What if I can’t afford to file bankruptcy?

The actual court fee you have to pay when filing bankruptcy is not very expensive, and you might be able to get help with it if you need it. The more expensive part is hiring a bankruptcy attorney to guide you through the process and handle filing your case.

The cost of filing a Chapter 7 bankruptcy in southern California, for example, is only $338, and even less for a Chapter 13 bankruptcy ($313). But if even that would be a hardship, you might qualify for a fee waiver that will let you pay the court fee in installments.

The cost of a bankruptcy attorney is an additional expense you have to pay because filing on your own is not feasible or wise. In southern California, for example, the average cost is around $1,560 for a Chapter 7 (see this article on Lawyers.com) case and anywhere from $3,300–$5,000 for a Chapter 13 case (see this article on Lawyers.com). If you can’t manage those fees because you’re low-income, you may be eligible to get free legal help. See a listing of State Legal Aid Resources at FindLaw.com. In southern California check with the Legal Aid Society of California or the San Diego Volunteer Lawyer Program.

Related post: 12 Bankruptcy Myths Busted

The actual court fee you have to pay when filing bankruptcy is not very expensive, and you might be able to get help with it if you need it. The more expensive part is hiring a bankruptcy attorney to guide you through the process and handle filing your case. The cost of filing a Chapter … Continue reading “What if I can’t afford to file bankruptcy?”

How can I get a car loan after filing bankruptcy?

One of the worst myths out there about bankruptcy is the assumption there’s no way you can get a car loan if you need one after filing bankruptcy. People end up paying what little cash they can scrape together for a horrible car that ends up being more trouble than it’s worth. Please know it is possible to get a car loan in spite of a bankruptcy, but you have to find the right kind of lender who offers a bankruptcy car loan.

It’s true that many lenders won’t approve a car loan for you if you have a bankruptcy case open or even if it’s discharged for a couple years. But there are other lenders who will work with you on a bankruptcy car loan. The interest rate on the loan is going to be higher, but that’s the extra price you have to pay for being what lenders think is a higher-risk customer.

Related post: 12 Bankruptcy Myths Busted

One of the worst myths out there about bankruptcy is the assumption there’s no way you can get a car loan if you need one after filing bankruptcy. People end up paying what little cash they can scrape together for a horrible car that ends up being more trouble than it’s worth. Please know it … Continue reading “How can I get a car loan after filing bankruptcy?”

Will I lose everything if I file for bankruptcy?

Most people understand very little about bankruptcy, which is why some resist filing bankruptcy even when it would be the best thing for them to do. One of the biggest myths out there is that people just assume filing bankruptcy means they’re going to lose everything. Not true!

Bankruptcy laws were designed to help you either eliminate or catch up on your debts, and to do so while making sure you get to keep what you need, including your house, a vehicle to drive, your retirement fund, and all the basic personal possessions you need.

But if you have tons of debts and also have lots of assets that don’t fall within what the courts think you need, then they’re going to want to sell those off to pay the creditors you owe. Bankruptcy laws get very complex around what assets you’re allowed to protect and keep, and which ones would be liquidated to pay off some or all of your debts. And this also varies from state to state. This is why you need the guidance of an experienced, reputable bankruptcy attorney to guide you through the process.

Related post: 12 Bankruptcy Myths Busted

Most people understand very little about bankruptcy, which is why some resist filing bankruptcy even when it would be the best thing for them to do. One of the biggest myths out there is that people just assume filing bankruptcy means they’re going to lose everything. Not true! Bankruptcy laws were designed to help you … Continue reading “Will I lose everything if I file for bankruptcy?”

Isn’t filing bankruptcy a sign of failure?

Many people resist filing bankruptcy even when they should because they think it’s a sign of failure. How you view your bankruptcy is your choice.

A lot of people assume filing bankruptcy is a sign of failure because they assume the person filing has been irresponsible. That may be true for some, but there are just as many who are forced to file bankruptcy through no fault of their own.

There are many reasons people file bankruptcy. If you lose your job in the middle of an economic recession, bankruptcy might become your best option. Others might get hit with giant medical bills they weren’t expecting, and bankruptcy might be their only option even if they have health insurance. Everyone’s situation is different, and plenty of people who file bankruptcy not because of any kind of failure on their part but because of circumstances beyond their control.

