Who would think that filing for Chapter 13 bankruptcy would be considered one of those “happy times”? If your marriage falls apart during your case, you could be looking at tougher times ahead.

Lots of married couples who make the decision to file for bankruptcy do so at a time when the marriage is on rocky ground. Bill problems and the associated stresses they cause can tax even the strongest relationship.

Chapter 13 bankruptcy requires budgeting and mindfulness in dealing with your finances. If you’re married, you’re going to have to work together to keep the household in check. It doesn’t matter whether you’re filing together or on your own; a household budget doesn’t change based on who’s filing for bankruptcy.

Still, most of my clients find that going into bankruptcy takes away stress rather than adding to it. Though keeping to a plan isn’t simple, it gives people the chance to work together towards a common goal.

For some, however, the damage to their relationship is far too extensive by the time they come to me. Separation and, ultimately, talk of divorce becomes the order of the day.  That’s going to impact your income as well as your expenses.

Your Bankruptcy Lawyer May Have To Go

A lawyer can’t represent someone who has a conflict with another client. If you’re getting divorced, you and your soon-to-be former spouse are in conflict of a very real nature. Your lawyer may need to withdraw, leaving both of you looking for a new attorney.

If the divorce is amicable, however, your bankruptcy lawyer may be able to keep both of you on as clients. You’ll need to sign a few waivers regarding the potential conflict, but that should be fairly simple.

Can Your Plan Be Completed?

If you’re getting divorced, you and your spouse are going to have to decide who’s going to pay into the Plan, and how the money will be divided. If the Chapter 13 covers joint debts, there’s a better chance that both of you will pitch in. If, however, the debts are one-sided then there may be some friction.

Remember that if the Plan can’t be completed due to the divorce, you may be able to modify your Chapter 13 payments due to the change in income and expenses in connection with the divorce.

Regardless, your attorney will need to review with you and your spouse whether the new Plan payments are going to be sufficient to pay back the debts required in Chapter 13.

Beware of Property Divisions

During a Chapter 13 bankruptcy, you’re not allowed to transfer property without court permission. If there’s going to be a property settlement in connection with the divorce, you may need to get permission from the bankruptcy court.

For Nasty Divorce Battles, Split The Chapter 13

If the divorce gets heated, you may not be able to work together in your Chapter 13. You and your spouse will have to hire new bankruptcy lawyers and file a motion with the court to split your case into two distinct Chapter 13 bankruptcy filings (or convert one of the cases to Chapter 7, or dismiss one of them). You and your spouse will each file a new Chapter 13 Plan and things will roll on accordingly.

Here’s The Critical Piece Of The Puzzle

You need to talk with your bankruptcy lawyer if you think you’re going to be splitting up. I can’t say what other lawyers do in this situation, but I view my role as part lawyer, part counselor. If clients are having problems we need to talk so we can figure out a way to handle things properly.

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Do me a favor, will you?  Just walk away from them.  Here’s why.

Services Offering Credit Repair After Bankruptcy Are A Waste

The reality is that most of the credit repair that’s involved after bankruptcy will either be really easy or complex enough that you’ll need a lawyer to sue someone.  Getting the job done will take a few hours of your time, and none of it will be particularly difficult.

Why?  Because after bankruptcy, your credit repair should be 95% completed.  The outstanding debts have been wiped out, the balances brought to zero, and the information all corrected.

If your credit report doesn’t look correct after bankruptcy then you’ve got two steps.  Only two, no more.

After Bankruptcy, Review Your Credit Reports

About four (4) months after bankruptcy, go to AnnualCreditReport.com and get copies of all three (3) of your credit reports.  That’s Experian, Equifax and TransUnion.

Do not use a service like FreeCreditReport.com.  Sites like that will sign you up for a myriad of services you don’t need, and will cost you money in the long-run.  Only AnnualCreditReport.com is the “official” place to get a free copy of each credit report each year under the federal laws.

