Bankruptcy? How hard is it to rebuild credit after. Also I am turning in a car that i have financed?

in Bankruptcy

? asked:

I had a very bad injury and now no income, I can not afford to pay for car or any other bills, bankruptcy is only option. How hard is it to rebuild your credit?

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3 comments

lepr0kan on April 29, 2009 at 9:17 am

You’ll have the BK affecting you directly for 7 yrs if you file ch 7, then you still won’t be able to get any major credit (mortgage, etc) until it’s been discharged for at least 2 yrs and it will still show on your report until the statute of limitations is up from the discharged date. Bankruptcy is always a bad idea.
Steveo on April 29, 2009 at 7:57 pm

It will take a few years of staying within your means. I did a bk 9 years ago and started getting a 700 plus rating about 2-3 years after the bk. With some exceptions, I paid off most all my credit cards in full every month. Those that I didn’t were cards that had single digit interest rates. It was a long haul, but now everything is peachy keen.
Randall Parker, MBA on April 30, 2009 at 1:35 am

Disclaimer: Nothing that follows is intended to be legal advice. If you need legal advice for any issue, please consult a qualified, licensed attorney in your area. What follows is simply a lay, but educated, opinion, and no warranty, guarantee, or responsibility; legal, financial, or otherwise, passes from the author to the reader. In other words, don’t sue me for what I am about to say.

Bankruptcy is almost never the only option.

If you speak to a bankruptcy attorney, I can guess their advice to you with a very high degree of certainty (if you need a clue, think how s/he makes money). If you don’t file, they don’t get paid.

A bankruptcy will stay on your credit for ten years. Also, you will NEVER be able to check a box on a credit application which states, “Have you EVER filed for bankruptcy protection?” without committing perjury.

People file bankruptcy in order to protect their things or their income. It will be much easier to rebuild your credit if you don’t file bankruptcy than if you do, although it may look like it would be easier to start off fresh. (It’s not really a fresh start)

A couple of rules of thumb with regard to choosing if you do, or if you don’t, want to file:

1) Is anyone suing you? If not, you have no worries yet.
2) Are you going to lose anything that you might be able to afford to keep otherwise? You said you want to give back your car, so let it go. (The finance company will try to sue you for a deficiency balance. Do everything you can to convince them that they are wasting their time and money, because you will never be able to pay them back, and you have no income or assets. – If they don’t sue you, that will help you a lot.)

Regarding medical bills, which I assume you have. If you were treated at a county hospital (or other state-funded care facility), speak to someone at their collections department, and see if you qualify as a “Medically Indigent Adult” or MIA.

No, this does not mean that you are living on the street or that you are missing in action. All it means is that you do not have the resources (cash or insurance) to cover your debt to the hospital. If you qualify, a good portion or perhaps all of your medical debt from the hospital can go away. No collection agencies, no bankruptcy, just forgiveness.

Next, you should probably choose one credit card to keep for emergencies. Pick one with a high limit, and hopefully, a low balance. Let the rest go, if you can’t make the payments. If you cannot work because of your injuries, file for disability, unemployment, or worker’s compensation; whichever might apply to your situation.

Do contact your creditors and ask if they have any possible solutions for you. DO NOT go to a credit counselling service or debt management company, because this can cause more damage to your credit than a bankruptcy would!

If your injuries are permanent, you should investigate whether you might be able to qualify for state disability, medicare or social security disability benefits.

If you will not be able to generate an income in the future, then credit will not be an issue for you anyway, because no one will give you credit if you have no income.

If your inability to work is temporary, then I have good news for you! Even though you will not be keeping up with your bills in the short term, when you do start working again, and you can afford to make payments again, you can more easily rehabilitate your credit by resuming the monthly payments on your bills.

After six to twelve months of on-time payments, you can approach your creditors to see if they would be willing to remove any negative marks against you, taking into account your prior payment history and the fact that you are making good on your original promises, in spite of your injury, now that you are back on your feet again.

If you do get sued for any of your bills and lose, all they can take is a maximum of 25% of your income above a threshhold that varies by state. The 25% may hurt, but it’s probably not as much as you are paying in total for your bills now, so it could actually be an improvement.

It may sound like I am saying to run from your bills. Actually, I’m not saying that, but that’s what a bankruptcy does. I’m saying that your situation, while dire, need not be fatal to your credit future.

I hope you recover quickly, and I hope that some of this advice may help you. Good luck to you.