In many cases, filing bankruptcy is the most responsible thing you can do to get your financial life back on track. Bankruptcy laws were designed to help people get out from under crushing loads of debt and make a fresh start. Instead of viewing bankruptcy as a failure, you can view it as a new beginning to make things better. The choice is yours.

Related post: 12 Bankruptcy Myths Busted

Many people resist filing bankruptcy even when they should because they think it’s a sign of failure. How you view your bankruptcy is your choice. A lot of people assume filing bankruptcy is a sign of failure because they assume the person filing has been irresponsible. That may be true for some, but there are … Continue reading “Isn’t filing bankruptcy a sign of failure?”

Will filing bankruptcy ruin my credit forever?

People filing for bankruptcy often ask this question: Will bankruptcy ruin my credit forever? The short answer is no, but it is a little more complicated than that. Here’s what you need to know.

When you declare bankruptcy, it does stay on your credit report for anywhere from seven to ten years depending on the type of bankruptcy you filed. While that bankruptcy is on your credit history, some lenders may view it as a red flag, which in turn means you may find it difficult to obtain new loans or lines of credit. That’s the potential negative impact of bankruptcy on your credit.

But there are also lenders who have specific lending programs designed to meet the needs of bankruptcy customers. You’ll likely have to settle for higher interest rates because all lenders view you as a higher risk for default due to that bankruptcy on your credit report.

Whether your credit score goes up or down after filing bankruptcy depends on a variety of factors. If your credit score was already very low when you filed bankruptcy, then it might go up after your bankruptcy is discharged because you’ll have much less delinquent debt than before.

But however it works out, the most important thing is to start proactively rebuilding your credit as soon as possible after filing bankruptcy. That’s how you make the most of the fresh start bankruptcy was designed to give you.

Related post: 12 Bankruptcy Myths Busted

People filing for bankruptcy often ask this question: Will bankruptcy ruin my credit forever? The short answer is no, but it is a little more complicated than that. Here’s what you need to know. When you declare bankruptcy, it does stay on your credit report for anywhere from seven to ten years depending on the … Continue reading “Will filing bankruptcy ruin my credit forever?”

Have Bankruptcies Increased During the Pandemic?

have bankruptcies increased during pandemic

Although the economic impacts of the recession caused by the novel coronavirus and COVID-19 pandemic have varied widely by industry and even from person to person, everyone agrees it’s been severe. And yet personal bankruptcy filings in 2020 were the lowest they’ve been since 1986! In fact, bankruptcy filings actually went down by nearly 30% in 2020 compared to 2019. What exactly is going on here?

For Most People, Bankruptcy is the Absolute Last Resort

bankruptcy last resort

Job loss is one of the major causes of bankruptcy, but it takes a while for it to really kick in. Because so many people have a negative, stigmatized view of bankruptcy, it’s usually treated as the absolute last resort. In other words, when times are tough, people do whatever they can to avoid filing bankruptcy. These actions may not be wise, but here are some of the ways people try to avoid filing for bankruptcy:

Drawing down their savings and using their stimulus checks to keep up debt payments.

Borrowing additional funds from creditors, perhaps putting up assets as collateral.

Withdrawing money from their retirement plan.

Borrowing money from employers.

Borrowing money from friends and family.

Stopping payments to some creditors while keeping up others.

These tactics could see some through the current pandemic recession and prevent them from declaring bankruptcy, but they could also just be delaying the inevitable.

Every Recession is Different, and the Pandemic Recession is Bizarre

irregular recession

Most every recession has been accompanied by a significant increase in personal (or consumer) bankruptcy filings (as opposed to commercial bankruptcies for businesses). But remember it’s what is called a lagging indicator, meaning it takes a while for bankruptcies to rise after a recession hits. Unemployment is also a lagging indicator of recessions. For example, in the Great Recession that began in December 2007 unemployment was 5%. It took nearly two years of gradual job loss for the unemployment rate to march slowly up to its peak of 10% in October 2009. Bankruptcy filings tend to lag even further behind, which is why the peak in bankruptcy filings didn’t come until a later in 2010.

