22 hours 7 min ago

Financial writer Liz Weston (@LizWeston) writes that many people who could benefit from bankruptcy don’t file because of fear and misplaced optimism.  See Fear of Bankrutpcy Holds Too Many People Back.
This is the second time that Liz Weston has suggested that more people consider filing bankruptcy (Do Debt Management Plans Work?), and this is notable since she is something of a financial guru with a long track record of encouraging Americans need to create spending budgets and advising many to seek assistance through credit counseling.
But something has changed in her approach. Maybe she is just seeing the futility of trying to dig out of debt when wages are stagnant, health insurance is non-existent or insufficient to cover ongoing medical bills, and it just seems like wasted effort to pay debts when new ones just spring up overnight.

About 14% of U.S. households — or roughly 17 million — owe more than they own, according to Federal Reserve Bank of New York estimates. Many of these households could benefit from having their debts wiped out, but fewer than 1% of U.S. households actually file for bankruptcy each year. Last year, there were 752,160 personal bankruptcy filings. Researchers refer to this gap as “missing bankruptcies” — the filings that could be happening, but aren’t.

So what is holding Americans back from filing more cases? In a word, fear. Fear of living with bad credit. Fear of the judgment of future employers. But Weston says much of this fear is misplaced.

A bankruptcy filing remains on your credit reports for up to 10 years. But credit scores can start to recover soon after you file. It’s possible to get a VA or FHA mortgage two years after a bankruptcy. Most loans require you to wait at least four years.
People can start to rebuild credit a few months after their bankruptcy case is discharged by getting secured credit cards, which require a deposit, or credit-builder loans, available from some credit unions, community banks and online.

Yes, credit scores begin to recover as soon as the case is filed. Why is that?
There are two reasons bankruptcy enables the healing of credit scores.  First, once a case is filed all negative reporting stops. Creditors no longer report late payments, collection accounts, judgments, and other negative information.
Second, filing bankruptcy improves the single biggest factor in your credit score–the Debt-to-Income Ratio.  About one-third of your credit score is based on how much debt you owe compared to how much income you earn.  The higher that ratio the lower your credit score. Filing bankruptcy eliminates the debt, so the debt-to-income ration is immediately improved.
Weston claims that too many people have an irrational belief that things will get better.

Misplaced optimism can also be a problem. The same hopefulness that causes people to take on too much debt also can lead them to put off the reckoning.

What Weston calls “misplaced optimism” is what I call Around-The-Corner Thinking.  “As soon as I get this debt paid then I can start saving money.”  The problem is, once you pay off that debt or solve that problem, a new set of problems pop up.  So you adjust your plan and will start saving money after that problem is solved, but before you know it yet another problem arises.
The problem with around-the-corner thinking is that it fails to recognize that new problems ALWAYS continue to arise.  That’s actually the norm.  The concept that we can start to achieve financial goals AFTER today’s problems are solved is delusional.  Today’s financial woes never end.  Employers continue to lay off workers. Health insurance companies continues to not pay claims. Recessions continue to occur.
So instead of delaying making contributions to that retirement plan, instead of delaying saving for the house down payment, instead of delaying college until after the credit card debt is paid, start doing that today and consider filing bankruptcy to solve a debt problem that is not going away. Stop being overly optimistic and face the music of you debt problem. It’s not going away.
Am I taking Liz Weston’s advice too far? Gosh, this sounds so bleak!  Well, by all means, we should find ways to pay back debt if possible.  But do you really have a Plan to get out of debt, or is it just unrealistic optimism?
It’s time to stop fearing the debt problem and time to start addressing it realistically.

2 days 1 hour ago

Did you know that it’s possible to file bankruptcy more than once? For former debtors, a bankruptcy petition paves the way for a fresh start and a bright financial future. However, an unexpected turn of events such as sudden illness in the family, loss of income, or closure of business can spark another round of financial burden. 
The good news is that even if you have a prior bankruptcy record, you may still submit a new petition after you fulfill the time requirement specified under the bankruptcy code.
The sections below will help you determine if declaring bankruptcy the second time is the best option given your unique situation. You’ll also find valuable insights as to which types of bankruptcy you can consider depending on the former chapter you filed.
The bankruptcy act stipulated a set number of years that must pass between bankruptcy filings geared towards abuse prevention. Essentially, once you receive your discharge notice from the court, your “bankruptcy” clock is reset and you won’t be eligible for another bankruptcy court discharge until you get past the time gap. 
Time Requirements Before Another Bankruptcy Discharge
How long you’ll have to wait before your loan debt becomes discharged under a second bankruptcy filing will depend on the filings in your credit history, filed chapter, and bankruptcy case outcomes (discharge or dismissal).can you file bankruptcy
For instance, if you have filed for bankruptcy under Chapter 7 in the past, you’ll wait for a fewer number of years than if you’re refiling a Chapter 13 petition in bankruptcy. However, the opposite is true for Chapter 13 filers: the waiting time is shorter if they file a bankruptcy petition under Chapter 13 instead of Chapter 7. 
To avoid complications during a refiling, it’s best to contact a bankruptcy law firm in your area who can advise you on when and how you should begin your second bankruptcy application. 
The main rule is that these time limits apply only to debt discharges and not to your bankruptcy filing per se. To understand this, consider the situations below:
Scenario #1: An individual struggling with debt file for bankruptcy but the case gets dismissed because there was an improvement in his financial problems. 
Scenario #2: A filer received a case dismissal after filing bankruptcy under Chapter 7 and then failing to abide by bankruptcy laws and procedures such as attendance in the meeting of creditors, payment of filing fees, or incomplete paperwork.
Which of the two scenarios would allow you to refile bankruptcy? Although the latter is a negative dismissal, the truth is, both scenarios allow you to file yet again, and since there was no discharge, the time limit does not apply. However, an exemption applies to individuals falling under the second scenario, who must wait 180 days before starting the second bankruptcy process.
If you successfully pay all your unsecured debts, pay back to lenders what you owe, or faithfully abide by your repayment plan, you may be able to qualify for other exemptions from the time requirement. Talk to an experienced bankruptcy lawyer to know if you’re eligible.
Reapplications for Bankruptcy
The biggest hurdle that prevents people from filing for bankruptcy again is the belief that they are ineligible for various reasons as simple as a notation on their credit report. What they don’t know is that they’re missing out on an opportunity to wipe dischargeable debts such as medical bills and credit card debt. 
If you are overwhelmed by such debt problems, reach out to a Northwest Debt Relief Law Firm bankruptcy attorney who can clear these matters for you. If you’re worried about how this affects credit-reporting, your lawyer can inform you on how you can rebuild your credit after bankruptcy.
Another possible roadblock in refiling is the lack of knowledge on bankruptcy options that a debtor can take. If you’ve chosen to declare personal bankruptcy before, you can still consider the same path or explore other chapters of bankruptcy with the help of our law firm. Our bankruptcy attorneys will help protect your assets and properties, discharge your nonexempt loans, or repay your creditor under a new agreement. 
Find a reliable partner in debt management. Contact our office for a free consultation today.
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