Yes, chapter 13 bankruptcy stops the foreclosure process in its tracks and allows you to pay off the past-due amount over a period of 3-5 years.  Oftentimes, mortgage holders want the entire past-due amount in one lump sum payment.  However, making this lump sum payment is almost never possible for those under financial stress.  Your chapter 13 payments are made at 0% interest and without any continuing late fees, which allows you to make up the past-due amount in manageable payments.

Yes, chapter 13 bankruptcy allows you to pay back your secured debts, such as car, truck, or SUV debt, at a substantially lower interest rate compared to what is offered by sub-prime lenders.  Lower interest rates will allow you to pay down your debt much faster or increase your monthly cash flow. Additionally, chapter 13 bankruptcy can combine the remainder of your unsecured debts into the same monthly payment where you pay back these debts at a fraction of what is owed with 0% interest.

Yes, both chapter 7 and chapter 13 bankruptcy can help reduce your tax debt.  Generally, if past-due income days are older than three (3) years from the date the taxes were assessed by the IRS or the state, then those past-due taxes may be discharged through the bankruptcy process.  However, this 3-year rule changes if you have not filed your taxes or filed a late tax return.  If the tax debt cannot be discharged, then you can pay these back taxes through a chapter 13 bankruptcy with manageable monthly payments over a period of 3-5 years without continued interest or late fees

Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts.  Chapter 7 provides for a discharge of most unsecured debts, such as credit cards, medical debt, finance company, payday loans, deficiency balances on a repo or foreclosure, old utility bills, and income tax debts older than 3 years.

The Bankruptcy Code provides exemptions that protects homes, vehicles, household goods, electronics, cash, money in the bank, tax refunds, retirement accounts, inheritances, insurance policies, and many other different types of assets.  However, if for some reason, your property and other assets are so great that you do not have enough exemption space, we can explore other options that can still allow you to receive a discharge of your debts in bankruptcy while protecting your property and other assets.

Chapter 13 bankruptcy is a repayment plan that is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time.  This repayment plan lasts for a period of 3-5 years, and during this time you will pay back your secured creditors in full (often at a lower interest rate) and pay your unsecured creditors a very small portion of the amount they are due with the remaining balance being discharged through the bankruptcy.  These payments are made in monthly installments and make it so your debts are organized and manageable.  Once you have made all your payments, your secured debts will be paid in full, and the remainder of your unsecured debts will be discharged so you are no longer responsible for these unsecured debts.

A wage garnishment occurs after a creditor has obtained a judgment against you.  Once the creditor has obtained this judgment, it will contact your employer and instruct your employer to withhold up to 25% of your after-tax income.  Your employer will send this 25% deduction directly to your creditor to pay off your debt.  However, once a wage garnishment is put into place the total amount of debt that you owe has increased exponentially due to interest, court costs, and attorney’s fees.  Filing bankruptcy will stop this wage garnishment; additionally, if you meet certain requirements, Peace Law can assist you on retrieving some of the money that has already been garnished.

A non-wage garnishment occurs after a creditor has obtained a judgment against you.  Once the creditor has obtained this judgment, it will inquire to see if you have any checking, savings, or other cash equivalent accounts.  The creditor will file paperwork with your financial institution so that it may extract funds from these accounts to pay off your debt as ordered by the court.  Filing bankruptcy will stop this non-wage garnishment; additionally, if you meet certain requirements, Peace Law can assist you on retrieving some of the money that has already been garnished.

A judgment lien occurs after a creditor has obtained a judgment against you.  Once the creditor has obtained this judgment, it will research to see if you own any real estate.  If the creditor discovers that you have real estate, then it will file a lien against your real estate property with the county clerk where you live.  This judgment lien acts as an obstacle to your interest in your property.  For example, if you were to ever sell your real estate property, the holder of the judgment lien would need to be paid prior to you receiving any funds from the sale.  Additionally, there are certain circumstances where the holder of a judgment lien may file to foreclose on your property and have it sold at auction through the court system.

Filing bankruptcy can remove these judgment liens or otherwise have them satisfied so that your interest in your real estate property is no longer affected.

