Q: Is it possible to establish one's credit after filing for bankruptcy? If yes, then what are the ways that would help one build his or her credit?

The Bankruptcy Law Firm, P.C. only does bankruptcy work. We do not advise on "rebuilding credit". We encourage our clients to get a bank account with a debit card, and use the debit card, instead of getting back into debt after they get a bankruptcy discharge, by accepting and using more credit cards.

Question 1

Why do you think so many consumers are filing bankruptcy?

Accepted Answer

The American Bankruptcy Institute reported on 5/1/08 that U.S. consumer bankruptcy filings increased 47.7 percent nationwide in April from the same period a year ago, relying on data from the National Bankruptcy Research Center (NBKRC). The overall April consumer filing total of 92,291 also represented a 7.1 percent increase from the 86,165 filings in March. This is a HUGE increase in bankruptcy filings. Obvious reasons for this HUGE increase in the number of people filing bankruptcy include rising unemployment, credit card interest rates of 20-25% or more, decreasing real property values nationwide (while adjustable mortgage interests adjusted UP, increasing monthly mortgage payments on houses that were losing value). Most individuals who owe $30,000 or more credit card debt can barely make their monthly payments, and making those monthly payments does NOT reduce the total balance they owe, and in some cases that balance keeps increasing. Eventually, the load of credit card debt, plus in some cases medical debt, plus in some cases failed small businesses, plus in some cases adjustable interest rate mortgage payments that adjusted up to the point where the person cannot pay them, results in the consumer making the decision to seek the "fresh start" provided to individuals by the bankruptcy discharge, which makes general unsecured debts of various types permanently unenforceable against the individual who receives a discharge.

Question 2

How do you feel about Chapter 7 versus 13, which option is better in your opinion?

Accepted Answer

For the majority of consumers, Chapter 7 is preferable, because Chapter 7 is the only Chapter (kind) of bankruptcy where the debtor does not have to do a repayment plan for a period of years (usually 5 years, but sometimes 3 years), to try to repay credit card debt, medical debt, and other unsecured debt. In Chapter 7, a debtor can seek to discharge credit card debt, medical debt, and certain other kinds of general unsecured debts. Discharge means make permanently UNENFORCEABLE against the debtor as a personal liability of the debtor. However, only consumer debtors who can pass the "means test" (form 22 of bankruptcy official forms) can file Chapter 7. Also, for some debtors, Chapter 13 or 11 can do things that Chapter 7 cannot do, such as allow debtor to pay off an arrearage on the debtor's real property(ies) over a 60 month repayment plan.

Question 3

Who should (and should not) file bankruptcy?

Accepted Answer

There is no "one size fits all answer" to that question, which is why my law firm, The Bankruptcy Law Firm, PC, offers a "free first consult to tell you whether our law firm can help you" to every person or business considering filing bankruptcy. Call our California bankruptcy law firm for your free initial consultation.

Question 4

What are the factors one should consider prior to filing bankruptcy?

Accepted Answer

Factors include, total debt versus ability to pay, what debts will be dischargeable/nondischargeable in bankruptcy, what assets will the individual be able to exempt if the individual files bankruptcy versus what assets will the individual NOT be able to exempt, will the individual be eligible for a bankruptcy discharge at all, can the individual consumer debtor pass the "means test" (form 22 of bankruptcy official forms), which a consumer must pass in order to be able to file Chapter 7 bankruptcy without the Office of US Trustee moving to dismiss that Chapter 7 as constituting "abuse" of Chapter 7, which chapter is suitable for the particular financial problems of a particular debtor, etc.

Question 5

If a husband files bankruptcy will it be reported on his wife's credit report too?

Accepted Answer

My firm doesn't usually see that happening, but lawyers don't control what credit reporting agencies do, so it could happen.

Question 6

Is it possible to establish one's credit after filing for bankruptcy? If yes, then what are the ways that would help one build his or her credit?

Accepted Answer

The Bankruptcy Law Firm, P.C. only does bankruptcy work. We do not advise on "rebuilding credit". We encourage our clients to get a bank account with a debit card, and use the debit card, instead of getting back into debt after they get a bankruptcy discharge, by accepting and using more credit cards.

Question 7

Is there still a stigma associated with bankruptcy?

Accepted Answer

Less and less. 1 of every 10 people in the U.S. files bankruptcy at some time or another during their lives.

Question 8

Many people think that bankruptcy is a way to cover up one's bad spending habits or poor money management skills?

Accepted Answer

Most consumers do not intentionally overspend. Some consumers overspend, or over-use credit cards, by mistake, because they don't understand the impact of credit cards running interest at 20-25% a month until they owe so much they can't pay it back. Bankruptcy may solve that problem once. But a debtor who receives a Chapter 7 bankruptcy discharge cannot file a second Chapter 7 case and seek a discharge in that second Chapter 7 case unless it has been over 8 years between when the first Chapter 7 case, and second Chapter 7 case, is filed. In addition, since 2005, debtor education during bankruptcy is required for all individual debtors, in their bankruptcy cases, before they can get a discharge in any chapter of bankruptcy. These factors together should cut down on people continuing to "overspend" or "overborrow".

Question 9

If a person inherits an amount between the time the petition is filed and the time of hearing, does he or she have to report to the bankruptcy court regarding the inheritance?

Accepted Answer

If a person files bankruptcy and someone dies within 180 days after the bankruptcy case is filed, what the debtor inherits from the decedent becomes property of the debtor's bankruptcy estate, and the creditors/trustee get that money, up to amount necessary to pay all allowed claims 100%. Yes, there is a duty to tell trustee if this happens.

Question 10

Can a person file bankruptcy on his own?

Accepted Answer

Individuals can file bankruptcy "pro se" (means without any attorney), but its very hard to be successful doing so, and many such cases get dismissed, with no discharge. It is well worth the money to find and pay an experienced consumer bankruptcy attorney to represent you to do your bankruptcy case. There is too much at stake to try to do it "pro se".

Commonly Asked Bankruptcy Questions

Interview with Los Angeles Bankruptcy Attorney Kathleen March

Why do you think so many consumers are filing bankruptcy?

How do you feel about Chapter 7 versus 13, which option is better in your opinion?

Who should (and should not) file bankruptcy?

What are the factors one should consider prior to filing bankruptcy?

If a husband files bankruptcy will it be reported on his wife's credit report too?

Is it possible to establish one's credit after filing for bankruptcy? If yes, then what are the ways that would help one build his or her credit?

Is there still a stigma associated with bankruptcy?

Many people think that bankruptcy is a way to cover up one's bad spending habits or poor money management skills?

If a person inherits an amount between the time the petition is filed and the time of hearing, does he or she have to report to the bankruptcy court regarding the inheritance?

Can a person file bankruptcy on his own?

Q: Why do you think so many consumers are filing bankruptcy?

Q: How do you feel about Chapter 7 versus 13, which option is better in your opinion?

Q: Who should (and should not) file bankruptcy?

Q: What are the factors one should consider prior to filing bankruptcy?

Q: If a husband files bankruptcy will it be reported on his wife's credit report too?

Q: Is it possible to establish one's credit after filing for bankruptcy? If yes, then what are the ways that would help one build his or her credit?

Q: Is there still a stigma associated with bankruptcy?

Q: Many people think that bankruptcy is a way to cover up one's bad spending habits or poor money management skills?

Q: If a person inherits an amount between the time the petition is filed and the time of hearing, does he or she have to report to the bankruptcy court regarding the inheritance?

Q: Can a person file bankruptcy on his own?