What To Expect After Filing Bankruptcy
When you file bankruptcy, you should feel an instant sense of relief. Your bankruptcy attorney has filed the paperwork, and the court has sent out notices of the filing to your creditors. The Automatic Stay immediately goes into effect, which means your creditors are no longer allowed to contact you. You are on your way toward a brighter financial future. Below, we address some common concerns clients have shortly after filing.
The Post-Bankruptcy Timeline
If you file a Chapter 7 or a Chapter 13 bankruptcy, you will receive notice within a week, of your 341 meeting date. The 341 meeting date is typically 45 days after the bankruptcy is filed. The meeting only takes about 10 minutes and your attorney will attend with you. The advance notice is provided so you can make sure to clear your schedule. You can read further in our blog about what happens at a 341 meeting if you like.
Note also that the trustee may request additional documents at the 341 meeting. These may be bank statements, or other information related to assets or debts. The trustee will typically continue the meeting for a few weeks. So long as you provide the requested documentation within 14 days, you do not have to attend a continued 341 meeting.
Chapter 13 Payments
If you have filed Chapter 13, you will need to make your first Chapter 13 payment within 30 days of the bankruptcy filing. Because it takes seven days for your payment to post, you should make sure to mail your payment no later than 21 days after the bankruptcy was filed. Making on time payments in Chapter 13 is a key part of not having your Chapter 13 case dismissed. You will be provided guidance as to how to make a payment.
Taking The Financial Management Course
Once you file, you will need to take a second online course called the Financial Management course, or the Post Bankruptcy course. This is true of Chapter 7 or Chapter 13. The course is for education purposes only, but it is a requirement that it is completed prior to the entry of your discharge. A failure to take the course in the required time will result in you not receiving your discharge. Taking the Financial Management course should be done prior to your 341 meeting. Our firm pays for both the Credit Counseling course you take before filing, and the Financial Management course you take after filing.
Reaffirming Vehicle Loans
In Chapter 13, there is nothing to do regarding your vehicle except to make your monthly Chapter 13 payment. If you have decided to keep your vehicle in Chapter 7 bankruptcy, you may need to complete a Reaffirmation agreement with the lender. Essentially, if you want to keep your car, and if the car has a loan, you must complete and submit the Reaffirmation agreement as quickly as possible after filing. In any case, it must be completed prior to the entry of discharge. In a Chapter 7, this means you have roughly 60 days to complete the Reaffirmation agreement and return it to the lender with enough time for them to review it and file it.
While we will assist with completing the Reaffirmation agreement, you will need to request it from your lender. Steps should be taken toward this as quickly after you file your bankruptcy as possible—certainly no later than two weeks after filing. It will take time for the lender to draft the agreement and send it to our office.
When you reaffirm a vehicle loan, you are re-obligating yourself to the debt. This is done under the same interest rate, terms and repayment period. Additionally, once you reaffirm, any payments you make on the loan will be reported by the lender to the credit bureaus and will help to rebuild your credit.
Surrendering A Vehicle
If you are surrendering a vehicle in bankruptcy, you will simply need to reach out to the lender and make arrangements for them to pick up the vehicle. In the alternative, you can deliver the vehicle to them. This process is quite painless, but you should take steps shortly after filing, to complete the process.
Making Car Payments
In Chapter 13, your car payments are built into your Chapter 13 payment. In Chapter 7, if you plan to keep your car in bankruptcy, you will find that until your bankruptcy case closes, you will most likely need to make your monthly car payments to the bankruptcy division of your car lender’s office. This is a procedural matter for the car lender, and is a temporary payment situation until your cases closes. Once your case closes, you can resume auto-draft or any other type of payment method available prior to your bankruptcy filing.
Redeeming A Vehicle Loan
You may also choose to Redeem a vehicle loan in Chapter 7. This is a process by which you take out a new loan with a redemption company such as 722 Redemption. They will pay off your current vehicle loan, and going forward you will pay the new loan and keep the car. This is usually done to avoid reaffirming a vehicle loan with a very high interest rate, lower the loan balance to the blue book value, and may even offer a longer repayment period than a Reaffirmation. If you wish to start this process, you must reach out to a redemption company as soon as possible after the filing of your bankruptcy.
Home Mortgage Concerns
In Chapter 13, you simply make your Chapter 13 payment. In Chapter 7, as opposed to Reaffirmations on vehicles, you can generally keep your home so long as you continue to pay your mortgage. There is a public policy against reaffirming a home loan. The theory behind this is that your bankruptcy filing relieved you of the obligation to repay the home loan. To enter into a large debt immediately after filing bankruptcy may not be advisable. Supposing the housing market crashed after your bankruptcy. If you never entered into a home Reaffirmation, you could simply turn the home over to the mortgage lender and you would not be responsible for any remainder on the loan if the home is upside down.
For this reason, most individuals choose to “Retain and Pay” the mortgage. This means that as long as you continue to make mortgage payments, you are allowed to keep your home. You do not need to sign a home reaffirmation agreement. Additionally, your lender can not foreclose on the property if you are current. Lastly, your mortgage balance will reflect any payments you make, over time.
The only downside to not reaffirming a home loan is that the lender will typically NOT report the payments to the credit bureaus. This means you won’t get credit for your mortgage payments, and your credit score will not reflect them. You can address this yourself at the end of each year by submitting a list of payments you made on the mortgage, to each credit bureau. If the mortgage lender does not dispute them, you will be given credit for the payments on your credit report.
Your Credit Score After Bankruptcy
Everyone is concerned about their credit score after bankruptcy. You will be surprised how quickly your credit score recovers after bankruptcy. Additionally, you will receive offers for credit cards and vehicle financing shortly after your discharge. In most cases, our clients are able to purchase new homes two years after filing bankruptcy. You can read more about Your Credit Score After Bankruptcy on our blog.
The Discharge
In Chapter 7, after replying to any trustee requests for documents, filing Reaffirmation agreements, and taking your Financial Management course, your discharge will be entered. This means your case is officially closed and you have no further obligations in bankruptcy.
In Chapter 13, your discharge will be entered after you make your final Chapter 13 payment.
Speak With A Charlotte Bankruptcy Lawyer Today
If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.
Further Reading
If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.