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Category: Chapter 13
Credit repair strategies after filing for bankruptcy

On Behalf of O’Brien Law Firm, LLC

Posted on: May 9, 2018

People in Mississippi with bankruptcies on their records naturally await the day when their credit reports no longer show their defaults. The Fair Credit Reporting Act allows credit bureaus to report bankruptcies for up to 10 years from the date of filing. Until then, former debtors can take steps to improve their credit ratings and potentially remove bankruptcies from their records.

A certified financial planner said that Chapter 7 bankruptcies remain on record for 10 years, but Chapter 13 cases can come off records after only 7 years. People might have the ability to remove these events from their credit reports if the credit agencies have recorded them inaccurately. To begin, a person would examine credit reports from all three major credit reporting companies. If any errors are present, then the person could dispute the entry. A credit agency’s inability to verify a bankruptcy might enable a person to have the record removed. Another tactic involves contacting the court house where the bankruptcy filing took place. If the court did not verify the bankruptcy for the credit agencies, then it would be an unverified entry. After obtaining a written statement about this, a person could ask the credit bureaus to erase unverified entries.

Whether a bankruptcy remains on record or not, people have the ability to improve their credit ratings by paying bills on time or early. Avoiding new debts could also help people keep their records clean.

A person contemplating bankruptcy may wish to consult an attorney. A legal evaluation of the person’s finances might show that a Chapter 13 filing could pave the way to a fresh financial start. The attorney may help the person create a manageable payment plan that repays creditors at least partially before the court dismisses remaining debts.

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Tax debt and bankruptcy

On Behalf of O’Brien Law Firm, LLC

Posted on: April 20, 2018

Mississippi residents who find themselves with debts they cannot afford to pay have the option of voluntary bankruptcy. A voluntary filing means that a debtor chooses to file for bankruptcy without being petitioned to do so by a creditor. While bankruptcy can wipe out many types of debt, some debts are excluded. For example, taxes owed are often not allowed to be dismissed in bankruptcy. It all depends on what type of taxes, what type of bankruptcy and whether or not the taxes in question meet some very specific criteria.

For individuals and couples, there are generally two types of bankruptcy. Chapter 7 dismisses allowable debt and liquidates some assets to pay creditors. On the other hand, Chapter 13 requires making payments to creditors for a period of time under an affordable payment plan. When the payment plan is completed, remaining debt is dismissed.

Taxes can sometimes be eliminated by bankruptcy, but there are very stringent rules about this. Generally, taxes can be discharged if they are associated with a tax return that was due at least three years before the bankruptcy was initiated and filed at least two years before the bankruptcy. If an associated return was never filed, the taxes cannot be discharged. The taxes must also have been assessed at least 240 days before bankruptcy was filed.

This is only a partial list of the criteria that must be met for taxes to be dischargeable. Additionally, the rules could be different if the bankruptcy is involuntary.

When someone is considering bankruptcy, they might not have the option of filing for Chapter 7 if they do not meet the income requirements. Chapter 13 is considered to be bankruptcy for wage earners who have steady income and can make payments under a payment plan. A lawyer could help a debtor decide which type of bankruptcy to file.

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Bankruptcy and credit myths

On Behalf of O’Brien Law Firm, LLC

Posted on: March 21, 2018

People in Mississippi who are struggling with debt might hesitate to file for bankruptcy because of certain myths they believe about bankruptcy. There are a number of misconceptions about filing for bankruptcy and what happens to a person’s credit afterward.

The main impact of a bankruptcy on a credit score is the bankruptcy itself. In other words, the score is unlikely to be mitigated by positive information on the credit report. The amount of debt discharged may affect the severity of the drop in credit score. Furthermore, debts that cannot be discharged, such as student loans, will remain on the report. However, it is important to remember that a bankruptcy eventually falls off the credit report. A Chapter 7 bankruptcy remains on the credit report for 10 years. All other information, including a Chapter 13 bankruptcy and things like liens and judgments discharged in bankruptcy, are removed from the report after seven years.