Yes, in almost every circumstance, this debt can be discharged through bankruptcy even though a judge has ordered you to pay.  The notable exceptions to this rule include orders for child support, alimony or spousal maintenance, student loans, fines, criminal restitution, probation and parole fees, certain debts for acts that caused the death of personal injury of another, and if the creditor can prove that this debt arose from fraud, theft, or breach of fiduciary duty.

No, bankruptcy will not reduce your credit score to zero.  Additionally, oftentimes bankruptcy will improve your credit score depending on your situation.  To elaborate, filing bankruptcy will reduce your credit score; however, the discharge on your debts that you receive through your bankruptcy will improve your credit score.  In sum, if your credit score is considered “high”, then the bankruptcy will dramatically reduce your credit score.  However, your credit score will not receive the same negative impact if your credit score is already in the “average” to “poor” range.

More common, once you file a chapter 7 bankruptcy, you must wait eight (8) years from the filing of your original bankruptcy to file another chapter 7 bankruptcy.  However, if you have filed a chapter 7 bankruptcy, you can file a chapter 13 bankruptcy and receive a discharge if you have waited four (4) years from the filing of your original chapter 7 bankruptcy. 

Less common, if you filed a chapter 13 bankruptcy and successfully received a discharge, you must wait six (6) years from the filing of your original chapter 13 bankruptcy to file a chapter 7 bankruptcy, unless you paid all of your unsecured creditors in full during your previous chapter 13 bankruptcy.  Finally, once you file a chapter 13 bankruptcy and receive a discharge, you must wait two (2) years to from the date of filing of the original chapter 13 bankruptcy to file another chapter 13 bankruptcy.  However, this time period is often moot because chapter 13 bankruptcy typically last for 3-5 years.

If you are married, you and your spouse may be included on the same petition.  By being included on the same petition, you will save legal fees, court costs, and ensure that you and your spouse are on the same page in your financial matters.  However, oftentimes it does not make sense for your spouse to be included on the same petition.  Reasons for your spouse not being included in your bankruptcy petition could include lack of debt in your spouse’s name, assets solely in your spouse’s name that are not protected by the bankruptcy exemptions, or your spouse simply does not want to be included in the matter.  In any of the above situations, you may file bankruptcy without your spouse being included on the bankruptcy petition.

Unfortunately, you may have been involved in a car accident and did not have insurance or did not have enough insurance.  In this situation, you may find that your license has been revoked due to this lack of insurance coverage because the insurance company who paid the damages has a subrogation claim against you.  In most circumstances, if you file bankruptcy and include this insurance company on your bankruptcy petition, then you may get your license reinstated by the Kentucky Department of Transportation.

Depending on the chapter of bankruptcy that you file, a bankruptcy will continue to show on your credit report anywhere from 7 to 10 years after filing your bankruptcy.  If you file a chapter 7 bankruptcy, it will show on your credit report for up to 10 years after your chapter 7 bankruptcy is filed.  However, if you file a chapter 13 bankruptcy, it will only show on your credit report up to 7 years after your case is filed.  Additionally, if your chapter 13 bankruptcy lasts for a period of 5 years, that means that the chapter 13 will only show on your credit report up to 2 years after you receive a discharge in your chapter 13 bankruptcy.

The answer to this question depends on the type of bankruptcy that you filed and what type of home loan you are looking to obtain.  The common categories of loans are conventional loans, Federal Housing Authority (FHA) loans, United States Department of Agriculture (USDA) loans, Veteran’s Affairs (VA) Loans, and non-qualified mortgage (Non-QM) loans.

Conventional Loan:

A conventional home loan is a loan that is federally guaranteed and follows the guidelines of Freddie Mac and Fannie Mae.  In order to qualify for this type of loan you will need to wait the appropriate time period and meet other certain qualifications.  If you file a chapter 7 bankruptcy, you will need to wait four (4) years from the date of discharge in order to qualify for a conventional home mortgage.  However, if you file a chapter 7 bankruptcy, you may qualify for a conventional home mortgage after two (2) years, if you can show the lender you are under certain extenuating circumstances.  If you file a chapter 13 bankruptcy, you may qualify for a conventional home mortgage after two (2) years from the date of discharge. 

In either chapter 7 or chapter 13 bankruptcy, your credit score must be a minimum of 620 and you must put at least a 3% down payment on your home.  If you can meet the time, credit score, and down payment requirements, then you will most likely qualify for a conventional home loan even after your bankruptcy.

