How Long Do I Have to Leave My House After Filing Bankruptcy?

How Do I Get Financing for a Vehicle After Bankruptcy?

Often, when a person files bankruptcy, they are in one of four situations regarding a vehicle:

They are behind on their payments and must surrender the car (this usually happens in a Chapter 7 bankruptcy).

They drive an older vehicle that is paid off.

They are borrowing a friend or family member’s vehicle.

They are current on their payments and are able to keep their car in a Chapter 7 bankruptcy or they are able to catch up on the payments in a Chapter 13 bankruptcy.

If you fall into the first three categories, odds are, not too long after your bankruptcy is complete, you will need to purchase a new vehicle. Unfortunately, most people do not have enough extra money to pay cash for a reliable vehicle. Instead, they must look at financing an automobile.

Male'­s hand writing in the document

If you need to finance a vehicle, you should wait until your bankruptcy has been discharged. If you can, you should then wait a few months and be sure that you pay all of your bills on time – even your utility bills. This will help you to begin rebuilding your credit.

When you are ready to look into financing, be sure to “shop around” at various dealerships to get competitive interest rates and prices. With the ability to do research online many of our clients have had a lot of success by shopping around online. You have the ability to contact a countless number of financing companies to see what opportunities they can provide for you.

 

Do not look at brand new vehicles – instead, you should be looking at two or three year old vehicles that are new to you. This will help to dramatically reduce your purchase price.

Do not be surprised if you receive an interest rate between 13-20% after your bankruptcy, simply as a result of your bankruptcy filing. One way to compensate for a higher interest rate is to look at vehicles with a lower purchase price – you must ensure that you can afford the monthly payment in your budget. For more on monthly budgeting, look at our budgeting after bankruptcy series.

The biggest thing to keep in mind when obtaining financing for a vehicle after bankruptcy is that you want a reasonable and dependable vehicle – one that you can truly afford, not necessarily the nicest, newest vehicle on the lot. That can come in time after you are able to get a lower interest rate.

Bankruptcy Lawyers in Charlotte, NC Area See 6% Increase in Filings

Charlotte NC SkylineThe decline in the national economy is reflected by an increase in personal bankruptcy filings in 2010. However, in North Carolina, bankruptcy filings increased in some parts of the state while they decreased in other areas of the state.

In 2010, national filings were up 9% from 2009. In 2010, there were 1,530,078 consumer bankruptcy filings, an increase from the 1,407,788 consumer filings in 2009.

At the local level across North Carolina, the number of bankruptcy filings in 2010 varied.

In the Western District of North Carolina, there were 8,450 new bankruptcy filings in 2010, up from the 8,238 filings in 2009 – an increase of approximately 2.5%. The Western District of North Carolina includes Asheville, Bryson City, Charlotte, Shelby, and Wilkesboro (and areas in between).

Specifically within the Western District of North Carolina, bankruptcy cases filed in Charlotte, NC were up approximately 5.7% in 2010, with 3,839 cases filed. In 2009, there were 3,631 new bankruptcy cases filed in the Charlotte division. These numbers reflect the ongoing financial difficulties that families are facing in the Charlotte area. Many of these bankruptcy filings were a direct result of a job loss or pay cut.

Within the Middle District of North Carolina, which includes Winston-Salem, Greensboro, and Durham (and areas in between), bankruptcy filings decreased 4.9% in 2010.

Why the difference in two sections of the state so geographically close? It is likely because of the varying job availability and varying housing markets. The housing markets are different from county to county. While people in the Charlotte area may be choosing to file Chapter 13 bankruptcy to stay in their homes and avoid foreclosure, the trend in Greensboro may be to not try to save the home and to instead surrender the home and later file bankruptcy. However, folks in the Greensboro area who are simply walking away from their homes will eventually be harassed and possibly sued by the mortgage company for any remaining balance due on the home. At this point, those individuals will need to file bankruptcy to eliminate their responsibility on the debt.