But comparing the current pandemic recession to the Great Recession might be like comparing apples and oranges. Take a look at the graph below and you’ll see for yourself (data source: https://www.bls.gov/):

unemployment rate graph

Look how different the shapes of the unemployment rate line is between the two recessions. It took two years for unemployment to reach its peak of 10% and then started its steady march down to record lows just before the pandemic hit.

By contrast, the economic shut down was so fast in response to the pandemic, unemployment immediately shot up to its peak of 14.8% in April but has dropped to half that since. No one was expecting that to happen. It’s hard to make any predictions when the two situations look so entirely different. It’s also worth mentioning that a lot of people (especially older workers and moms managing their children’s education from home) have completely exited the workforce, which means they’re not even counted in the unemployment rate.

Based on what happened in the Great Recession, which was a peak in bankruptcy filings about a year after the peak in unemployment, you might be tempted to predict that the peak in bankruptcy filings will come in 2021. But it’s not clear it’s going to happen any time soon, or at all. This is unchartered territory in terms of how unique this recession is.

Why Did Bankruptcy Filings Fall in 2020?

bankruptcies fell in 2020

It would be one thing if personal bankruptcy filings had held steady or gone up a little during 2020, but they fell sharply by 30% to the lowest level seen in more than three decades. One thing to keep in mind is that the bankruptcy courts were shut down for a significant period of time and many are still operating at lower capacity and remotely, so there may be people who want to file but don’t because they don’t even know if the system is really even functioning right now.

Then there’s all the relief that has been made available. The federal government was quick with an initial round of relief payments extended unemployment benefits. Then those dried up. Then they finally passed more, but not nearly as much. With a new administration in charge, the relief may once again be on the horizon in a significant way. These relief measures in the form of stimulus payments and extended unemployment benefits may be just enough to keep most people afloat long enough to be able to recover without declaring bankruptcy.

Perhaps just as important, consumers are getting a lot of other kinds of breaks specifically related to debts. Student loan payments are on hold, many mortgage holders aren’t being penalized for missed payments, some states have stopped debt collection altogether, and so on. At some point, however, all those temporary measures are going to fall away and the creditors who have been waiting will want to collect on all those debts. The question is whether or not people will be ready to pick back up on their debt payments.

Also remember that it does cost money to file bankruptcy. While the court fees are modest, most people can’t (or shouldn’t try to) file on their own without the help a bankruptcy attorney, which can cost anywhere from $1,500 to $5,000 depending on your location and how complicated your case is. Amidst all this economic uncertainty, a lot of people may want to file but don’t feel like they can justify laying out the significant amount of money it takes to get the expert guidance of a bankruptcy attorney.

Bankruptcy by the Numbers in 2020

bankruptcy stats

What’s interesting about the 30% decline in bankruptcies in 2020 is how that figure covers all kinds of bankruptcy. When you drill down into the types, the picture gets even more fascinating. People who need to file person bankruptcy tend to go primarily with a Chapter 7 or a Chapter 13 type of case. In 2021 Chapter 7 bankruptcy filings fell by 21.6% in 2020 compared to 2019. And Chapter 13 filings fell by a whopping 46% in 2020. Chapter 11 filings, however, which is a type often used by businesses, were up by 29% in 2020. This is not surprising when you think about how many businesses have had to close permanently because of the pandemic.

The question remains, will there be a sharp rise in bankruptcy filings caused by the pandemic recission? The only real way to answer this question right now is that we just have to wait and see. If the next round of federal stimulus and assistance keep those who are struggling afloat while the roll-out of coronavirus vaccines ramps up, a significant number of people might make it through the recession without having to declare bankruptcy. But there will undoubtedly be some number of people who will still struggle and will have to file for bankruptcy. We just don’t know how many yet.

When You Need to Buy a Car in Bankruptcy

buying a car in bankruptcy

We hope no one reading this will have to file for bankruptcy because of the pandemic-induced recession. But if you do declare bankruptcy and then discover you also need to finance the purchase of car, please know that Day One Credit is here to help you find the bankruptcy car loan you need. We work with top lenders who are willing to work with bankruptcy customers, whether your case was filed yesterday or was recently discharged. You can learn more about how we can help you by visiting Why Day One.

