You may wonder what will happen to your debt during your bankruptcy case. Unsecured debt like credit cards, medical debt, and payday loans will be eliminated, but the secured debt will be handled differently. Secured debt usually includes a home mortgage or vehicle loan. The lender holds the property as collateral until you have paid off the loan.
Secured Credit Cards
Some retailers like Sears or JCPenney issue secured credit cards. They claim to take your property if you fall behind in payments. While they may have a right to repossess the property, they do not have the right to enter your home to do so. These companies know this and rarely attempt to repossess property purchased with their store cards.
Some banks will also let you open a credit card that is secured by cash. They will hold the money in an account, and if you fail to make your credit card payments, they will take the money from the account for the secured credit card debt.
Home equity credit cards are secured against your home. It is almost always a bad idea to use these types of cards. If you fail to make the payments, you could lose your home.
An automatic stay goes into effect as soon as you file your bankruptcy papers with the court. This effectively interrupts all secured and unsecured creditors from taking any action against you to collect on your debt for a certain period of time. The automatic stay stops phone calls, letters, foreclosures, vehicle repossessions, and utility shut-offs to name a few.
The bankruptcy court can sometimes stop secured creditors from taking collateral by removing the creditor's lien. This action renders the debt unsecured. Unsecured debt can often be eliminated in your bankruptcy case. Another option for dealing with secured debt as you can pay the value of the property at the time of the filing and not the amount you still owe on the loan. This enables you to keep the asset and pay considerably less for the item.
Chapter 13 Bankruptcy
Filing Chapter 13 bankruptcy enables you to restructure your debt so you can gradually pay the arrears on any secured property you have fallen behind in payments. Sometimes your interest rate can be lowered, making your payments even lower.
If you are overwhelmed in debt and worried about losing your home or other secured property, contact a Sacramento bankruptcy attorney to find out how you can get financial relief.
As a Bankruptcy attorney in Sacramento California, questions about obtaining a small business loan after bankruptcy are reasonably common. Specifically, small business owners who have declared personal bankruptcy in California in the past want to know if a small business loan is within their grasp. While the general impression is that a lender will not loan money to an individual who has filed bankruptcy in the past, obtaining a small business loan is possible under certain situations and with some considerations.
Owner and business relationships
Small business owners and their businesses are intrinsically connected. Running a small business means that you will personally guarantee loans. As a non-legal entity, you are the business, and the business is you. Therefore, it doesn't matter to lenders if your previous bankruptcy was due to personal or business debt; instead, lenders focus on whether you were able to reestablish credit, have a business plan, and are earning a steady income.
Credit Report and Credit Score
A bankruptcy will remain on your credit report for 7 to 10 years depending on which type of bankruptcy you filed. If you are seeking a loan during this period, you are likely to experience much more difficulty in obtaining a small business loan. This level of difficulty will start to decrease around the two-year mark. This timeframe gives you 24 months to put maximum effort into increasing your credit score by making payments on time and not taking on too much additional debt.
Business Plan and Consistent Income
Business plans typically help business owners approach private or public lenders for a small business loan. They lay out operations of the business, what products you will sell, and how you will sell them. While putting one together may seem like a daunting task, the “keep it simple” motto can be applied to the creative process to ease some of the anxiety surrounding developing a business plan. Business owners have been able to obtain lending with a business plan as short as one or two pages. The critical point is that a business plan shows lenders that you have put time into developing a program that is executable. The easier to understand and grasp the concepts, the better. While business plans are grand, showing a revenue stream from business operations is even better. If you have a pre-existing and consistent income stream, banks will be able to ascertain your ability to repay the loan.
The Business Loan Interview
It will be impossible, in most cases, to obtain a small business loan without meeting or speaking with a loan specialist to explain any discrepancies or negative information contained on your credit report. In preparing for this conversation, you should be prepared to explain either on your credit report. Spend time to go over your credit report after bankruptcy and create a written explanation for each negative item. This preparation will better prepare you to answer any questions that may arise during the loan consideration phase.
Consider Alternatives to Big Banks
While it is natural to envision approaching a large, national bank for a small business loan, do not discount the many alternatives in small business financing that are available to you. Smaller, local credit unions can have less stringent requirements for loans and can be an excellent source of business funding. Additionally, many online business loan companies have emerged over the last five years that offer even more alternatives if you have been turned down through more conventional small business loan venues.
Obtaining Loans After Bankruptcy
While there is no guarantee that you will be able to obtain a small business loan after bankruptcy, if you create a business plan and wait at least two years after bankruptcy will greatly improve your odds of obtaining funding. In addition, you should try to consistently improve your credit score, demonstrate consistent income, and explore multiple options for financing. II you currently own a business but are having trouble making payments to vendors or on personal loans, bankruptcy attorneys in Sacramento California can assess your situation and advise you on whether filing a California bankruptcy can help you discharge debt while keeping the assets that you already own.
A subprime loan is commonly referred to a secured interest loan made to an individual with a credit score of 620 or lower. Interest rates are normally higher on these types of loans in order to offset the riskier lending. In subprime auto loans, serious delinquencies are showing signs of another financial crisis, leading to questions from U.S. economic policymakers as to whether the economy needs a boost or not. While there isn’t necessarily a problem yet, many believe that the auto finance industry could drag the rest of the U.S. economy with it.
20% of Car Loans to Subprime Borrowers
Of the $1.2 trillion in auto loans balances in the U.S., roughly 20% of them are made to subprime borrowers. The trend emerged from a record year of auto sales in 2016 which was largely fuelled by consumer debt. Now that auto sales in America have begun to level off, and with the Federal Reserve increasing borrower costs, the auto loan industry is starting to look like it could run into trouble. Compounding these problems is the fact that last quarter the Federal Reserve noticed a drastic increase in the number of 90+ day’s delinquency rate specifically in new car loans.
