Category: Bankruptcy

How to Wipe Out Debt Permanently with Chapter 7 Bankruptcy: 15 FAQs That Could Change Your Life

Posted on August 4, 2025 by - Bankruptcy

What most people don’t realize is that Chapter 7 bankruptcy isn’t a last resort. It’s a legal solution built to help people reset and rebuild. I’ve worked with thousands of people who thought their financial lives were over, only to watch them walk away from six figures of debt and rebuild their credit within two years.

Below are 15 of the most common questions I hear about how to wipe out debt permanently with Chapter 7 bankruptcy. This guide will help you understand your options, ask the right questions, and start thinking differently about what’s possible for your financial future.

Watch and Learn: How to Wipe Out Debt Permanently with Chapter 7 Bankruptcy

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What is Chapter 7 bankruptcy, and how is it different from other types?

Chapter 7 bankruptcy is a legal process that wipes out most of your unsecured debts in about three to four months.

It’s different from Chapter 13, which requires you to make payments for three to five years. With Chapter 7, there’s no repayment plan. If you qualify, the court will erase your debts after a trustee reviews your finances

Here’s a simple breakdown:

  • Chapter 7 is fast and doesn’t involve repayment.
  • Chapter 13 takes longer and requires a payment plan.
  • Chapter 11 is mostly for businesses.
  • Chapter 12 is for farmers and fishermen.

If your income is below a certain threshold (called the means test), you can usually qualify for Chapter 7. Most people who file get to keep their house, car, and retirement accounts thanks to exemption laws.

If you’re looking for a clean slate, Chapter 7 is often the most powerful tool available. According to the U.S. Courts data, over 60 percent of consumer bankruptcy filings in recent years have been Chapter 7, mostly because of its speed and simplicity.

If you’re considering bankruptcy, we can introduce you to a qualified attorney who can help you figure out whether bankruptcy is the right move for your financial situation … and whether you’re eligible to wipe out debt permanently with Chapter 7 bankruptcy.

What types of debt can Chapter 7 bankruptcy eliminate?

Chapter 7 bankruptcy can eliminate most unsecured debts. These are debts that are not backed by collateral. Examples include:

  • Credit card balances
  • Medical bills
  • Payday loans
  • Old utility bills
  • Personal loans
  • Some older tax debts (usually more than 3 years old)
  • Judgments from lawsuits

It will not eliminate:

  • Child support or alimony
  • Most student loans
  • Court fines
  • Recent tax debt

Medical debt is the number one reason people file for bankruptcy, according to the National Consumer Law Center. Chapter 7 is often the fastest way to erase these types of obligations, along with high-interest credit cards and personal loans.

Will I also get rid of interest on my debts during Chapter 7 Bankruptcy?

Yes. When a debt is discharged through Chapter 7, you eliminate not only the principal balance but also all interest and fees attached to that debt.

According to the Federal Reserve, the average American pays around $1,200 per year in credit card interest alone. Some pay much more. So wiping out debt permanently through Chapter 7 bankruptcy is a huge deal, especially if you’ve been making minimum payments on a credit card with a 20 percent interest rate.

Let’s say you owe $20,000 and pay $500 a month. Most of that payment is going toward interest, not the balance. Chapter 7 clears that entire amount: principal, interest, and late fees included. It’s one of the most effective ways to break the cycle of endless payments.

Chapter 7 Bankruptcy seems too good to be true. Is it?

It’s not. Chapter 7 is a legal and legitimate way to get a financial reset.

Many people think there must be a catch. But Congress wrote bankruptcy laws to help honest people who fell into debt because of job loss, divorce, illness, or other life changes. These laws have been around for more than 100 years.

A 2022 study by the Consumer Financial Protection Bureau found that people who file for bankruptcy often experience less financial stress and more financial stability than those who continue to struggle with debt. Filing can reduce mental strain, protect your income, and improve your ability to recover.

Why does Congress allow people to wipe out all their debt through Chapter 7 bankruptcy?

Congress created Chapter 7 bankruptcy because people need a way to recover. The U.S. Bankruptcy Code protects both the economy and individuals. When people are trapped in debt, they stop spending and saving. That hurts businesses, families, and future generations.

Congress built Chapter 7 to offer relief when other options are no longer viable. They allow you to wipe out debt permanently with Chapter 7 bankruptcy. 

These protections date back to the Bankruptcy Act of 1898 and are rooted in Article I of the Constitution.

A study by the National Bureau of Economic Research found that people who file are more likely to return to work and build savings than those who don’t. That matters because employment and savings are key to long-term financial stability. Once debt is gone, people can stop working just to tread water and start planning ahead. They’re more likely to invest in education, take better jobs, and contribute to the economy. In other words, bankruptcy helps individuals, and it helps rebuild financial momentum for families and communities.

