What is the Impact of Bankruptcy On Getting Financial Aid For School?

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I’ve filed for bankruptcy and now I want to go back to school. I need a loan to be able to do this. Can I still get a student loan?

Filing for bankruptcy should not affect your ability to get students loans that are federally funded.  As long as any other student loans that you may have are not in default and are being paid back, a student typically should not have any trouble getting any new federal student loans because of the bankruptcy.

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Privately backed student loans are a different story. Private student loans typically take your credit into consideration so that may make them more difficult to obtain after having filed for bankruptcy. But it is still possible to obtain private student loans after filing. They do look at your previous credit, but having a bankruptcy on your credit is not the only determining factor. The lenders will typically looks at more than just that. If a parent has gone through bankruptcy and the child is applying for a private student loan, then it is only the child’s credit history that is being looked at. One way that there might be a problem with getting this loan is if the parent is required to co-sign for it and they have filed bankruptcy before.

We understand that after filing bankruptcy you, or your children, may want to go to school to further their education. Most student loans are “need based”. This means they are based on your income each month. Filing bankruptcy obviously does not increase your income (although it may increase your disposable income). Therefore, you would still be eligible for students loans despite your bankruptcy filing.

Must I Disclose Gambling Income and Losses in Bankruptcy?

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If you file bankruptcy, gambling income for the current year and the two previous calendar years must be disclosed on your bankruptcy filing.  Gambling losses incurred in the past twelve months must also be disclosed on your bankruptcy.

The Internal Revenue Service (IRS) considers earnings from gambling as income and they are taxable.  Per the IRS, earnings from gambling includes winnings from lotteries, raffles, horse races, and casinos.  It also defines income not only as cash winnings but also the fair market value of prizes such as cars and trips.  Similarly, the bankruptcy code requires you to disclose the earnings on your bankruptcy.

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Losses from gambling must also be disclosed on your bankruptcy filing.  These losses are often scrutinized by the bankruptcy Trustee assigned to your bankruptcy case.  If large sums of money have been withdrawn from your bank account and you indicate it was lost gambling, you may be asked to provide the receipts from the casino, track or other venue where you gambled the money.  If it is in a location away from your home, you may even be requested to provide the hotel receipt or voucher.  With today’s technology, it is easy to determine the exact date and time you were at the venue and how much you won or loss while gambling.

If you took cash advances on a credit card, especially in the months leading up to your bankruptcy filing, and used those funds to gamble, the credit card company may question whether those charges on the credit card can be discharged or eliminated in bankruptcy.  In other words, the credit card company may argue the money was not spent on necessities but a frivolous activity.  They may also argue that you knew in advance you would be filing bankruptcy, so you decided to take your chances and gamble with “their money”.  And if you lost, you planned to eliminate the debt through bankruptcy.  As a result, they may object to the discharge of these debts in bankruptcy and you may be required to pay the money back to the credit card company.

As a result, it is important to speak openly and honestly with your bankruptcy attorney about any gambling income and losses you may have incurred in the past year.  Otherwise, you may find yourself owing money you otherwise thought could be eliminated in bankruptcy.

What If I Move During My Bankruptcy?

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Your mailing address is very important while you are in an active bankruptcy.  Your attorney as well as the Trustee and/or Bankruptcy Court, send you important documents during your bankruptcy for a number of reasons, such as updating you on the status of your case or sending you your final decree which lets you know your case is closed.

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In a Chapter 7 bankruptcy, from your filing date, you will receive your Final Decree within 4 to 6 months.  As long as you have a mailing address that will remain the same during that time period, there should not be an issue.  However, in a Chapter 13 bankruptcy, it will be 3 to 5 years before you receive your final decree.  Therefore, it may be more likely for you to switch residences.  You should notify your attorney of your updated address, so they may file a notice of address change with the bankruptcy court. This is important because it will ensure that you receive important and time sensitive information from the bankruptcy court.

Also, please be aware that if you are selling your home, you must request permission from the Bankruptcy Court to transfer that property while in an active bankruptcy, regardless of which chapter you file.

Can I Purchase a Vehicle in a Chapter 13 Bankruptcy?

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The short answer is yes.  However, there is a bit of a process behind purchasing a vehicle in a Chapter 13.  First, your budget needs to be reviewed.  This requires your bankruptcy attorney to review your income and your expenses to make sure you can afford to have an extra payment in your budget.  Once it has been established that you are able to make a new car payment, a request to purchase a car must be made to the Bankruptcy Court.  This is done through a process called a Motion to Incur Debt.