Do not get one or two reports, forsaking the others.  Each credit report contains different information, and you can’t go through credit repair unless you’re sure you’ve got all of the reports under control.

Don’t try to start your credit repair after bankruptcy immediately – you should wait four (4) months.  Each creditor and debt collector updates credit information, but some do so every 90 or 120 days.  Waiting a few months to get the ball rolling keeps things running more smoothly.

Review And, If Necessary, Dispute

After bankruptcy, your credit reports should show that the outstanding debt is $0.  Any balance due, with the exception of a debt that was not discharged, is improper after bankruptcy.  Look carefully at each tradeline to make sure you’re showing $0 due.

After bankruptcy, the creditor is required to note that the balance due is $0, and that the debt was discharged in bankruptcy.  If the creditor charged-off the debt prior to bankruptcy, however, it might be alright for the notation to say that the debt was discharged after charge-off.

If there is an inaccuracy, that’s where the after bankruptcy credit repair work begins.  You’ll need to send a detailed dispute to the credit reporting agency, indicating the incorrect tradeline and providing proof that it was discharged.  Send the letter by certified mail, and keep a copy of both the original signed letter and the certified mail receipt card.

Check The Updated Reports

When you file a proper dispute with the credit reporting agency, they need to send you back the results of their investigation.  That usually comes in 30-60 days, but it could be a slightly longer or shorter time period.  Be sure to review the outcome, and double-check the make sure it’s all corrected.

If it is, congratulations – your journey of credit repair after bankruptcy is complete.  You’ll need to keep checking your credit reports every six months to make sure none of the errors resurface, but aside from that you’re all set.

If You Don’t Understand The Reports Or If Errors Persist

I get that you may not be able to resolve the problems immediately.  Maybe you can’t understand the credit reports, or perhaps the errors don’t go away.  LIke I said, most of the work in handling credit repair after bankruptcy are simple – but not all of it.

There are a lawyers who handle credit report issues, and some (like me) who have a particular concentration in how they should look after your Chapter 7 or Chapter 13 case is completed.

If you’re in my neck of the woods, drop me a line and let me know you found this article.  I’ll review your reports at no charge, and if there’s a reason to do so then I’ll do what needs to be done through the court system.

I don’t like to go that route, though; it takes time, and I think we’d both rather your credit reports get cleaned up than have to sue someone.  But it happens, and when it does we take care of it.

The bottom line is this – those credit repair after bankruptcy ads you see are designed to prey on the chance that you’re scared and just want to jump start your finances after the case is over.  I get it – but let’s go about it the right way, shall we?

Chapter 13 bankruptcy is a useful tool to reorganize your finances. Sometimes that reorganization that includes the sale of real estate. Knowing how to do it right will keep you from getting in trouble with the Chapter 13 trustee and the judge assigned to your case.

Let’s say you filed a Chapter 13 bankruptcy and decided that selling your house makes sense for you. You need to realize is that when you file your bankruptcy case, all property that you own becomes part of the bankruptcy estate. This means that, in the absence of court permission, you’re not allowed to sell, transfer, or dispose of any property. Doing so is going to get you into a load of trouble.

The first thing that you need to do in order to make sure you don’t get into trouble when you want to sell your house is speak with your lawyer. Your attorney will help you navigate the bankruptcy system as you try to sell the house. There are few things as uncomfortable as leaving this key player out of the transaction until it’s too late.

Be sure to let your buyer know that you’re currently in an active Chapter 13 bankruptcy. This way, if there’s a hold up in getting the sale approved, your buyer won’t start to freak out. Make sure that your real estate broker is aware of your situation as soon as you decide to sell your house.

You may need court permission to  hire your real estate broker to represent you. In the absence of bankruptcy court permission, you may not have the right to enter into a binding contract for the sale of your house.

Once the real estate broker has been hired, you’re going to need to get the contract to sell the house approved by the bankruptcy court. Thankfully, Chapter 13 gives you the right to make these requests. This stands in contrast to your rights and powers under Chapter 7, which gives the trustee the exclusive power to sell your property pursuant to 11 USC § 363.