This is not a loophole. It’s a safety net, and it’s used by hundreds of thousands of Americans every year.

Does Chapter 7 help reduce stress and anxiety?

Yes. And often immediately.

Debt can take a real toll on your mental and physical health. The American Psychological Association reports that over 70 percent of adults say money is a major source of stress. Chapter 7 can change that overnight.

The moment you file for Chapter 7 bankruptcy, the court issues something called an automatic stay. This is a legal order that stops most collection activity right away. Creditors must stop calling, sending letters, suing you, garnishing wages, or trying to repossess your car. If your home is in foreclosure, that process is put on hold, too.

The impact is immediate. For many people, this is the first time in months they can answer the phone without fear or open the mail without anxiety. One client told me she finally slept through the night after filing. Another said it felt like someone had hit a pause button on all the noise. 

That quiet gives people space to breathe, think clearly, and take the next steps toward recovery.

The automatic stay offers emotional relief. When your nervous system is no longer in a constant state of fight or flight, you are better able to make thoughtful decisions and rebuild your life.

Will I lose everything I own if I file for bankruptcy?

No. Most people keep everything they need. Thanks to exemption laws, you can protect essential property such as your home, car, clothing, household items, retirement accounts, and tools of the trade. These exemptions vary by state, but in most cases, you won’t lose anything at all.

But there are exceptions. If you own valuable assets that fall outside the exemption limits (like a second home, high-value collectibles, or too much money in a checking account) your attorney might suggest Chapter 13 as a better option.

Chapter 13 works differently. Instead of wiping out debt in a few months, you make monthly payments to a court-appointed trustee for three to five years. This option is often used by people who want to keep non-exempt property, catch up on missed mortgage or car payments, or earn too much to qualify for Chapter 7. It’s also a good option for stopping a foreclosure when you want to keep your home.

If your situation is straightforward and you don’t have unprotected assets, Chapter 7 is usually faster, cheaper, and more effective. If things are more complex, Chapter 13 may give you the breathing room you need without giving anything up.

Talk to a bankruptcy attorney who can review your full picture and explain which chapter offers the most protection.

What happens if I want to walk away from a car or home because I don’t like it or can’t afford it?

You can surrender it. And you won’t owe a dime. 

Chapter 7 lets you walk away from secured debt, like car loans or mortgages, if the asset isn’t worth keeping. For example, if you owe $25,000 on a car that’s only worth $10,000, you can return it during the bankruptcy, and the lender can’t pursue you for the $15,000 difference. That balance is discharged with the rest of your unsecured debt.

About 20 percent of filers choose to surrender a vehicle or home, according to Experian. It’s a clean break that gives you a chance to move forward without dragging underwater debt behind you.

This option is especially helpful if your home or car has equity beyond what your state’s exemptions protect. Every state has a specific list of exemptions that determine what you can keep. While most people keep everything, if you own something that falls outside those limits (like a fully paid-off home in a state with a small homestead exemption) Chapter 13 may be the better fit. Chapter 13 is designed to help people manage overwhelming debt while keeping assets that would otherwise be at risk in a Chapter 7 case.

Can Chapter 7 stop lawsuits and harassment from creditors?

Yes. It stops everything instantly.

As soon as you file for Chapter 7, the court issues a legal order called an automatic stay. This order protects you from almost all forms of collection. Creditors must stop calling you, sending letters, filing lawsuits, garnishing your wages, repossessing property, or moving forward with foreclosures. If they ignore the stay, they’re in violation of federal law and can be fined or sanctioned.

The automatic stay is one of the most immediate and powerful benefits of bankruptcy. According to a 2024 report from the Consumer Bankruptcy Project, more than 70 percent of filers were facing active collection efforts at the time they filed. For many, the automatic stay is the first time they experience relief from constant pressure. One client told me it was the first day in years that she didn’t feel like she had to check over her shoulder or screen every call.

The protection lasts for the duration of your bankruptcy and is replaced by a discharge order once your case is complete. That discharge gives you permanent protection from future collection attempts on the discharged debts.

If a creditor continues trying to collect after you’ve filed, your attorney can ask the court to enforce penalties against them. In most cases, just notifying the creditor of your bankruptcy filing is enough to make them back off.

If you’re being harassed, sued, or garnished, speak with a bankruptcy attorney about how quickly they can file your case, assuming bankruptcy is the right choice for you. The sooner you file, the sooner the protections begin.

What if a debt gets discharged in a Chapter 7? Can creditors come back later?

