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3 tips for building credit after filing bankruptcy
If you struggle to stay on top of your bills every month and feel like you will never get out of debt, bankruptcy may be a helpful option. There are two types of consumer bankruptcy, which include Chapter 7 and Chapter 13, and filing may help you move forward financially.
The Federal Trade Commission states that filing bankruptcy could help stop repossessions, foreclosures, utility shut-offs, wage garnishment and other debt-related activities. Although bankruptcy is helpful for many, it can damage your credit score, which is why you will want to take steps to rebuild your credit after filing.
1. Keep an eye on your credit score
Check your credit score and review your credit report on a monthly basis. While your bankruptcy filing will stay on your credit report for several years, you should still negate any errors or issues on your reports to ensure an accurate reflection of your creditworthiness.
2. Use debt carefully
You may feel hesitant to use debt after you finalize the bankruptcy process but doing so carefully can help you rebuild your credit. Try using a secured credit card or ask someone to co-sign on a loan application.
How may I keep my car during bankruptcy in Maryland?
Maryland residents may ask the court to exempt their vehicles when filing for bankruptcy. Your car's value and the amount left on an auto loan may determine whether you could keep it. The type of bankruptcy you file may also affect your ability to protect your vehicle.
Section 11-504 of Maryland's Courts and Judicial Proceedings code allows residents to exempt personal property up to $5,000. If your car's equity does not exceed $5,000, bankruptcy may not affect it. You may find whether your vehicle's value falls within the exemption limit by subtracting your loan balance from your car's market value. If the dollar amount does not exceed $5,000, you may keep your car.
Keeping vehicles with loans in Chapter 7 bankruptcy
As noted by Experian.com, bankruptcy petitioners must show that they have not fallen behind on car payments. A delinquent auto loan may result in repossession, and bankruptcy may not protect it. If you could catch up on past-due payments, however, you may keep your vehicle.
What are the leading causes of bankruptcy?
Collection calls may at first cause a nuisance, but they may soon become a bigger issue. When debtors want to collect, they may take legal action against you. If this is where you find yourself, you may want to consider filing bankruptcy.
Unlike years ago, the legal act of declaring bankruptcy no longer carries a negative perception. While you may not want to consider it, if your debt situation is dire enough, it may serve as a viable option to help you get a fresh start. Your debt may have from one of these common scenarios many others face.
What does the court consider unsecured debt?
A common source of overwhelming debt comes from unsecured accounts. This means that a creditor gave you a line of credit without requiring collateral. If you have a credit card, you have an unsecured line of credit. Credit card debt is on the rise and a leading contributor to needing to declare bankruptcy as late fees mount and interest rates rise.
A look at what an automatic stay can and cannot do for you
When you file for bankruptcy, you trigger an "automatic stay," your protection against creditors and others who wish to collect money from you.
However, the automatic stay is not all-powerful. Here is a look at what it can and cannot do for you
Stops wage garnishment
An automatic stay will stop all wage garnishment proceedings. If you have multiple garnishments, you can begin taking home your entire salary once the automatic stay is in place.
Halts foreclosure
Perhaps you worry about the threat of foreclosure. Even if your financial institution has already begun the process, the automatic stay will put an immediate stop to it. Keep in mind that once the stay is lifted, the foreclosure process may resume. Consider filing Chapter 13 to get around this activity.
Delays disconnection of utilities
Is the utility company preparing to turn off your service because you are behind in your payments? The automatic stay can prevent this from happening for at least 20 days, allowing you time to pay your bill.
The 341 meeting is an early stop in your bankruptcy journey
Soon after you file for Chapter 7 or Chapter 13 bankruptcy, you will attend the 341 meeting.
You may feel a bit anxious, wondering what this is all about. Be assured that this meeting is a good first step on your journey to a better financial future.
Naming the meeting
The 341 meeting, or meeting of creditors, takes its name from Title 11, Section 341 of the United States Code. It is this section that requires debtors to meet with creditors. However, creditors usually decline to attend since they lose no standing in a bankruptcy case if they choose not to appear.