The request to sell your house will be made to the judge assigned to the case, and notice must be given to the trustee as well as to all of your creditors. Your lawyer will be able to draft the motion and make sure that it complies with all of the local requirements, but in most places your Chapter 13 trustee will require that the judges order to include certain provisions for the turnover of proceeds for the funding of your Chapter 13 plan.

There is, however, one wrinkle as far as the timing of this transaction. Federal Rules of Bankruptcy  Procedure 6003 provides that the bankruptcy court cannot issue an order granting a motion to sell property within 21 days after the date that you file your Chapter 13 case. Therefore, if you’re on the cusp of finalizing a contract and the need to file for Chapter 13 bankruptcy before the contract is completed, you should let the real estate agent as well as the buyer of your house no at the transaction may be held up for a few extra weeks.

This may sound complicated, but in the hands of an experienced Chapter 13 bankruptcy attorney the entire process can run fairly smoothly.   Due to the technical aspects of the motion, however, this is definitely something that you don’t want to try on your own.

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I read in The Wall Street Journal that the judge assigned to your Chapter 13 bankruptcy tossed your case out of court.  I also see that he locked you out of court for 180 days.

I’m sure you filed for Chapter 13 to get a handle on your financial situation, and I’m sorry to see that it hasn’t worked out for you.  That having been said, I think you could have avoided most of this hassle.

This was not your first Chapter 13, T-Boz.  You should have known better. I’m not sure why it went down this way, but I’m thinking maybe you didn’t get the memo about rules of Chapter 13 bankruptcy.

You apparently didn’t show up for your meeting of creditors.  You allegedly didn’t propose a Chapter 13 Plan that provided for your car payments.  According to the trustee’s motion to dismiss, you didn’t make your Chapter 13 Plan payments.

In other words, you didn’t follow the rules of the game.  And when you don’t follow the rules, you get thrown out.

I’m licensed to practice law only in New York, and am pending admission in California.  I know you filed for bankruptcy in Atlanta, so I can’t help you out.  But I thought I’d pass along some advice, which is the same stuff I tell all of my Chapter 13 bankruptcy clients.

The rules of Chapter 13 bankruptcy are pretty simple, but exceptionally important.  Here are the top 8 you need to keep in mind.

1. Disclose all assets and property, no matter how big or small.
2. Draft your bankruptcy petition, schedules, and related statements with the precision of a surgeon operating on the brain of a head of state.
3. Show up for your hearings – all of them.
4. Make sure your Chapter 13 Plan complies with not only the U.S. Bankruptcy Code but also all local rules and the trustee’s recommendations (unless your trustee is wrong, in which case you need to be prepared to do battle in the courtroom).
5. Make all of your Chapter 13 Plan payments.  On time.  Every time.
6. Keep copies of your post-petition car and mortgage payments.  Make them on time.  Again, on time – every time.
7. Provide every document the trustee requests in order to recommend confirmation of your Chapter 13 Plan.  Some courts have local rules (the U.S. Bankruptcy Court for the Eastern District of New York, for example, uses these), others go by the Code, and still others work on an informal list.  Whatever your trustee and court demand, that’s the benchmark for you.
8. Keep open and clear lines of communication with your bankruptcy lawyer.  And if you’re filing for bankruptcy without a lawyer … well, maybe it’s time to get one.

Hope this helps.  And if you decide to go back to bankruptcy after the 180-day bar is over, good luck.

- Jay

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Deciding whether to file for bankruptcy isn’t easy – nor should it be. If the benefits outweigh the burdens, perhaps it’s right for you.

It would be unfair of me – in fact, of any lawyer – to proclaim that bankruptcy is all about benefits.  So, too, it’s wrong for pundits and creditor representatives to say there are no advantages whatsoever.  Rather, it’s a question of balance.  For the right person, the benefits can be huge.  For others, they don’t matter much if at all.