No. Once a debt is discharged, it’s permanently erased.

If you file Chapter 7 bankruptcy to wipe away your debt, bankruptcy courts will issue a discharge order that legally protects you from future collection. That means no calls, no letters, no lawsuits … ever. If a creditor tries to collect on a discharged debt, they can be sued and fined.

The Federal Trade Commission confirms that once a discharge is issued, creditors cannot take any further action to collect the debt. Keep your paperwork as proof.

How does Chapter 7 help my monthly budget?

It can make a big difference right away.

When your debts are discharged, you’re no longer making monthly payments on credit cards, personal loans, or medical bills. That money stays in your pocket. According to a 2023 American Bankruptcy Institute report, the average Chapter 7 filer eliminates around $48,000 in unsecured debt. That often translates to hundreds of dollars back each month.

I’ve seen people free up $500 to $1,000 a month overnight. Instead of sending that money to creditors, they use it for rent, groceries, childcare, or even savings.

One client told me her entire tax refund used to go toward catching up on credit cards. After her Chapter 7 discharge, she used that refund to buy a used car and still had money left over.

Next step: Add up your minimum monthly payments. That’s how much Chapter 7 could put back into your budget.

Will filing Chapter 7 help me start saving money?

Yes. In fact, it’s often the first time people are able to save in years.

A Bankrate study found that more than half of Americans can’t cover a $1,000 emergency. Chapter 7 helps reverse that by removing the biggest barrier to saving: debt payments.

When you’re not making endless minimum payments or paying high interest, you can start building an emergency fund. Saving even $100 a month after bankruptcy adds up fast. Over a year, that’s $1,200 you didn’t have before.

I’ve seen clients open savings accounts for the first time in their adult lives. Some have saved for vacations, home repairs, or just a rainy day. That kind of financial breathing room makes a huge difference.

Can I rebuild my credit after Chapter 7?

Absolutely. And it often happens faster than people expect.

Once your debts are wiped out, your debt-to-income ratio improves overnight. Your credit report is cleaner, and you’re no longer dragging around balances that show as late, maxed out, or in collections. That shift makes you more appealing to lenders than you were before the bankruptcy.

According to the Federal Reserve, many filers see their credit scores improve significantly within the first year after discharge. I’ve seen clients get approved for secured credit cards within weeks. Some finance cars within months. And it’s common for people to qualify for a mortgage within two to three years, especially if they rebuild the right way.

Here’s what works:

  • Start with a secured credit card. Use it for small purchases and pay it off in full each month.
  • Open one installment account. This can be a credit builder loan or a program like the Credit Rebuilder.
  • Never miss a payment. Even one late payment can set you back.
  • Keep balances low, ideally under 10 percent of your credit limit.
  • Check your credit reports. Look for errors or accounts that weren’t properly discharged and dispute them if needed.
  • Enroll in the 7 Steps to a 720 Credit Score, our free credit-education class designed for people who have been through a bankruptcy. 

How much does Chapter 7 bankruptcy cost?

The basic cost to file Chapter 7 bankruptcy includes a $338 federal court filing fee. Beyond that, attorney fees typically range from $1,500 to $3,500, depending on where you live, how complex your case is, and what services your attorney includes.

Some attorneys charge one flat fee for everything. Others charge a lower upfront fee but bill separately for court appearances, document preparation, or responding to creditor objections. You’ll want to know exactly what is (and isn’t) included before you commit.

You can file Chapter 7 without a lawyer (it’s called filing “pro se”), but it comes with risks. Filing without an attorney may save money up front, but you’ll be responsible for understanding complex legal rules, completing and submitting forms correctly, and knowing how to protect your property using exemption laws. If something goes wrong, the court will not walk you through fixing it.

People with simple cases, no valuable property, and clear income eligibility may be able to file on their own. But if you have income above the median, own a home, or are behind on mortgage or car payments, working with an attorney can prevent costly mistakes and give you peace of mind.

The good news? Most people save far more than the cost of bankruptcy in just a few months by eliminating credit card payments, interest, and late fees. Some attorneys also offer payment plans or will use your tax refund to cover costs. Let us know if you’d like an introduction to a bankruptcy attorney! 

How do people come up with the money to file Chapter 7?

Most stop paying the debts that will be wiped out.

The Consumer Bankruptcy Project found that nearly 75 percent of filers used funds they would have otherwise paid to creditors. If you’re struggling to pay credit cards or medical bills, those are exactly the bills Chapter 7 eliminates. So instead of sending money to lenders, people redirect those funds toward the cost of filing. 

Others use tax refunds, borrow from family, or sell things they no longer need. Some pick up extra work temporarily. A few clients have used small loans from 401(k)s, although that should be a last resort.

