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Month: January 2020
When should I file for bankruptcy protection?

On Behalf of O’Brien Law Firm, LLC

Posted on: January 14, 2020

Many people consider bankruptcy protection as the last resort. It remains on your credit report for up to 10 years, depending on which chapter you file. It can be a difficult yet wise decision if you are struggling to make ends meet.

Here are a few signs that may suggest filing bankruptcy is a good solution.

Decrease in monthly income

A permanent change in monthly income may be tough to adjust to. It could be the result of job loss, reduced hours, a job change or retirement. If you are unable to adapt to a permanent reduction in monthly income, bankruptcy may help. It could relieve reoccurring financial struggles, such as mounting credit card debt.

Increase in monthly debt

The stigma of bankruptcy often keeps consumers in a whirlpool of mounting debt. Many opt for overuse of credit cards to pay for necessities, such as groceries and utility bills. This can escalate into out-of-control debt. During challenging financial times, you may have to pay credit card payments late or skip them altogether. This gives the credit card companies the ability to raise your interest rate.

Bankruptcy may offer financial relief when struggling with medical expenses or student loan debt. Bankruptcy forgives most medical debts. Although it is rare for someone to have student loan debt discharged, filing bankruptcy may temporarily suspend payments. Additionally, you may be on a better track to make your student loan payments after bankruptcy has eliminated other debts.

Change in living arrangements

Changes in your living arrangements often affect monthly expenses. Death, divorce or a grown child moving back home are typical scenarios. If you own your home and have monthly mortgage payments, it is important to stay current. Falling behind by a few months will affect your ability to maintain regular payments and can lead to foreclosure.

Banks and mortgage companies must abide by the decision of the bankruptcy court. Do not hesitate to file bankruptcy to protect your most important asset – your home.

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Could filing bankruptcy be a good thing for your credit?

On Behalf of O’Brien Law Firm, LLC

Posted on: January 3, 2020

Deciding to file bankruptcy is a big decision. It is one you cannot make lightly without considering all the consequences and how filing for bankruptcy in Mississippi will affect you in the years to come. While filing may help you to take care of the problems you currently have with your credit, you may wonder what it will do to your credit afterward. 

The effect that a bankruptcy may have on your credit can actually be positive. To begin with, you will have the debts removed from your credit report, including any collections. This clean wipe can help quite a bit. However, you should note, you will have the bankruptcy show up on your credit report, which is still a negative. If you file Chapter 7, it stays on your credit report for 10 years. If you file Chapter 13, it stays on for seven years.

The impact

The impact of a bankruptcy on your credit depends on which one you file. With a Chapter 7, you may see a rebound in your score almost right away because you have so much removed from your report that is negative. With a Chapter 13, since you repay some or all of your debts, it takes a little more time for it to have a positive impact on your credit.

Future filings

Furthermore, once you file bankruptcy, you cannot file it again for eight years, which tells creditors that they do not have to worry about that. This makes you less of a risk because they know for sure that you will not be able to get rid of a debt with them through bankruptcy. Essentially, it means they will get any money you owe them.

Filing bankruptcy is something you should do only with serious consideration, but it can be a good way to get your credit back on the right track.

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Qualifying for lien stripping when filing for bankruptcy

On Behalf of O’Brien Law Firm, LLC

Posted on: January 2, 2020

Taking out a second mortgage may have seemed like a reasonable financial solution at the time, but as your debt level has risen, it may now represent an unmanageable burden. Bankruptcy may offer you an opportunity to eliminate your second mortgage through a process called lien stripping.

However, filing for bankruptcy does not automatically qualify you for lien stripping. There are requirements that you must meet to be eligible for elimination of your second mortgage.

Chapter 13

A handful of states allow filers to strip a second mortgage when filing Chapter 7 bankruptcy: Georgia, Florida and Alabama. However, in Mississippi, Tennessee and all other states, you can only eliminate a second mortgage when you file Chapter 13. You may qualify for Chapter 13 if you have a regular income, but your debt level is now beyond your control.

Home value
You can only eliminate a second mortgage through Chapter 13 bankruptcy if the current value of your home is less than what you still owe on the first mortgage. If this is the case, it means that your second mortgage represents unsecured debt, similar to medical bills or a credit card balance. Chapter 13 bankruptcy involves reorganizing your unsecured debt so that you pay it off gradually by making monthly payments over a period ranging from three to five years.

Lien stripping is only available if the value of your home has dropped since you took out the second mortgage. If you still have equity in your home, you cannot eliminate your second mortgage through bankruptcy because it does not qualify as an unsecured debt.

In addition to these requirements that pertain specifically to lien stripping, you must undergo credit counseling within 180 days before filing for bankruptcy. This is a requirement imposed by the Federal Trade Commission and, with a few exceptions, applies to all Chapter 7 and Chapter 13 bankruptcy filings.

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