Although the economic impacts of the recession caused by the novel coronavirus and COVID-19 pandemic have varied widely by industry and even from person to person, everyone agrees it’s been severe. And yet personal bankruptcy filings in 2020 were the lowest they’ve been since 1986! In fact, bankruptcy filings actually went down by nearly 30% … Continue reading “Have Bankruptcies Increased During the Pandemic?”

Do I need a bankruptcy car loan after my case is discharged?

When your bankruptcy case is discharged and over, you might think you wouldn’t need a bankruptcy car loan to buy your next ride, but chances are good you will still need one.

Remember that after your bankruptcy is fully discharged, the bankruptcy will still be listed on your credit report for 7-10 years. Many lenders will see it as a red flag and won’t consider you for a car loan. Other lenders might say they will only consider you after at least two years have passed after your bankruptcy discharge, and they still might reject you at that time as well.

If your bankruptcy has been discharged but you can’t find a regular lender who is willing to work with you, that’s when you need to consider applying for a bankruptcy car loan. Lenders who specialize in working with bankruptcy customers are more willing to take a chance on you, and you’ll pay a higher interest rate for them to take on higher risk. But your chances of getting the loan will be much better than with lenders who still view you as too risky even though your bankruptcy has been discharged.

Related post: Bankruptcy Car Loan Timing

When your bankruptcy case is discharged and over, you might think you wouldn’t need a bankruptcy car loan to buy your next ride, but chances are good you will still need one. Remember that after your bankruptcy is fully discharged, the bankruptcy will still be listed on your credit report for 7-10 years. Many lenders … Continue reading “Do I need a bankruptcy car loan after my case is discharged?”

Is there a difference between Chapter 7 and Chapter 13 timing?

The timing of when you apply for a bankruptcy car loan is slightly different depending on the type of bankruptcy filing you make.

If you’re filing for Chapter 7 bankruptcy, the timing is easy. As soon as your case has been filed with the bankruptcy court and you have a court-assigned case number, you can apply for a bankruptcy car loan.

If you’re filing a Chapter 13 bankruptcy, however, the timing is little different. Because a Chapter 13 bankruptcy involves a payment plan put together and managed by a court-assigned bankruptcy trustee or judge, you have to wait a little longer before you can apply for a bankruptcy car loan. Specifically, there are two things that have to happen before you apply for the loan. First, your Chapter 13 bankruptcy repayment plan has to have been finalized and approved. Second, if you want to take on new debt, it has to be approved by the bankruptcy trustee or judge assigned to your case. You’ll need to work with your bankruptcy attorney to add a new post-petition debt to your case. The bankruptcy trustee or judge will review the request to make sure it’s going to work for you within your payment plan. Because most people need a car, your request should be granted as long as the court thinks you can handle the extra payment in your plan.

Related post: Bankruptcy Car Loan Timing

The timing of when you apply for a bankruptcy car loan is slightly different depending on the type of bankruptcy filing you make. If you’re filing for Chapter 7 bankruptcy, the timing is easy. As soon as your case has been filed with the bankruptcy court and you have a court-assigned case number, you can … Continue reading “Is there a difference between Chapter 7 and Chapter 13 timing?”

When should I apply for a bankruptcy car loan?

When you need to finance a car purchase with a bankruptcy car loan, it is important to pay attention to the timing of when you apply for the loan.

If you haven’t yet declared bankruptcy but are about to, you should wait until after you have filed your bankruptcy before applying for bankruptcy car loan. When you’re about to file for bankruptcy, many lenders will see your heavy debt load and will likely to reject your loan application. But you’re also not yet eligible for a bankruptcy car loan until after you’ve filed your bankruptcy. That’s why waiting to apply for the loan until after you file for bankruptcy makes the most sense.

The lenders who specialize in bankruptcy car loans want to see you’re on the path to making a fresh start, which is what filing for bankruptcy does for you. Once your case has been filed and is in the process of moving forward, that’s when bankruptcy lenders can start working with you.

Related post: Bankruptcy Car Loan Timing

When you need to finance a car purchase with a bankruptcy car loan, it is important to pay attention to the timing of when you apply for the loan. If you haven’t yet declared bankruptcy but are about to, you should wait until after you have filed your bankruptcy before applying for bankruptcy car loan. … Continue reading “When should I apply for a bankruptcy car loan?”