The key is to stop pouring money into debts that aren’t going to get you out of the hole.

If you’re overwhelmed by debt and ready for a fresh start, understanding how to wipe out debt permanently with Chapter 7 bankruptcy may be the most important step you take this year. We’re here to help. Let us know if you’d like an introduction to a bankruptcy attorney. 

 

Rebuilding Credit After Bankruptcy

Posted on November 12, 2021 by - Bankruptcy, CREDIT BLOG, Credit Score

Like a lot of folks who start trying to rebuild credit after bankruptcy, you might be thinking of wiping your hands clean of credit. And it might make sense that the fastest way to move past the bankruptcy is to stop relying on the loans and credit cards that precipitated the bankruptcy.
But contrary to popular belief, using credit appropriately in the wake of a bankruptcy is the best way to rebuild credit after bankruptcy. Of all the bankruptcy facts, this one might be the most important. Indeed, you might be able to build your score to 720 within a couple of years of declaring bankruptcy if you follow a smart plan to re-establish credit.
This twofold plan to learn how to fix credit starts by opening new lines of credit and concludes with paying your bills on time and in full.
Rebuilding Credit After Bankruptcy Rule #1: Open new lines of credit!
You might hear claims that you can have a bankruptcy wiped from your record. Beware of these claims! There is no legal way to wipe a bankruptcy from your credit report. That said, time does heal. The credit-scoring bureaus—Equifax, TransUnion, and Experian—are more concerned with your recent behavior than they are with your past behavior. The trick, then, is to persuade the bureaus to pay more attention to your recent good behavior than to your past behavior. By establishing new credit and using it responsibly, you can prove to the bureaus that you are a new person—that the bankruptcy forced you to change your habits and establish smarter financial strategies.
After you have declared bankruptcy, open three new credit cards (Visa, MasterCard, or American Express) and one installment loan as part of your plan to rebuild credit after bankruptcy. Taking out a car loan is not advisable, in part because of the high interest rates you would assume, but also because of the debt you would add to your credit report. Instead, buy a new appliance, piece of furniture, or electronic using an installment loan. Then pay the loan off within six months.
Keep the credit cards active by using them at least every other month. Make only small charges (preferably less than 10 percent of the limit), and pay the balances in full.
Of course, with both the credit cards and installment loan, be aware of high interest rates. Because of your bankruptcy, you will likely not qualify for the best interest rates, which is why I stress the importance of paying the balances in full as quickly as possible.
Another note about opening new accounts: Insomuch as it is possible, open these accounts all at once and as soon as possible after the bankruptcy. The credit-scoring bureaus respond best to accounts that have been open for long periods of time. Your future credit score will benefit best if you open the accounts now.
By opening these new lines of credit, you can begin to rebuild your credit after bankruptcy by giving the credit bureaus new information on which they can judge your creditworthiness. Show them you have changed your patterns of behavior.
In this way, you can immediately begin proving to the credit bureaus that the bankruptcy allowed you to turn over a new leaf and change your payment behavior.
Rebuilding Credit After Bankruptcy Rule #2: Never, never make a late payment!
After a bankruptcy, the credit-scoring bureaus will have an eye on you, even as your score begins to climb. If you make a payment that is even one day late, the bureaus will assume you are back to your old ways, and your progress will be for naught.
To best rebuild your credit after bankruptcy, you must pay your bills immediately every single month. This means that you must live within your means. Be sure to read our article about how to create a budget, find money, and establish habits that best afford you to bounce back after a bankruptcy.

The important part of improving your score fast, by 720 Credit Score

Posted on October 4, 2021 by - Bankruptcy, CREDIT BLOG, Credit Score, CREDIT SCORING

If I had to choose one thing as the most important aspect for raising your score after a financial meltdown, it would be this: Apply for new credit.
The problem is: How can you qualify when your score is low?
We generally refer people to secured cards, but even then: If you are already having financial problems, how can you afford the deposit required by secured cards?
Fortunately, our researcher, Natalie, found a new card that accepts applications for people with a score as low as 580. It’s not a secured card, so you don’t have to put any money down to qualify.
If you don’t have three cards in your name and cannot afford secured cards, you should apply for this card right away. Don’t wait, even for a day since we don’t know how long the guarantee will last.
Of course, we’ve done the research, and we believe this is one of the best subprime cards out there. It isn’t one of the 46% of cards that will hurt your score, so as long as you keep your balance low and pay your bills on time, this card will help your score increase.
Click here to apply.

