Category Archives: Chapter 13 Bankruptcy

Can I Rehabilitate My Credit Report after Bankruptcy, and How?

Yes, you can rehabilitate your credit report after bankruptcy. Even though the bankruptcy details remain on your credit report for as much as ten years, you can immediately begin to improve your score after filing for bankruptcy. This is quite important considering the fact that credit companies, including car finances and mortgagors, will examine your credit report. Credit reporting companies generally look at your outstanding debt, your payment history, your length of credit history, and also how much new credit you are seeking; all of these are put together to determine your credit score.

 
The American economy in a sense is paradoxical: While one goes into bankruptcy because he or she has defaulted in paying off debts, one of the fastest means of rehabilitating your credit report is to spend even more and establish a better credit history. It is believed that your power to spend more after bankruptcy translates into increase earning power to show you are more credit worthy and responsible.

 
But before applying for new credit cards, try to purchase within your means, paying off your bills in full at the end of every month; the essential thing is to improve your repayment habit. Paying off debts in full when they are due, and making sure your debt is as low as possible when compared to your available credit, will enhance your ability to earn more, and that will put you in a better light when it’s time to borrow money. In other words, always try to spend within your means before you borrow more money. Adopting this approach when you assume more debt will help to rehabilitate credit report as you will make your payments in full and on time; and eventually, if this process is continued and improved upon, your credit report will become much better.

 
Talk to a professional bankruptcy attorney or credit counsel to properly guide you in your quest to rehabilitate and improve on your credit rating. Going into bankruptcy is not an end in itself, but an opportunity to make a fresh start, and will need to make wise financial short and long term decisions.

 
Summary
The blog explains that it is possible to rehabilitate and improve on the credit report. It also highlights the steps necessary to be taken to achieve this over time.

 

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Attorney Eli Tamkin is a Cleveland bankruptcy lawyer.  He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.

Can I Keep My Car if I file for Bankruptcy?

The law permits you to keep one vehicle whose value or equity after reducing any lien for financing is equal to $3,675.00 or less. You can determine the general value of your car by Googling NADA or Kelly’s Blue Book and checking it out there. The trustee may valuate your car differently than that amount, but it gives you a general idea as to the value. You should also reduce the value based on the number of miles driven and the condition of your vehicle. The vehicle exemption under Ohio law protects a vehicle with a value up to $3,675.00; you will be able to add onto that another exemption, called, “wild” car of up to $1,225.00.

 
If the equity in your car as discussed above is less than the combined exemptions listed, you will be able to keep your car. But if the equity in your is over that amount, and you still want to keep your car, then you may have to pay to the trustee the difference between the value and your exemptions. So, for example, if after your car is paid off in full from financing, it is worth $6,000.00; and you apply the car exemption of $3,675.00 and the wild card of $1,225.00, the total value of the car that will be protected totals $4,900.00. Subtract that amount from $6,000.00, the Blue Book value of your car. So in order to keep your vehicle, you will have to pay approximately $1,100.00. However, that amount may vary depending on how much the trustee has valuated your car. Usually the trustee allows installment payments to be made. If you do not pay the trustee, the trustee may file a motion in court to sell your car at an auction.

 
On the other hand, if your car is being financed you can also deduct the amount you owe on the note to further reduce the equity of the car. An important point to note is that you are behind in your car payments, a Chapter 7 Bankruptcy will only stall the collection proceedings temporarily, and the finance company may file a motion to repossess your car. Unless you get current on your payments before you file, the financing company may eventually repossess your vehicle, unless your Attorney works out a payment arrangement. A Chapter 13 bankruptcy on the other hand is designed to allow you to pay off the prearrange over a period of time, usually 3-5 years; in that case you would get long term relief for your car payments with a Chapter 13.

 
To get a better handle on what you are entitled to with respect of Ohio law and the total motor vehicle exemption ceiling, talk to an attorney proficient in bankruptcy laws and processes; this would give you a clear idea of what the status of your car before you file for bankruptcy.

 
Summary
The blog explains when the trustee can “take” your car and how you can avoid that. It avers that it depends on the condition of your vehicle at the time you file the bankruptcy and the exemptions that come into play to protect that value.

 

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Attorney Eli Tamkin is a Cleveland bankruptcy lawyer.  He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.

What is a Reaffirmation Agreement in a Bankruptcy?

Many times when a person files a Bankruptcy, the bank will send him or his attorney a document called a “reaffirmation agreement.” With this, the bank is asking him to reaffirm the mortgage debt if he wants keep his home.  Many times the reaffirmation agreement will include better mortgage terms than the original note—this is done by the bank to induce your agreement.

Under the law, when one is in a bankruptcy, he is not required to reaffirm this debt or any other, but it is another option for him to keep his home. One should file the signed reaffirmation agreement with the court prior to the discharge, or within 60 days after the 341 creditor’s meeting. If one reaffirm’s his mortgage note and then goes into default because he cannot afford to make the payments, he will be liable for the note even though he had filed a Chapter 7 Bankruptcy.

There are instances when mediation is better for a homeowner than signing a reaffirmation with the bank (see below, for discussion on mediation).  For example, sometimes a person can discharge his mortgage note in a bankruptcy and then continue on to mediate the terms of his monthly payment, even though he may not liable for the note if he defaults; whereas, if a person signs a reaffirmation agreement, he will still be liable for the mortgage note if he later defaults.

Summary

When a homeowner is in bankruptcy, he may sign a reaffirmation agreement; many times, the terms in the reaffirmation agreement will be better than the original note.  There are instances when it is better for a homeowner to mediate his mortgage terms in court than to sign a reaffirmation with the bank in bankruptcy.

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Attorney Eli Tamkin is a Cleveland bankruptcy lawyer.  He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.

Mediation in Ohio to Stop Foreclosure in lieu of Chapter 13 Bankruptcy

I read an interesting article called “Filing Bankruptcy: 9% Rise in Personal Bankruptcy Filings with Chapter 7 More Popular than Chapter 13”, which discusses the rising interest of Chapter 7 over Chapter 13 bankruptcies.

In the article, the author correctly states that the Bankruptcy Law was amended in 2005 to make it more difficult for some people to file Chapter 7s and to steer these people instead into Chapter 13s.  Generally,  Chapter 7 involves the discharge or wiping out of ones unsecured debts (credit cards, medical bills, etc.), while Chapter 13 involves paying off ones debts over time.

The new law was intended to prevent some Chapter 7s in cases where the debtors have higher incomes, because presumably they could afford to pay off some of their debts.  The author of the article comments that in fact the opposite has happened:  Despite the new law, more people have filed Chapter 7s since 2005 due to the significant housing slump and deep recession and fewer have filed Chapter 13s then expected.

Historically, Chapter 13s have been used to save ones home from foreclosure because through it one could pay off his arrearage over 3-5 years.  In my opinion, a reason for the decrease in Chapter 13s in Ohio is due in part to the implementation of the mediation program in foreclosures.  Mediation permits an individual to get out of foreclosure by negotiating in court directly with the bank without the need for a Chapter 13. I would refer the reader to the 10 questions and answers  where I discuss the strategic use of mediation to defend oneself in a foreclosure.  In Ohio, Chapter 13s will continue to take a back seat in foreclosure defense while foreclosure mediation I believe will become increasingly popular.

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Attorney Eli Tamkin is a Cleveland bankruptcy lawyer.  He has been practicing law since 1989 and in Cleveland Ohio since 1994.  Since then, he has dealt with a variety of legal issues,  including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well.   His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.

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