life after bankruptcy: myths and misconceptions
DESCRIPTION
Once you decide to file a bankruptcy you will need to decide which chapter to use. Learn more about life after bankruptcy in Kentucky in this presentation.TRANSCRIPT
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LIFE AFTER BANKRUPTCYMyths and Misconceptions
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BANKRUPTCY CHAPTERS
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Once you decide to file bankruptcy you will need to decide which
chapter to use
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Individual debtors (or married debtors) can use the following chapters;
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Chapter 7 –
Chapter 7 is used by moderate to low income debtors. It requires you to pass the “means test” which compares your income to other similar households in your area.
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In a chapter 7, most debts are discharged, or eliminated, at the end of the bankruptcy which usually only takes about four to six months to complete
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Chapter 13 –
Chapter 13 is used by debtors who do not pass the “means test” or by debtors who qualify for a Chapter 7 bankruptcy
but who have valuable non-exempt assets they wish to protect that would be liquidated in a Chapter 7 bankruptcy
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Chapter 13 requires you to develop a repayment plan to pay back a
percentage (0-100%) of your debt over an extended period of time, usually
three to five years
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Chapter 12 –
similar to a Chapter 13 but can only be used by a family farmer or family
fisherman
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Chapter 11 –
Can be used by an individual; however, is more commonly used by a business
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Chapter 11 –
Chapter 11 is also used by debtors whose debts exceed the Chapter 13
maximum
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Chapter 11 –
Operates much the same as a Chapter 13
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YOUR ASSETS IN BANKRUPTCY
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In a Chapter 7 bankruptcy you may use either the Federal bankruptcy
exemptions or the Kentucky bankruptcy exemptions to protect
your assets
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An exemption means that the asset is protected from seizure and sale
during the bankruptcy
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If your assets exceed the state or federal exemption amounts you will need to file Chapter 13 bankruptcy
(or Chapter 11 or 12)
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Because you will pay back all or parts of your debt in a Chapter 13
bankruptcy most assets can be protected
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YOUR CREDIT SCORE AFTER BANKRUPTCY
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Chances are good that your credit score has already taken a hit, or is
headed that way soon
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Filing for bankruptcy will help your credit score in the long run as long as you take steps to improve your
score post-bankruptcy
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Your credit score will likely go down right after filing for bankruptcy; however, it will typically begin to
improve shortly after discharge in a Chapter 7 or shortly into your
repayment period in a Chapter 13
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FINANCING PURCHASES AFTER BANKRUPTCY
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Most debtors find that they are able to obtain credit cards and even financing for a vehicle within about six months of
discharge of a Chapter 7 bankruptcy
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Court approval is needed for financing purchases during a Chapter 13
repayment plan period but is possible
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FHA rules require you to wait two years after discharge in a Chapter 7
bankruptcy to qualify for financing
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A debtor can potentially obtain an FHA mortgage loan while going through
Chapter 13 bankruptcy if the monthly payments have been made on time for
at least 12 months
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HOW TO IMPROVE LIFE AFTER BANKRUPTCY
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To make the most of your fresh start, consider the following three post-
bankruptcy rules:
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The single best thing you can do for yourself after bankruptcy is to pay all
your bills on time from now on
PAY BILLS ON TIME1
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Doing so will add to the increase in your credit rating as well as establish
good financial habits
PAY BILLS ON TIME1
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To increase your credit score you must re-establish your credit history which requires you to use credit sparingly
RE-ESTABLISH CREDIT2
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A secured credit card is a good option
RE-ESTABLISH CREDIT2
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Watch your credit carefully
MONITOR CREDIT3
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Initially, check your credit to make sure that the debts eliminated in the
bankruptcy show as such on your credit report
MONITOR CREDIT3
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After that, keep an eye on it to make sure it is accurate and to see how steps
you take are reflected on the report
MONITOR CREDIT3
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Learn More About Life after bankruptcy in Kentucky
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