FHA Loan:

A FHA Loan is a loan that is insured by the Federal Housing Authority, which is intended for first-time home buyers or individuals who have filed bankruptcy or had a home foreclosed.  Usually, FHA lending requirements are more flexible than conventional mortgages. 

If you file a chapter 7 bankruptcy, you will have to wait two (2) years from the date of discharge.  However, you may be able to shorten this two (2) year waiting period to twelve (12) months if you can prove that filing the bankruptcy was beyond your controlling or caused by certain extenuating circumstances such as: the death of a spouse who was the family’s primary earner, serious medical issues, being laid off from your job, or certain natural disasters that caused you to lose all of your property.

If you file a chapter 13 bankruptcy, you can qualify for an FHA loan while actively making payments in your chapter 13 bankruptcy.  In order to qualify for an FHA loan in this situation, you must wait a period of twelve (12) months and have made every payment in your chapter 13 bankruptcy on time.  Additionally, you will need permission from the bankruptcy court to incur a debt, such as an FHA loan.  Peace Law will assist you in obtaining this permission from the court.

In addition to meeting the time limitation for each chapter of bankruptcy, you must meet obtain a certain credit score combined with a certain down payment.   The higher your credit score, the lower your down payment can be.  Inversely, the higher your down payment, the lower your credit score can be.  Typically, you will need a credit score of at least 580 and a minimum down payment of 3.5%.  However, if your credit score is between 500-579, you will need at least a 10% down payment. 

USDA Loan:

If you are looking to buy a home in a rural area, then you may qualify for a USDA loans, which is guaranteed by the United States Department of Agriculture.  If you file a chapter 7 bankruptcy, you will have to wait three (3) years from the date of discharge in your bankruptcy case.  If you file a chapter and you are attempting to qualify for a USDA loan in this situation, you must wait a period of twelve (12) months and have made every payment in your chapter 13 bankruptcy on time.  Additionally, you will need permission from the bankruptcy court to incur a debt, such as an USDA loan.  Peace Law will assist you in obtaining this permission from the court.

Typically, you are not required to put a down payment on your home for this type of loan.  Additionally, there is no minimum credit score required, but many lenders still require a credit score of at least 640.  Lastly, you and your household must be under certain income thresholds to qualify

VA Loan:

United State service members, veterans, and their families may be eligible for loans backed by the United States Department of Veterans Affairs.  If you file chapter 7 bankruptcy, you will have to wait two (2) years from the date of discharge in your bankruptcy case.  If you file chapter 13 bankruptcy and you are attempting to qualify for a VA loan in this situation, you must wait a period of twelve (12) months and have made every payment in your chapter 13 bankruptcy on time.  Additionally, you will need permission from the bankruptcy court to incur a debt, such as an VA loan.  Peace Law will assist you in obtaining this permission from the court.

One of the additional benefits of a VA loan is that you do not need a minimum down payment on or a minimum credit score.  However, some VA loan lenders require a credit score of 620 or higher.

Non-QM Loan:

A non-qualified mortgage loan is a type of loan that is not within the federal guidelines for a qualified mortgage.  There are no standard requirements for Non-QM loans.  For example, there are no waiting periods to qualify for this type of loan after a chapter 7 or chapter 13 bankruptcy.  Additionally, the required credit score and necessary down payment will vary lender-to-lender.  These loans are common for individuals who have just filed bankruptcy, but they may include some negatives such as: interest only payments, balloon payments, or terms longer than thirty (30) years

No matter what type of loan you are looking to obtain, there are certain actions that you can take that can improve your chances of qualifying or allow you to obtain a more favorable interest rate.   You must make conscious, well-thought-out decisions when attempting to obtain and home loan and rebuilding your credit after a bankruptcy

First, when trying to rebuild your credit, do not apply for every type of credit that comes your way.  When you apply for credit, lenders may do a hard credit inquiry.  Multiple hard inquires in a short period of time will negatively impact your credit score.  Additionally, opening several different lines of credit in a relatively short period of time may indicate to other lenders that you are having financial hardship, even if that may not be the case.  Second, do the simple things to rebuild your credit such as paying bills on time, avoid carrying a balance on any credit cards at the end of each month, and if you are in a chapter 13 bankruptcy, make all of your monthly payments on time.  Third, save as much money as possible to put towards a down payment.  If you are able to put down a larger down payment, you may be able to avoid a higher interest rate and increase your chances of being approved.  Fourth, wait as long as possible to apply for a home loan.  As time passes and if you adhere to the above steps, your credit score will steadily improve.  As you increase the time from your bankruptcy discharge, you also increase the likelihood that you will qualify for a home loan.