Removing a Bankruptcy From Your Credit Report

Posted on May 5, 2017 by - Bankruptcy, Credit Report

I host Question & Answer sessions for students who need help rebuilding their credit score. Removing a bankruptcy from a credit report and rebuilding credit after a bankruptcy are both frequently asked questions on these calls.
Below is one of the many questions I received and my response.
Question: Can you give me the specifics on how to remove a bankruptcy from my credit report?
Answer: Forget all you’ve heard about how to remove a bankruptcy from your credit report because I have a very different approach to this topic.
First of all, I assume your bankruptcy is legitimate. You, not someone else, are responsible for it. This simply means you are not a victim of identity theft and the bankruptcy on your credit report is legitimately yours.
With that assumption, here is my answer: You cannot get it removed and you should not worry about getting it removed. Wait! Before getting discouraged and losing hope, let me explain my approach to handling bankruptcies.
It isn’t necessary to remove a bankruptcy from your credit report. Yes, that’s right. Even though a bankruptcy is on your credit report, it will not prevent you from reestablishing your credit after bankruptcy.  Don’t believe the statement that your credit is ruined for seven years. You can have a 720 Credit Score in just two years after the bankruptcy.
Don’t search for someone to help you remove a bankruptcy from your credit report. Many people and/or organizations will say they can help you remove a bankruptcy for a fee. Don’t believe them! They will tell you they can remove a bankruptcy from your credit report and may offer a “100% money back guarantee.” The truth is that you won’t be able to get your money back. There are no legal ways to remove a legitimate bankruptcy from your credit report. Save your money and avoid these scams.
Removing a legitimate bankruptcy from your credit report is illegal! According to the FTC, it is illegal to get an item off your credit report that is correct.
Here is the one simple solution that works every time: Reestablish your credit after a bankruptcy the same way you established credit the first time.  Start now, don’t delay.
Learning to rebuild credit is simple, just keep in mind that it’s going to take you between 12-24 months to get a credit score over 720, assuming you do it the right way.  The biggest mistake people make is wiping their hands of all credit. Never do that because no credit is just as bad as bad credit.
Please check out my free ebook: “Rebuilding Your Life After Bankruptcy… It’s Easier Than You Think” You will learn a lot of very valuable information.

5 Steps to Rebuild Bad Credit

Posted on August 8, 2014 by - Bankruptcy, Credit Score, CREDIT SCORING, Personal Finance

We live in a credit-driven society. You need credit for just about everything from buying a house to getting a job. Since many people use credit in lieu of currency, it is no surprise that many hard-working people have not managed credit wisely. As a result, they have bad credit. But there is hope. Here are five steps to rebuild bad credit.
Before examining the steps to rebuild your credit, let’s see how the credit bureaus determine our credit scores. There are 22 different criteria for determining a credit score. Unfortunately, the only ones who know the actual formulas are the credit bureaus. Not much information exists on rebuilding credit. Therefore people often make common mistakes that seem like the right choice, but in the end these choices hurt their credit score.
If you have bad credit and want to increase your credit score, follow these five steps. Prior to doing anything, you need to make sure you know your credit scores. Odds are you wouldn’t build a house without a blueprint. Your credit scores are the blueprint of your credit history. The only way you’ll know what corrections are needed is to get your credit report.
Quick Fix #1: Check for Errors
One of the most common sources of a bad credit score can be attributed to reporting errors.  Check your credit limits first! Make sure your credit limits are reported correctly because your credit limits are used to determine your utilization rate. This rate is based on the percentage of your credit limit you use each month. If your credit limit is not reported correctly, your utilization rate will not be accurate. A high utilization rate lowers your credit score.
Also check for duplicate notices from collection accounts that are being reported as active. Often a collection account is transferred to more than one collection agency. All of these collection agencies might be listed on your credit report. That’s not a problem, but only the agency currently trying to collect the debt should be listed as active. All other collection agencies should be listed as transferred since they are no longer responsible for collecting the debt.
If more than one collection agency is reporting the collection account to the credit bureaus as active, you have a problem. Since the single collection account is reported as two separate accounts, your credit score will be lowered.
Quick Fix #2: Reduce Your Credit Card Debt
Most people do not know why the amount of their credit card debt is significant because it has never been explained to them. I call this tip the 30/30 rule. Thirty percent of your credit score is based on your outstanding debt. If your credit balance is more than 30 percent of your credit limit, your score will drop. Here’s an example: If your credit limit is $1,000 and you charged $600, you are at 60 percent of your limit in debt. When you’re over 30 percent of your limit to debt and you’re only paying the minimum monthly payment each month, your score is going to drop, even if your monthly payments are “on time.” You must reduce your credit card debt to 30 percent or less to maintain the 30/30 rule and rebuild bad credit.
Quick Fix #3: No Credit Equals Bad Credit
Credit scores are based on the information in your credit history. If don’t have a credit history, you are treated like the person with bad credit. When evaluating your credit worthiness, companies would rather lend or give better interest rates to those whose credit history proves they are a good investment. Think of it this way: Let’s say you needed heart surgery, and you met a guy who said he was the best heart surgeon in the world. He might be the best heart surgeon in the world, but if he had no credentials and no references, there’s no way you’d ever let him open up your chest.
The credit scoring bureaus think of you the same way. If you don’t have a credit history, they consider you high risk. Prove your credit worthiness by getting three to five credit cards as well as an installment loan. Doing this will help rebuild your bad credit and provide enough information for credit bureaus to judge your risk fairly.
Quick Fix #4: Becoming an Authorized User
If you don’t have much credit (less than three major credit cards and an installment loan) or have bad credit and want to rebuild your credit, you may want to explore becoming an authorized user. Ask a relative with good credit to add you as an authorized user to their account. It helps if you and your relative have the same address.
Becoming an authorized user allows you to piggy-back on your relative’s good credit standing and reap the benefits of their credit history. This only works if the credit card company reports your status as an authorized user to the credit bureaus and if the outstanding debt on the card never exceeds 30 percent of the credit limit. While this is a great way to improve your score, if the account falls into poor standing, your credit score will also be negatively affected.
Quick Fix #5: Use Credit!
It’s natural to steer clear of credit if you have had bad credit. Avoiding credit is not helpful when it comes to rebuilding your credit. The only way to rebuild bad credit is to establish a credit history.