If you are in the Charlotte area and are considering bankruptcy, contact Duncan Law for a free, no strings attached consultation to learn more.

Who Is Considered A Dependent In Bankruptcy?

Boy Holding HandsA dependent is an individual who requires and is actually receiving financial support from the debtor on a regular basis. This is usually children, grandchildren or an elderly family member. Generally, if you provide more than half of that person?s support, that person is considered your dependent.

When it comes to bankruptcy, the rules relating to whether or not a person can be claimed as your dependent are complex. There are various opinions on this topic and often times are determined on a case to case basis. Some Courts determine who is a dependent on the basis of who qualifies under the IRS standards while others use different standards. Most of the time, if they are considered dependents on your taxes the the bankruptcy courts will also consider them dependents.

The number of dependents you have is important in bankruptcy filings because it plays an important role in your Means Test calculations. Properly determining who is or is not a dependent may mean the difference between filing a Chapter 7 bankruptcy or having to file a Chapter 13 bankruptcy.

If you are uncertain as to whether an individual qualifies as your dependent, your best bet would be to consult with your bankruptcy attorney.

What Happens When I Surrender My Property in Bankruptcy?

Bankruptcy v. Deed In Lieu of Foreclosure

Foreclosure Sign in Front of HouseClients have frequently asked us what is the difference between a deed in lieu of foreclosure and a bankruptcy?

First, a deed in lieu of foreclosure (DLF) is when the homeowner signs over and transfers the deed to the home to the mortgage company without the legal process of a foreclosure. Most people believe this will look better on the credit report than a bankruptcy or a foreclosure. This is possible, however a DLF does not wipe out the pre-existing debt on the home as a bankruptcy would do. In other words, you as the homeowner would still owe the deficiency debt on the mortgage, the DLF just saved the mortgage company the time and expense of foreclosing. It does not eliminate the debt you owe them! This is the same on a “short sale”.

The mortgage company will eventually sell the home, usually at a loss, and demand you pay them the difference in money unless you have agreed in writing to wipe out the debt still owed. This debt is usually several thousands of dollars and possibly tens of thousands of dollars.  The difference in what you owe the mortgage company and the amount they sold the house for is called a “deficiency balance”.

If you do not pay the mortgage company the money they have demanded, they could sue you for the difference they lost from the sale of the home. The mortgage company will usually win the lawsuit because you do owe them the deficiency balance unless you have reached an agreement with them saying that you will not owe the deficiency balance.

In the alternative, the mortgage company could believe the debt is “uncollectable” from you and forgive the debt.  You may think, “that’s great!”  However, there’s a catch. The mortgage company will try to “write off” these thousands of dollars of loss on their taxes by filing a 1099(c) with the IRS eliminating your debt to them.  The drawback is the IRS will consider this “forgiven” debt to be gross income if it totals more than $600. In other words, you don’t have to pay back the full amount of the debt but the IRS will tax you on that forgiven debt as gross income. For example, the mortgage company losses $50,000 on the sale of your home.  The IRS will expect you to pay taxes on the $50,000.  If you are in the 25% tax rate, you would have to pay $12,500 in taxes to the IRS.  If you do not have the $12,500, the IRS could start assessing you penalties and interest. That could, in turn, lead to the garnishment of your paystubs!

In contrast, a bankruptcy will usually eliminate any deficiency balance you owe the mortgage company.  Therefore they cannot sue you or attempt to collect the deficiency balance you owe them. The IRS usually cannot tax you for the deficiency balance you owe the mortgage if you file the bankruptcy.  If you file bankruptcy, you are considered insolvent, and the IRS must waive the tax liability on the 1099 if you are deemed insolvent.

In conclusion, consider your options. However we believe surrendering the home in bankruptcy and wiping out any deficiency balance and eliminating your other unsecured debts, such as credit cards and medical bills, is usually a better alternative than a deed in lieu of foreclosure.