income will never let them meet the requirements to pay even the minimal amount of what they owe each month? Then bankruptcy might be their only choice.”
Negotiations Don’t Work
It’s always advised that before you decided to file for bankruptcy, that you try to work things our with your creditors. Creditors are often inclined to help out consumers as long as consumers are active in doing so. Many creditors are able to reduce the amount of money owed if you are able to prove you are struggling financially. You might need to provide copies of your most recent paycheck stubs and bank statements, or anything that will prove that your income has fallen or that your savings are depleted to your creditors before they are able to offer assistance.
This is the first step you should take in trying to deal with debt.
But if your creditors are not willing to negotiate, the only option you may have is to file for bankruptcy protection. After you file, your bankruptcy trustee will be responsible for negotiating with the people you owe. A lot of times, these professional negotiators are more able to convince creditors to forgive at least some of your debt.
A Job Loss or Serious Illness
Job loss or serious illness can be devastating – and not just emotionally, but also financially.
Bills and debt tend to pile up quickly during these times, which can make it impossible to generate the monthly income you were once used to.
If job loss, medical emergency, or other financial disaster has made it impossible for you to come up with a monthly income, and there is no way that you will be able to recover in a quick amount of time, then bankruptcy can provide the relief you might need to help you recover from these financial setbacks.
Recovering After Foreclosure
Foreclosure can be a devastating experience, but recovery is possible! Here are some ways to prepare for the aftermath.
Damaged Credit
It can take between three and seven years for your credit score to bounce back. And the lower your initial score, the less time will be needed for it to recover. For example, a consumer with a pre-foreclosure score of 680 will take three years, while a consumer with a score of 720 or above will take about seven years. In the meantime, there are some habits you can learn to rebuild your credit: build an emergency fund of 6 months, pay your bills on time, and use credit cards wisely.
You Might Receive Higher Interest Rates
After going through foreclosure your interest rate can increase as much as 30 percent. If your credit record is good other than the foreclosure this rate can drop to a lower amount within two years.
Potential Employers
You might have to disclose your foreclosure to potential employers because they often perform credit checks if they are hiring for a job that requires the person to be financially responsible – such as an accountant position or even cashier. It might be in your best interest to be completely up front about this, and maybe even helpful to explain how the foreclosure has helped you change your habits.
Watch for a Tax Bill
In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act, protecting foreclosed homeowners from being taxed in some instances. But that law expired this year, so your forgiven debt may be considered taxable income. But there are exceptions and if you can prove you’re insolvent, some or all of your forgiven debt might not be taxable.
Avoiding Foreclosure
There are steps you can take to avoid home foreclosure. You should immediately contact your lender if your circumstances change due to a loss of job or other unforeseen circumstance and you’re unable to pay. Remember that mortgage lenders would rather you stay in the home, rather than try to recoup the money on the loan via a foreclosure sale. Because of this, they are willing to work with homeowners that are willing to work with them. A lot of times mortgage lenders will still work with you even if you’ve missed three monthly mortgage payments.
Working With a Bankruptcy Attorney
Foreclosure and bankruptcy can be hard to understand. Because of this, it’s highly advised that you work with a bankruptcy attorney that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time. Let the lawyers at RHM LAW LLP walk you through the process so you can achieve the best outcome possible.