Even while the bankruptcy is still on the report, it is possible to improve the credit score significantly. It is possible to begin rebuilding credit with a secured credit card or a loan and by paying all bills on time. In the end, while bankruptcy represents a short-term hit on a person’s credit, getting free and clear of that debt may allow a person to rebuild a stronger credit record than before.

Another misconception people might have about bankruptcy is that they will lose all their assets. Even in a Chapter 7 bankruptcy, certain assets are exempt, but in a Chapter 13 bankruptcy, a person may be able to keep assets such as a home. Filing for bankruptcy can halt, at least temporarily, actions such as foreclosures, and the person works out a plan to pay creditors over three to five years. This plan must be approved by the court and is supervised by a bankruptcy trustee.

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Americans are piling up credit debt

On Behalf of O’Brien Law Firm, LLC

Posted on: March 14, 2018

Mississippi readers with credit card debt are not alone. According to a report by WalletHub, in 2017, Americans added the most credit card debt since 2007. Further, the Federal Reserve estimates that the total amount of U.S. credit card balances currently exceeds $1 trillion.

WalletHub reports that Americans added $92.2 billion in credit card debt in 2017. Of that, $67.6 billion was added in the final quarter, which represents the highest one-quarter jump in three decades. The latest numbers are part of a trend. Between 2015 and 2016, U.S. credit card debt increased by $44 billion.

According to experts, one reason for the sharp increase in debt is that charge-offs, or uncollectable debts, are at historically low rates. This means that banks feel more comfortable extending credit to Americans with subpar credit scores. Another reason could be medical expenses. According to the Centers for Medicare and Medicaid Services, Americans were responsible for paying $338 billion in out-of-pocket health care costs in 2015. These costs included deductibles, co=pays, office visits and uncovered medical procedures. Apparently, many people paid for those costs with credit cards. WalletHub reports that 62.3 percent of Americans say health care expenses make up a portion of their credit card debt.

Mississippi residents who are seeking relief from credit card debt may wish to consider filing for Chapter 13 bankruptcy. Under this chapter, consumers repay their obligations over a period of three or five years pursuant to a court-approved plan. Any remaining credit card balance would generally be discharged upon the successful completion of the plan. An attorney can outline the eligibility requirements.


Source: Yahoo Finance, Credit card debt has now reached pre-recession levels“, Brittany Jones-Cooper, March 8, 2018

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Federal Reserve chair discusses student loan debt

On Behalf of O’Brien Law Firm, LLC

Posted on: March 8, 2018

Some people in Mississippi may be struggling to pay off their student loans, but these obligations are generally not dischargeable in a bankruptcy. The total amount of student loan debt in the United States has reached $1.4 trillion carried by 40 million people. In the 1970s, Congress began reducing the ability of borrowers to discharge student loan debt. It is only allowable in cases of “undue hardship”. What this is has never been defined, but courts have traditionally set very stringent guidelines.

On March 1, Federal Reserve chairman Jerome Powell spoke before the Senate Committee on Banking, Housing, and Urban Affairs and said he could not explain why student loans were not dischargeable. However, he said that it was not a change he could make in his position although Congress could address it.

Sen. Brian Schatz asked Powell about the effect the student loan debt could have on the economy. Powell said that on an individual level, it hurt people’s credit ratings and their economic lives over the long term. As for the economy as a whole, he said the amount of debt could hinder growth. Powell is not the first financial expert to express concern about student loan debt. For example, the president of the Federal Reserve Bank of New York has talked about its effect on economic mobility.

While a person may currently be unable to discharge student loans in bankruptcy, restructuring debts under a Chapter 13 bankruptcy might free up enough cash to stay on top of payments. People who are struggling with debt might want to talk to an attorney about how this type of bankruptcy could work for them. Filing for bankruptcy automatically stops any debt-related action against a person including foreclosure. Chapter 13 bankruptcy allows a person to keep some assets and pay off creditors over three or five years.

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