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Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for January 21, 2014 Divvy supplier rides its bikes into bankruptcy Hubway’s Canadian Supplier Files for Bankruptcy Retailer Dots Files for Chapter 11

The elderly are less prepared for retirement and deeper in debt than ever before.
The Employee Benefit Research Institute’s 2013 Retirement Confidence Survey reveals that only 46% have saved less than a total of $10,000 towards retirement.
The think tank, in its report entitled, Debt of the Elderly and Near Elderly, 1992–2010, found that the percentage of households with credit card debt headed by someone age 75 or older doubled from 11% in 1998 to 22% in 2010.
A 2010 study from the University of Michigan Law School, called The Rise in Elder Bankruptcy Filings, found that those 65 and older are the fastest-growing segment of the U.S. population seeking bankruptcy protection.
Is it a good idea, or just more of the same?

Caught Between A Rock And A Hard Place
It used to be that the elderly scorned debt. As children of the Great Depression, they knew all too well the dangers of being in debt.
Over time, however, the realities of declining economic fortunes set in.  With fewer traditional pensions to fall back on, easy credit and a need to help younger family members survive financially, parents and grandparents began to march towards the red line of debt.
Bankruptcy Protects Social Security And Retirement Accounts
If you’re receiving Social Security benefits or have a retirement account, it’s not going to be taken when you file for bankruptcy.
In addition, the monthly Social Security benefits won’t be counted as income when deciding whether you make too much to file for bankruptcy to wipe out your debts without making payments through the court system.
Save Your Assets For Next-Of-Kin
You’ve been working your entire life. You want to be able to leave something to loved ones.
You may not be able to protect your assets from creditors in a probate proceeding to the same extent as would be possible in bankruptcy.
For that reason, it may make sense to use a bankruptcy filing as an estate planning mechanism.
Let The Golden Years Be Golden
You’ve got a choice.
You could spend your later years mired in debt, dealing with collection calls and letters from angry people demanding money.
Or you could enjoy some peace and quiet with loved ones, passing the days as you see fit.
As far as I’m concerned, the latter seems like the better choice. Even if you’ve got nothing that the creditors can take, the peace of mind offered by the protection of the bankruptcy laws is a powerful tool.

Want to buy a home after bankruptcy and qualify for a mortgage?
Thanks to various government programs, you can – and a lot faster than you would expect.
The government knows how many people file for bankruptcy each year, and recognizes that preventing them all from becoming homeowners would kill the real estate market.
Luckily there are a number of programs out there to help you get a mortgage after bankruptcy.

FHA Mortgages As Soon As 1 Year After Bankruptcy
Under the Federal Housing Authority’s Back To Work – Extenuating Circumstances program, you can qualify for an FHA mortgage if you filed for bankruptcy as a result of an economic hardship that caused more than a 20% drop in household income:

• for a Chapter 7 bankruptcy, a minimum of twelve (12) months have elapsed since the date of discharge;
• for a Chapter 13 bankruptcy that has gone to discharge, all required bankruptcy payments were made on-time;
• for a Chapter 13 bankruptcy that’s still pending, or a minimum of twelve (12) months of the pay-out period under the bankruptcy has elapsed and all required bankruptcy payments were made on time.

In all other situations, you must wait two (2) years after a Chapter 7 bankruptcy discharge and one (1) year after a Chapter 13 bankruptcy has been discharged or dismissed.
Related:

• FHA Back to Work – Extenuating Circumstances

Mortgages For Veterans
The U.S. Department of Veterans Affairs helps Servicemembers, Veterans, and eligible surviving spouses become homeowners by guaranteeing various home loans provided by private lenders.
Generally, Chapter 7 and Chapter 13 bankruptcies discharged more than 2 years ago may be disregarded for the purpose of a VA loan.
For bankruptcy cases discharged between 1-2 years, the lender will look to your recent post-bankruptcy history of satisfactory consumer payments as well as evidence that the bankruptcy was caused by circumstances beyond your control.
For people in a current Chapter 13 bankruptcy, the lender must document that the applicant has satisfactorily paid on the plan for at least 12 months. Court approval of the new loan is also required.
Related:

• Houston RLC Training Guide
• Lender’s Handbook (VA)

Going To Fannie And Freddie After Bankruptcy
Conventional mortgages tend to be originated under guidelines established by Fannie Mae and Freddie Mac.
If you filed a Chapter 7 bankruptcy, you’ll typically have to wait at least two years to be eligible for a mortgage if your bankruptcy was caused by extenuating circumstances. If no such circumstances exist, then you’ll have to wait four years.
If you filed a Chapter 13 bankruptcy then the minimum waiting period could be as little as one year from discharge.
Not Too Long To Wait
When you get out of bankruptcy there’s a good chance that you don’t have a lot in the way of savings. Take the time to get together a downpayment as well as a cushion to avoid future financial difficulties. By the time you’re ready, you’ll likely be able to apply for – and receive – a mortgage without much trouble at all.

Your creditors can force you into bankruptcy – literally and figuratively.
At least twice a week someone tells me that they’d never file for bankruptcy if only their creditors would “work with them.”
It’s as if the credit card companies, car lenders and mortgage banks are conspiring against you.
What you don’t know is that in some ways, they are doing just that.
Creditors Often Don’t Care If You File For Bankruptcy
When you go past due on a debt, the creditor will try to collect for awhile. Then, after 180 days, the creditor is required to charge-off the debt.
That doesn’t mean you don’t owe the money anymore, however. Charge-off is nothing more than an accounting term that means, “we don’t reasonably expect that this debt is going to be paid voluntarily.”
When the debt is charged off, most creditors will sell the account to a debt buyer. Often, the deal is done years in advance by means of a forward flow agreement (sometimes called a future flow agreement).
The creditor makes back some of the losses, takes a tax write-off for the rest of the unpaid balance, and is out of it entirely. If you pay the debt, the money goes to the debt buyer as profit.
Sometimes, Creditors Want You To File For Bankruptcy
If you file for a Chapter 13 bankruptcy, your creditors will get paid back some of what’s owed to them.  Secured creditors will be paid in full, as will folks like taxing authorities.
If you file a Chapter 7 bankruptcy and have non-exempt assets that the trustee takes and sells, your creditors will be paid through the proceeds of sale.
In both situations, creditors are happy with the prospect of you filing for bankruptcy.
Involuntary Bankruptcy – A Rare Situation
In very limited situations, creditors can formally force you into bankruptcy under either Chapter 7 or Chapter 11. This is called an involuntary bankruptcy, and can happen only in limited situations.
Related:

• 11 USC 303 – Involuntary Cases

If you have fewer than 12 creditors, just one creditor can file an involuntary bankruptcy petition against you. If you’ve got more than 12 creditors, at least 3 of them need to come together to file a bankruptcy case against you.
In order for a creditor to file an involuntary bankruptcy proceeding against you, that creditor must have a debt that’s not in dispute and prove to the court that you’re not paying your debts as they come due.
Involuntary bankruptcy is rare for individuals, and it’s used primarily if the creditors get together and see that you’ve got major assets that you’re trying to hide – assets they could get if you were in bankruptcy.
It’s rare because most people have institutional consumer creditors – Citibank, Chase, Wells Fargo and the like.  These companies have procedures in place for the sale of debts, recovery of money and other collection actions.
Involuntary bankruptcy is more expensive for them given the relative low debt level associated with each account.
Psychological Terror Tactics More Common
Though creditors don’t often force people into involuntary bankruptcy, it’s not uncommon for people to feel as if that’s exactly what’s happening.
Collection calls, threats of lawsuits and wage garnishments, and the general fear of uncertainty makes it feels as if they’re forcing you into a corner.
For some, bankruptcy provides an escape hatch. The law operates as a steel gate, slamming down between you and the companies that are terrorizing you day and night.
It happens far more often than involuntary bankruptcy, and that’s good because it provides you with control over your financial situation.
Your Remedy, Your Choice
In the end, bankruptcy is seldom truly involuntary. People who need the relief may feel as if they’re being forced into bankruptcy, but the reality is far different.
Look at your choices for debt relief and decide which one works best for you.