Protecting Life Insurance During Bankruptcy

Posted on July 27, 2014 by - Bankruptcy, Personal Finance

Bankruptcies are difficult emotionally and financially because your creditors are intent on recovering the debt you owe them. That’s fair. But you must protect what is allowable by the Federal or State Government to give you a financial footing afterwards. Don’t forget to protect your life insurance when filing for bankruptcy.
When going through bankruptcy, make sure everything is not taken from you during the process, including your savings. Protecting your life insurance is important. If you overlook this, creditors may leave your family with nothing after your death.
Paying creditors is important, but you must also prepare for life after bankruptcy. Creditors aren’t interested in you or your family’s financial status. They want whatever they can get. This means you may end up in a hole that is nearly impossible to escape. Protect your safety net!
What is protected?
Life insurance is too important to give up. If you were to pass, the money helps pay expenses so your family does not end up financially strapped. To prevent creditors from taking everything, you need to understand what you can do. Under federal exemptions, you can protect up to $12,250 (check the current amount allowed) of a life insurance policy’s cash value. Married couples can double all exemptions under the federal bankruptcy code. Check with your bankruptcy lawyer to ensure all allowable assets are protected, especially your life insurance policy.
If you are afraid the bankruptcy will take your life insurance, make it exempt. This will give you the chance to keep your money, or at least some of it, to assist your family later.
Know the cash value amount your state allows you to protect. All states are different. Get professional help, if needed, to take advantage of all you can. An option is cheap life insurance. It protects you because it puts you under the maximums of several states. This makes it possible to keep all your money.
Taking all allowable exemptions can give you peace of mind, which is what you need during a stressful time. As long as you qualify for the exemption, take it! Enjoy the security of knowing your family will have something, regardless of the situation they find themselves.
Buying Life Insurance After Bankruptcy
Waiting for your bankruptcy to be completely off your records is not a good excuse to delay applying for life insurance. If cost is an issue, consider getting a 10-year term policy to make sure your family is protected. This gives you something until you are back on your feet. The only risk is failing health which could make purchasing life insurance ten years later more expensive or unattainable.
Before applying for affordable life insurance make sure your bankruptcy is completely discharged. Most insurance companies won’t underwrite you if you’re in the middle of the bankruptcy process. If the bankruptcy has been discharged, you shouldn’t have any problems finding an insurance company willing to underwrite you.
The Internet is filled with free online term life quotes that allow you to get a quote in minutes. Be sure to let them know you have filed bankruptcy recently. One of the biggest mistakes people make when applying for life insurance is not being truthful with the carriers. They will know if you have a bankruptcy. If you lie, it will hurt your chances of getting approved.
Understand Your Options
If you are facing bankruptcy, it is important to do everything possible to benefit you and your family afterwards. Don’t let creditors take your legally allowed exemptions. Protect them! This gives you and your family a financial cushion afterwards. As creditors fight for what is theirs, you must fight for what is yours. By taking advantage of what is available, you can keep yourself in the green and make it easier to get back on your feet after bankruptcy.