No, your employer cannot fire you for the sole reason of you filing bankruptcy.  Additionally, you employer cannot change the conditions of your employment, responsibilities, pay, or position just because you filed bankruptcy. 

Additionally, many jobs working or contracting with the government require you to obtain a certain security clearance to keep your job.  Oftentimes people are worried that they will lose their security clearance if they file bankruptcy.  However, this is almost never the case; the reason people in these situations lose their security clearance is because they have large amounts of debt and are at risk of being blackmailed.  Bankruptcy solves this issue by clearing the underlying debt that may cause you to lose your security clearance.

Finally, chapter 13 payments are often made through payroll deductions where the employer will withhold the chapter 13 payment to send directly to the creditor.  Sometimes people are worried that they will lose their job once their employer finds out about their chapter 13 bankruptcy through a payroll deduction.  However, this is not the case.  Under Kentucky law, it is illegal for someone in a chapter 13 bankruptcy to lose his or her job for the sole reason of instituting a payroll deduction order through his or her job.

You are required to attend your “meeting of creditors.”  This meeting is before the trustee not a judge and typically occurs within 4-6 weeks after your case is filed.   An attorney from Peace Law will be present with you at the “meeting of creditors” with you. 

There may be hearings after your “meeting of creditors”, such as your confirmation hearing.  You are not required to attend these other hearings unless directed to by your attorney.  The attorney will appear on your behalf at these subsequent hearings.

Peace Law may be able to get your payments lowered through a process called “redemption.”  In certain situations, you have the right to purchase the vehicle for its current value rather than what is owed on it.  This purchase must be in a lump sum payment from funds that you already have or through a new loan.

If you feel that your vehicle is worth less than you owe for it and it is a good vehicle you wish to keep, Peace Law can help you get a new loan that may lower your monthly payments.  Peace Law does not work with lenders for home loans or mobile home redemption at this time.

In order to qualify for a redemption loan on your vehicle:  (a) you must have less than two (2) repossessions in the last ten (10) years, (b) you must have less than three (3) bankruptcies filed in the last ten (10) years, (c) your vehicle must be less than ten (10) years old, and (d) your vehicle must have less than 150,000 miles on it.

The new loan will report to credit bureaus and help you re-establish credit.  Peace Law assists with the redemption process, negotiates the value with your current creditor, gets all necessary court approvals, and any legal fees are financed in the new loan.

The creditor may require that you sign something called a “reaffirmation agreement”, wherein the creditor can legally hold you responsible for not paying this debt even after your bankruptcy is completed.  The “reaffirmation agreement” treats the loan like the bankruptcy never happened.  The loan typically keeps the same terms as before the bankruptcy.  Additionally, this loan will report to the credit bureaus and can help you rebuild your credit, if you make timely payments.

Some creditors allow you to keep your home or vehicle(s) without signing the “reaffirmation agreement.”  This option is called “retain and pay”, wherein the creditor allows you to keep your home or vehicle(s) without signing the “reaffirmation agreement so long as you make timely payments on your loan until the loan is paid in full.  This option is not always available.  Under the “retain and pay” option, if you do not make the payments, then the creditor can foreclose or repossess, but cannot hold you responsible for a deficient balance.  However, this loan will not show on your credit.

Typically, neither the bankruptcy court nor the bankruptcy trustee will attempt to take your tax return or future tax returns.  In chapter 7 cases, you are provided protections called exemptions, which allow you to protect liquid assets such as cash, money in the bank, and tax refunds.  In almost every situation there is enough exemption space to protect a tax return in chapter 7 cases.  If there is not enough exemption, then Peace Law will assist you in protecting your most important assets.

Generally, in chapter 13 cases, the trustee will not require you to turn over any future tax returns so long as you have the necessary exemption space, meet certain income requirements based on your household size, and your employer does not withhold excessive taxes each pay period.