That’s one of the reasons why I turn away about 60% of the people who call me up thinking that either Chapter 7 or Chapter 13 is a good idea for them.  The reality is that for some, the benefits don’t apply.  They’ve got no upside to filing a case and, for that reason, I either give them another option or simply send them on their way.

What are some of the biggest benefits of bankruptcy?  Here are my top 9:

1. when you file for bankruptcy you can permanently wipe out your obligation to repay most debts;
2. filing for bankruptcy protects your property, income and bank accounts from creditors;
3. if you’ve got a car, under Chapter 13 you may be able to lower the interest rate on your car payment or ever the balance due;
4. under water on your home?  You might be able to get rid of that second mortgage;
5. the automatic stay stops repossessions, utility shut-offs, foreclosures and, in many cases, evictions;
6. in Chapter 13, the automatic stay extends to other people who are obligated to make payments on your debts;
7. filing for bankruptcy may help you keep from losing your driver’s license due to excessive fines;
8. Chapter 13 can give you a way to pay past-due child support obligations, thereby removing the possibility of jail time and tax refund offset while still providing for your child; and
9. if you’ve got tax debts, you may be able to wipe them out. Even if you can’t wipe them out, you can pay them off without further interest or penalty.

I’m not saying this is the right solution for everyone.  In fact, this is and should be a last resort for all but a very few.  It’s time-consuming, paperwork intensive, and is going to end up costing you money for a lawyer (you can do it yourself, but you can also do your own surgery).  Those are some heavy responsibilities.

In the end, it’s up to you.  You’ve got to weigh the benefits and burdens, decide if it’s right for you, and take appropriate action.  Don’t listen to your friends or family members.  Decide whether this is the best move for you on balance, and move ahead accordingly.

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Shut the drapes! I’d yell at the screen time and time again.

In the real world, you’re right to worry about the privacy of your credit information.  When the Fair Credit Reporting Act was being drafted, Congress tried to safeguard your rights by providing that credit reporting information was to be released only for specific permissible purposes and none other.

Permissible Purpose And The Fair Credit Reporting Act

In order to obtain a copy of someone’s credit report, you must have a permissible purpose.  Without having a reason plucked from the language of the statute, it’s not permitted – period.  In that way, Congress ensured that you have the protections of privacy when it comes to the release of your information.

Here are the permissible purposes as outlined by the FCRA:

1. a credit report may be issued in repose to a court order, subpoena or Grand Jury request;
2. a consumer (that would be you) can authorize the release of their credit report to anyone who wants to see it;
3. an existing or potential creditor has a permissible purpose under the Fair Credit Reporting Act in connection with a “credit transaction” involving the extension of credit to you, or in connection with the review or collection of one of your existing accounts;
4. it’s permissible for a potential employer to get a copy of your credit record in connection with employment, so long as you consent to the release and the employer agrees to make certain disclosures if adverse action is taken based in any part on the report;
5. an insurance company can get a copy of your credit report in connection with underwriting a policy for you;
6. the government has a permissible purpose if it gets a copy of your report in connection with issuing a government license or other benefit (such as public assistance); and
7. whenever there’s a legitimate business need.

How To Ensure Safety From Mrs. Kravitz

Your nosy neighbor, a stranger, or some random company can’t just decide to grab a copy of your credit report.  Without a permissible purpose, they’ve got no legal right to do so.  If someone gets a copy of your credit report without a permissible purpose, you’ve got the right to sue them for violating your rights.

Of course, that’s cold comfort – it would be better to avoid the lawsuit and simply lay hands off your report.  Unfortunately, the world is not always a logical or perfect place.  The only way to be protected is to get copies of all three (3) major credit reports every few months and vigilantly review them.

I know, you get only one copy of each report per year.  Paying for them is a drag, but it’s a drop in the bucket financially as compared with the damage Mrs. Kravitz can do otherwise.

Image credit:  twitchery