Steps to Take After Bankruptcy to Rebuild Credit

Posted on July 4, 2014 by - Bankruptcy, Credit Score, CREDIT SCORING

After a bankruptcy, rebuilding your credit may be the last thing you want to do. Avoid the urge to walk away from the loans and credit cards that precipitated the bankruptcy. Instead, focus on rebuilding your credit after bankruptcy. Whatever you do, don’t wipe your hands clean of credit.
Contrary to popular belief, using credit appropriately in the wake of a bankruptcy is the best way to rebuild your credit. If you follow a smart plan to re-establish your credit, it is possible to rebuild your credit score to 720 within a couple of years. This is the most important action you can take after bankruptcy.
This twofold plan begins with opening new lines of credit and concludes with paying your bills on time and in full. Therefore, keep small balances on your credit cards to ensure you are able to pay what you owe each month.
Rebuilding Your Credit after Bankruptcy Rule #1: Open new lines of credit!
Have you heard claims that you can have a bankruptcy wiped from your credit report? Do not believe these claims because they are not true. There is no legal way to wipe a bankruptcy from your credit report. However, time does reduce the impact of a bankruptcy on your credit report. All three credit-scoring bureaus—Equifax, TransUnion, and Experian—are more concerned with your recent credit behavior rather than your past credit behavior. The trick is to persuade credit bureaus to pay more attention to your recent good behavior than to your past behavior. By establishing new credit and using it responsibly, you can prove to the bureaus that you are a new person. Demonstrate to them that the bankruptcy forced you to get rid of negative credit habits and replace them with smarter financial strategies.
After declaring bankruptcy, open three new credit cards (Visa, MasterCard, or American Express) and one installment loan as part of your plan to rebuild credit after bankruptcy. Keep the credit cards active by using them at least every other month. Make only small charges, preferably less than 10 percent of the limit, and pay the balances in full.
Know that you will pay high interest rates with the credit cards and installment loan. This is one of the results of your bankruptcy. Another is that you will not qualify for the best interest rates with a low credit score. That’s why it is important to pay credit card and loan balances in full as quickly as possible.
Open credit cards and an installment loan as soon as possible after your bankruptcy. The credit-scoring bureaus respond best to accounts that have been open for a long time. Your future credit score is dependent upon opening all accounts now and paying them in full monthly.
By opening new lines of credit, you begin to rebuild your credit after bankruptcy. This allows the credit bureaus to re-evaluate your credit based on the new information it receives from your creditors. Experian, Equifax, and TransUnion are now able to judge your credit worthiness based on your current credit information. Use this as an opportunity to show them you have changed your patterns of behavior.
Don’t delay. Immediately begin proving to the credit bureaus that your bankruptcy allowed you to turn over a new leaf and change your payment behavior.
Rebuilding Credit after Bankruptcy Rule #2: Never, never, never make a late payment!
After a bankruptcy, the credit-scoring bureaus will have an eye on you, even as your score begins to climb. If you make a payment that is even one day late, the bureaus will assume you are back to your old ways, and your progress will be for naught.
The best strategy to rebuild your credit after bankruptcy is to pay your bills on or before the due date every month. This means that you must live within your means.
For more information on rebuilding your credit after bankruptcy, read this article on how to create a budget, find money, and establish habits that best afford you to bounce back after a bankruptcy.

Is Bankruptcy a Viable Option?

