When do the Phone Calls stop
From the moment your bankruptcy petition is filed, all actions to collect outstanding debt are stopped. This includes bill collector calls, lawsuits, vehicle repossessions and home foreclosures. If you have a pending legal action, the court will be notified and the case will close. In most cases, unsecured debts, such as credit card debt, medical bills and utilities are completely wiped out in a bankruptcy.
If you are behind on a secured debt like a mortgage or automobile loan, your house cannot be foreclosed upon or your automobile repossessed without permission from the Court. This allows you time to propose to the Court a reasonable repayment plan for any arrearage.
Bankruptcy and Loan Modification
A chapter 13 bankruptcy can help you catch-up on an arrearage or “strip off” a second mortgage. If you have two loans on your primary residence and the outstanding principal of the first loan is greater than the market value of the property, it is possible to “strip off” (wipe out) the second loan in a Chapter 13 bankruptcy. To do this, you will need an appraisal of your property to verify the value. In addition, a bankruptcy will allow you to catch-up on an arrearage on your home loan over a 3 to 5 year period.
Bankruptcy cannot modify the terms of a loan. Bankruptcy does not allow for an adjustment in the term, interest rate, or principal of your loan. To do that you need a loan modification. There are many loan modification programs available. However, there is no mandatory requirement that lenders participate in the programs. To be successful, you will need to strongly advocate for yourself in the process.
Getting a Loan Modification
If you need a loan modification, I advise that you contact a HUD housing counselor to assist you with the process (www.hud.gov). Before you contact the counselor, check to see if you have a Fannie Mae or Freddie Mac loan at the following web sites (www.fanniemae.com or www.freddiemac.com). Check out the programs available at the government website www.makinghomeaffordable.gov. Keep detailed notes of all contacts during the loan modification process: dates and times, who you spoke with, their phone number and department, what was said, and when you should contact them again. You can also contact the New Hampshire Superior Court’s Foreclosure Mediation Program (www.courts.state.nh.us/adrp/foreclosure/index.htm) and/or Pam Slack at U.S. Senator Jeanne Shaheen’s office ((603) 647-7500) to help with the process.
Bankruptcy and Your Credit Score: Will I Ever Be Able To Buy A House?
Probably the number one question I hear when someone is considering filing bankruptcy is “How will it affect my credit score?” Although, I do not have a definitive answer to that question, there are a number of facts about credit scoring I will share. In no particular order:
Your FICO score is made up of five factors:
A bankruptcy can remain on your credit report for 10 years. You can file chapter 7 bankruptcy every 8 years. Negative information (such as a missed payment), can be on your credit report for up to 7 years. That is, 7 years from the first default. If the account is later sold, the time relates back to the first default.
If you are considering filing for bankruptcy, in all likelihood your credit score is not too high right now. It makes sense to get a secured credit card after your case is closed to begin building your credit. The interest rate will be high so you do not want to carry a balance but you can still use the card and pay off every month. Check out www.creditcard321.com for comparative information on secured cards and cards for people with less than stellar credit. For more information than you possible care to know about credit, check out www.myfico.com.
Credit Counseling Requirement
You are required, by law, to attend two counseling sessions to obtain a bankruptcy discharge.
The first counseling session must occur within 180 days before the filing your bankruptcy petition. The second session must occur after the filing but before the entry of the bankruptcy discharge in your case. The only in-person counseling organization that I am aware of is CCC of NH located on Loudon Road (1-800-327-6778). Clients have reported satisfaction with the following providers.
www.abacuscc.org
www.ccsnh-vt.org
www.hummingbirdcreditcounseling.org
www.pioneercredit.org
Calls from Bill Collectors
Just because you cannot pay your bills does not give a person the right to harass or belittle you. You have rights under New Hampshire law (Unreasonable and Deceptive Acts and Practices) and federal law (Fair Debt Collection Practices Act) to protect you from unreasonable collection activities. The FTC has multiple fact sheets and brochures that outline your rights. www.ftc.gov/bcp/edu/pubs/consumer.
From the moment of a bankruptcy filing, creditors are prohibited from taking any actions to collect on a debt. This means no phone calls and no lawsuits. If you have a law suit pending, it will close. You can give any creditor calling your case number and the calls will stop.
Do I need a lawyer to file bankruptcy
As with any legal action, you are allowed to file your bankruptcy petition on your own. However, completing a bankruptcy petition is more than filling out a form. Most people appreciate having someone by their side who is familiar with the process and the nuances of the practice. If you do decide to hire a lawyer, make sure you are comfortable with the person you chose.
For more information, please contact www.marystewartlaw.com.