Possible Economic Issues
Some economic analysts are starting to suspect the subprime auto lending trend could be leading to a bubble. The good news, however, is that auto debt only accounts for 9.2% of household debt which is nowhere near the size of the mortgage industry subprime debacle that caused the financial crisis of 2007. Those who are hurting the most are the auto loan borrowers themselves who risk further hurting their credit and having their vehicles repossessed, but lenders could also be in the crosshairs as well. The U.S. Justice Department has looked into lending practices in the auto loan sector in the past and may see fit to lobby for increased regulations. Additionally, if late payments and defaults continue to rise many auto loan lenders may be out of business.
If you are currently struggling with making your monthly auto loan payment and are at risk of repossession, contact a Rocklin CA bankruptcy attorney immediately. If you qualify for Chapter 7 or Chapter 13 bankruptcy, you can stop collection attempts and repossessions and may even be able to reduce your total payment through a process known as “cramming down”.
For those drowning in debt and unable to pay bills for basic necessities, a short term loan such as a payday loan, cash advance loan, or title loan may seem like an intriguing option. However, these types of loans are typically only designed to hold you over until the next pay check and often times can end up creating a revolving cycle of needing additional loans in order to “catch up”. Many times there is no “catching up” and the receivers of these loans end up filing for bankruptcy. This is sometimes called the “debt spiral”. Let’s take a closer look at how short term loans are handled in a bankruptcy case.
Short Term Loans in Bankruptcy
In a chapter 13 Bankruptcy case a shorter term loan is placed in the unsecured debt category and subsequently paid back over the course of 36-60 months. If you are able to complete the repayment plan ordered by the court, then any leftover amount is discharged. Alternatively in a Chapter 7 bankruptcy, which are harder to qualify for, the short term loan will most likely be discharged along with any other unsecured debt.
It’s important to note that when you took the short term loan is of importance in your bankruptcy case and U.S. bankruptcy code has regulations on how long ago any dischargeable debt was taken on prior to the bankruptcy filing. For unsecured debt, it is typical that any debts acquired within 90 days of filing cannot be discharged and will have to be repaid. You should make the decision to file bankruptcy only after consulting a qualified bankruptcy attorney in the area you would file. A bankruptcy lawyer in Sacramento can explain how different debts will be handled in a bankruptcy case, which chapter of bankruptcy is right for you, and if there are alternatives to bankruptcy that you may want to consider.
If your student loan debt is giving you constant cold sweats and nightmares, you are not alone. There are millions of students in our country that are bogged down by their crippling student loan debt. Most are constantly looking for ways of easing out their financial burden. Here are a few student loan debt management solutions that might come in handy.
Student Loan Debt Management Solutions
- If you have multiple student loan debts, consolidation might be the answer to a majority of your worries. It gives you an opportunity of making single monthly payments towards the several student loan debts. It also lengthens your payoff tenure. This ensures that you have a longer time to pay off your debts.
- It is always advisable to pay off the most expensive student loan first. In other words, you must make it a point to contribute a major part of your monthly payments towards the student loan. Typically this is done with the highest interest rate. Once the costliest debt is repaid, you can move on towards repaying the second most expensive student loan debt.
- Federal student loans offer a bunch of alternative repayment plans. Graduated repayment, extended repayment, income contingent repayment and pay as you earn to help students repay their debts more effectively. You can try out one of these alternatives if you are on the verge of defaulting on a monthly payment.
- In certain extreme situations, there is an alternative termed as loan forgiveness. This allows you to request forgiveness, discharge or cancellation of your entire student loan debt. However, you can request loan forgiveness only under certain circumstances. This includes permanent or total physical disability, an impending bankruptcy or a closure of the school before you could finish your degree.
Loan debt of all types can be tricky. If you are struggling to pay your debts, contact our Sacramento bankruptcy firm for more information. We can get you out of debt and back on track.
Often taken as a last minute measure, payday loans are a high-interest, easy-to-procure kind of advance that are meant to be paid back in a few months. Under bankruptcy though, they are treated as an unsecured loan. Before looking for fast cash, learn the payday and title loan risks.
Payday and title loan risks
Payday loans and title loans are exorbitantly priced. A typical title loan or a payday loan can be nearly 300% in interest. If they are not paid by the end of the month or within the set date, they are rolled into the next month with a fee. In due course of time, these loans can rake up so much in interest that it will exceed the principal amount.
In bankruptcy, they are discharged. They are treated like unsecured loans and are readily wiped out. In chapter 13, they are treated like a credit card debt, but with even less priority. You will end up paying pennies on the dollar for it as per your repayment agreement. In some cases though, the lender might decide to fight back and challenge the court’s ruling.
If the loan was taken within 70 to 90 days of filing for bankruptcy, they might choose to challenge the judgment saying that it was the borrower’s (your) intention, to take the money and not have to repay it at all. However, that would mean lenders will have to prove intent to commit fraud and that is not easy. Bankruptcy courts are also not too friendly towards payday and title lenders, so you are quite safe when it comes to their legal retaliations.
However, there are chances that the lender can prove misdeeds, and you will have to pay it out. So, if you are going to file for bankruptcy, wait for a little over 90 days and then file. If you are stuck in the payday loan cycle, end it today. Our team of Rancho Cordova bankrutpcy lawyers can help get you out of debt the right way.