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After your bankruptcy lawyer files the Motion to Incur Debt the bankruptcy judge will evaluate your situation to make sure that you can make the monthly payments without any problems. If there are problems, they will deny your ability to get financing for the vehicle. It is the judge’s job to make sure that you do not incur new debt and end up in the same situation that caused you to file bankruptcy in the first place.

What if you plan to buy a car without financing?  You will still need to obtain permission; additionally, you will need to explain where the lump sum of money came from.  It is always best to discuss this possibility with your attorney first to remove any possible issues that may arise from the access of extra money.

Do I Need to Include a Creditor on My Bankruptcy If There Is No Balance on the Account?

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If you have a credit card or a loan with a zero balance, it is a personal decision whether you include them on your bankruptcy.  If there no balance, it may not be necessary to include them on your bankruptcy filing; however, it may be in your best interest to include them should there be any fees or interest charges that were placed on your account during the most recent billing cycle.

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Regardless of whether you include the creditor on your bankruptcy, the creditor will most likely find out about your bankruptcy filing and terminate your privileges with them.  For example, if you have a line of credit with no balance, you will most likely be unable to take any future draws on the line of credit.  The same would apply with a credit card.  Although you did not include the credit card company on your bankruptcy, they will most likely terminate your card.  As a result, attempting to make charges on the credit card after filing bankruptcy could lead to an embarrassing event.

If you have a credit card you would like to retain and use after filing bankruptcy, you will need to contact the credit card company in advance of filing bankruptcy and determine if their policy would allow you to keep the card.  A few companies have been willing to allow you to continue to use the credit card after filing bankruptcy; however, that is the exception.  Do not wait until after your bankruptcy has been filed to contact the creditor, since they will most likely not be willing to speak with you.  In addition, if you fail to include them in your bankruptcy filing and determine there was a balance on the account, you may be charged fees to add them to your bankruptcy.  As a result, it is always the safest approach to include the creditor on your bankruptcy filing regardless of whether there is a current balance.

Why Do I Have to Include My Spouse’s Income If They Are Not Filing Bankruptcy?

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Filing bankruptcy is not as simple as it once was.  You have to meet certain qualifications to determine which bankruptcy you may file.  This is normally done by what is referred to as the Means Test.  The Means Test will determine how your household income compares to the State median income and whether or not you can afford to pay some of your debts back or can qualify for them to be wiped out.

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The Means Test is based on the household income.  Household includes anyone living in the home who receives income of some sort, which would include your spouse.  Regardless of whether or not they file the bankruptcy with you, the court looks at the combined household income for purposes of the Means Test.  The bankruptcy court basically enacted this law to make sure that you cannot take advantage of creditors by one spouse filing a Chapter 7 bankruptcy to wipe out all of their unsecured debt while the other spouse is making $150,000 a year. Therefore, the household income is used for purposes of the Means Test.

One part of the Means Test deals with your income but another takes into consideration your expenses each month.  Any secured payments, taxes, health insurance, and other “qualified” deductions would be reflected.  If you are in the situation where you may be filing bankruptcy but your spouse is not, then this is where you would reflect any of the deductions that your spouse has as well.  This gives you the opportunity to show the court that while all of your income may be combined, your spouse still has their own debts.  Maybe there are small amounts of credit card payments that are only in your spouse’s name and they want to continue to pay those or a vehicle that is solely in their name only they are obligated to pay.

Unfortunately, the saying, “What’s mine, is yours” goes a long way and the court understands that income and expenses for a household are combined. The court is simply making sure that you cannot “get over” the system.  Including your spouse’s income and expenses in the Means Test is the best way to ensure that a person or couple filing bankruptcy is doing it in the fairest way possible.  We understand this question is, often times, asked because you are worried about your spouse’s credit. Including your spouse’s income in the bankruptcy will not have a negative impact on their credit.

Am I Responsible for the Loan On My Car If I Voluntarily Turn it In?

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You will still be responsible for the loan or debt on your vehicle even if you voluntarily turn it in. If you have a vehicle that you cannot make payments on, you have the choice of voluntarily surrendering the car or you can let the creditor repossess it. What many people do not know is voluntarily surrendering the vehicle is still considered a reposession on your credit report, a voluntary reposession.

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Do I Have to Pay my Homeowner’s Association Dues after Filing Bankruptcy?

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