Posted on June 6, 2014 by - Bankruptcy

Many of you are wondering if bankruptcy is a viable option. If so, they also wonder if filing for bankruptcy will destroy them financially for the next seven years.
Whenever I get asked about bankruptcy, I consider the emotional and financial stress of the person asking the question. No one wants a negative credit history or to be known as an irresponsible person not worthy of credit.
Your past credit history is no longer a stumbling block. Here are some reasons bankruptcy may be a viable option for you.
If you have creditors calling you at all hours of the day and have bills piling up faster than you can pay them, filing for bankruptcy has crossed your mind. While you should always repay debts you owe because it is the right and responsible thing to do, filing for bankruptcy may be the only way you can make a clean break from your overwhelming financial crisis.
Depending on your beliefs, you may never feel bankruptcy is a viable option. But sometimes bankruptcy is the best option available to you.
If you are struggling financially and wondering, “Is bankruptcy a viable option?” consider other alternatives:
1) Debt consolidation. It allows you to combine all your debts into one loan. One payment is certainly better than multiple payments or robbing Peter to pay Paul.
2) Loan modification programs and reductions in payments are another option for distressed homeowners. Contact the hardship department for your creditors and ask them to consider a change in terms to help you make it through the financial crisis you are experiencing. Some banks are willing to accept reduced payments. They know that many people are teetering on the verge of bankruptcy. In fact, you might want to call your mortgage lender and ask: “Considering my current financial distress, is bankruptcy a viable option or can I qualify for a loan modification program?” Rather than having all your debt discharged during a bankruptcy, many creditors will simply lower your payments. After all, something is better than nothing.
“Should I file for bankruptcy if none of these options are available?”
If you have exhausted all options, you might want to consider filing bankruptcy, especially if you face the possibility of losing property. Bankruptcy enables many people to hold on to their property despite their financial woes. When considering bankruptcy as a viable option, evaluate your finances. If you are overwhelmed by debt and cannot pay the minimum balances due, bankruptcy can stop creditors from charging late fees and interest on your bills. It will also give you the opportunity to make a fresh start. Emotionally, you’ll feel better because you won’t have to worry about harassment from creditors, losing sleep, and worrying about your debts.
Please know that a bankruptcy will definitely lower your credit score, but if you cannot repay your debts, your credit will definitely suffer after several more years of collection notices and repossessions.
Once you declare bankruptcy, the next step is rebuilding your credit. Increase your credit score by changing your spending habits and paying your bills on time. You will slowly regain financial stability. In fact, if you are diligent about repairing your credit and establishing good financial habits, you might even qualify for a home loan within two years of declaring bankruptcy!
Ultimately, your question, “Is bankruptcy a viable option?” is a personal one. You must learn how to create a budget, consider all of your bankruptcy options, and then make a strategic choice. If bankruptcy is eventually inevitable, begin the process today so you can start rebuilding your future and your credit score.

If You Believe You Cannot Discharge Your Taxes During Bankruptcy, by 720 Credit Score

Posted on October 27, 2013 by - Bankruptcy

Most people believe that taxes cannot be discharged through a bankruptcy. And while this is true in most cases, there are some exceptions …
Did you file your taxes more than two years ago? And was the due date at least three years ago? As long as you aren’t evading taxes, in certain cases, you can have federal tax debt discharged during bankruptcy.
I bring up bankruptcy a lot in my emails because I want to demystify it. A lot of people who feel tremendous financial pressure are scared of bankruptcy, But bankruptcy can be a great solution to financial problems. It allows you to wipe the slate clean and regain control of your life.
And listen … living with constant anxiety and fear about what the government is going to do because you cannot pay your taxes? Well, it is no way to live. You should be able to get out of bed and embrace life. If you cannot enjoy your life because of financial stress, you owe it to yourself and your family to explore your options.
And fortunately, I have connections to some of the best bankruptcy attorneys in the country, so if you are up to your neck in tax debt, just talk to a bankruptcy attorney. The phone call won’t cost you a dime, and you will probably walk away from the call feeling relief, hope, and the promise of a better future.
Click here for an introduction to a bankruptcy attorney in your area.
Sincerely,
Philip Tirone
P.S. The bankruptcy attorney I will introduce you to will help get you on the path to financial recovery. My attorneys offer so much more than bankruptcy services. After filing your bankruptcy, then they focus on helping you reclaim your life. If relieving your financial pain sounds appealing, click here for an introduction to a bankruptcy attorney.

How to Remove a Bankruptcy From Your Credit Report

Posted on October 18, 2013 by - Bankruptcy, Credit Report

One of my readers recently asked me if there was a way to get her bankruptcy removed from her credit report.
The answer is that no, there isn’t. At least not legally. But beyond that, there’s a deeper issue at play here. A lot of people worry about their credit scores and their credit reports. They worry about past delinquencies. They worry about their public records. They spend countless hours trying to get information removed from their credit reports.
My advice: You are worrying about the wrong thing.
You see, items that are older than two years—even major items like a bankruptcy—don’t matter nearly as much as the behavior you have taken in the past two years. A lot of credit “repair” companies have their clients spend hours and hours of their lives trying to suppress every single derogatory item on a credit report.
I don’t agree with that strategy. First off, it’s illegal. The Federal Trade Commission itself says, “No one can remove accurate negative information from your credit file. It’s illegal.”
Second of all, even if you do somehow manage to skirt the system and get negative information suppressed, it will rear its ugly head later on down the line. And in the future, the credit bureaus will be unlikely to spend their time helping you remove any true errors from your credit report.
My third point is that it’s just not where you should be spending your time. I know how attractive it is to think that you can erase your past, but you can’t. And if you spend your time trying to cover up the past, you will waste invaluable time living in the present and creating a better future.
There’s only one solution: Learn how to build credit. Educate yourself so that you have the tools to have a great score for life. Learn from your past, but don’t focus on what happened yesterday.