Meeting the trustee
For you, the primary benefit of attending this hearing is to meet the trustee from the Office of the United States Trustee who is in charge of administering your case. The trustee will ask questions that you must answer truthfully under penalty of lying under oath. The questions concerning your property, liabilities and current financial condition will help the trustee conduct his or her responsibilities efficiently.
Are there any downsides to zero-interest credit cards?
If you are like many Marylanders who have decent credit scores, you undoubtedly receive stacks of credit card applications in the mail every single month. Many of these may offer you attractive interest rates, such as 0% APR for a year or 0% APR on balance transfers.
Having high-interest credit cards can be demoralizing. After all, even when your pay more than your monthly minimum, your balances may seem never to decrease. According to reporting from NerdWallet, though, transferring these balances to a 0% APR card may make a great deal of financial sense.
Read the terms carefully
The news may not be entirely positive, as many zero-interest credit cards come with restrictions and drawbacks. Consequently, it is imperative to read the terms of your offer carefully. Because credit card companies have a legal obligation to disclose rate hikes to you, the offer should tell you exactly what to expect.
What are some alternatives to declaring bankruptcy?
When you feel the pinch of unmanageable debt, worry takes over. You might conclude your only choice is to go bankrupt.
In reality, there are options besides filing for Chapter 7 or Chapter 13. Here are a few you can try instead of declaring bankruptcy.
Negotiating with creditors
Working directly with lenders is always an option. These entities have an inherent interest in seeing you thrive. Thus, there is a good possibility they are willing to alter the structure of your payments. Be frank and pleasant with their representatives about your situation. Tell the person on the other end of the line how much you owe and what you can afford. The response could be a way out.
Working with a credit counselor
Another path worth exploring is guidance from someone knowledgeable about delicate financial situations. A fiscal advisor can communicate with creditors on your behalf. Together, they may be able to craft a workable repayment plan. Choose a professional who is a member of a reputable credit counseling organization.
If you cannot afford care, does a hospital have to treat you?
Most emergency rooms have physicians that know how to triage patients. For that reason, it often makes sense to visit one for any life-threatening condition. You even may choose to go to the ER for ailments that are less serious.
According to the Centers for Disease Control and Prevention, roughly 130 million Americans go to ERs every single year. Many of these, of course, have neither health insurance nor enough savings to pay for emergency medical treatment.
A duty to provide emergency care
Federal law requires all emergency rooms that receive federal funding to provide medical treatment during an emergency. Therefore, regardless of whether you can pay, you can expect to receive care for any of the following:
- An injury or illness that is severe or life-threatening
- An injury or illness that seriously impairs bodily functions or major organs
- Childbirth that is imminent
What does inflation mean for your credit score?
If your dollar does not seem to go as far as it did just a few months ago, your mind is not playing tricks on you. In fact, according to reporting from CBS News, the prices of goods and services have climbed faster in the past year than during any period in the previous four decades.
By itself, inflation should have no effect on your personal credit score. That is probably not true for the effects of inflation, however. Specifically, if you must pay more for the items and services you need to live, you may have little choice but to reach for your credit cards.
Your credit utilization ratio
Your credit utilization ratio is a major component of your overall credit score. This ratio compares the credit you are currently using to the credit you have available. For example, if you have a credit card with a $1,000 limit and have an outstanding balance of $500, your credit utilization ratio is 50%.
How may a bankruptcy affect my future medical care?
Unpaid medical debts may result in overwhelming financial hardships. Many Americans file for bankruptcy to find relief from unmanageable medical bills or to avoid losing their homes. As noted by Credit Karma, some bankruptcy petitioners may wish to continue paying their medical bills because it helps them maintain their relationships with health care providers.
When you file a bankruptcy petition, you must list all your outstanding debts. Based on whether you file for a Chapter 7 or Chapter 13 bankruptcy, your doctors may not receive payments for outstanding balances. In some cases, health care providers may stop seeing patients with unpaid or discharged debts.
Chapter 7 may discharge medical bills
Maryland residents must pass a means test to qualify for Chapter 7 bankruptcy. If your household income is below the average annual income for a Maryland family of the same size, you could file for Chapter 7.
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