Frequently Asked Questions
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 strongly advise you work through a Home Ownership Counselor. A Home Ownership Counselor will assist you assembling all the necessary documents and transmit the documents directly to the lender via a secure internet portal. No more lost documents! This service, available exclusively to New Hampshire homeowners, is funded by a grant and is completely free to the homeowner. For more information, visit www.homehelpnh.org.
If you decide to proceed on your own, keep close track of all phone conversations with your lender, including number called, date and time called, the name and department of the person you spoke with and exactly what they told you.
Bankruptcy and Your Credit Score
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: Debt to Credit Ratio Payment History Length of Credit History New credit Types of Credit 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.
For more information than you possible care to know about credit, check out www.myfico.com .
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, the bankruptcy automatic stay stops creditors 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.
Pre-Bankruptcy Credit Counseling Requirement
You are required to attend TWO credit counseling sessions when you file bankruptcy. One before you file and one after you file but before your case closes. In person counseling is available at Greenpath located on Loudon Road in Concord (1-800-327-6778). You can also complete the course on-line. The first course takes about 2 hours. You may chose any of the myriad of on-line pre bankruptcy counseling providers. Many of my clients use www.accesshope.net or www.debtorcc.org.