Thinking About Bankruptcy
There are not as many people in America that have chosen to file bankruptcy as an option like there was in 2008-2013.
Although times are pretty good right now, there are still people having problems keeping afloat with their finances. I am not saying that bankruptcy is the wrong way to go (I myself have had to file before), but I have learned a few tricks that can save you from making a decision that sticks with you for so long.
Before you file bankruptcy, know these few points. Chapter 13 bankruptcies stay on your credit report for 7 years and you are put on a payment schedule. Chapter 7 lasts on your credit report for 10 years. This can cause problems down the road when you need your credit. Even filing under a business will affect your personal credit. Just so you know. Now, here is how to evaluate your situation before a bankruptcy.
Run a budget-
Write down every single expense that runs through your wallet every month. If it is not crucial to the family, cut it out. This is not a time to play games. If cable TV is an expense, than you better learn to read more books and drop the service. Cut back everything you can and see what that does. If your budget is still in the red, it’s time to go deeper. Be smart with your money.
What can be sold-
Cars, boats, wave runners, real estate, etc. can help put you back on track. I am not a financial advisor; this is only my experience as a business man. If you have property that is not making enough to cover the mortgage, There may be some options here. When I filed bankruptcy, I tried to sell my houses outright, but no one would buy. If I had owner financed the sale of the houses, I would have gotten the money I needed to get back on track and I would not have a bankruptcy on my record. I would not suggest this idea with portable items like cars and boats.
Try a new business-
An established company can file bankruptcy too. Companies filed with the secretary of state are separate entities (LLC, LP, S-Corp, C-Corp). Just like you, this entity can incur debts, pay bills and file taxes. A company falls under a different set of tax rules than you as an individual. They can deduct things you can’t and write off more losses than you in many cases. The company can take some expenses off you if you can prove business reason for the switch. The company can also get funding that may put you in a better position with lower monthly payments. Don’t try this until you have talked to experienced professionals and researched corporate entity formation.
If I knew then what I know now, I may not have had to file bankruptcy. Currently Bankruptcy stays on your record for seven years. A “business” bankruptcy is still personal in the eyes of the lenders; I filed this way thinking 51% business assets lost is not as bad as personal, wrong. If it is under your name, the banks don’t see a difference at all. Another change is FHA rules. Earlier this year, FHA now says they will only lend to people after two years from discharge date for normal bankruptcy. If there was a foreclosure involved at all, any property lost, FHA requires three years from discharge date. The applicant also has to reestablish credit. Twelve months of new credit on two credit lines (car loan, credit card, etc.) must be on file before approval.
Owner financing the sale of some of your house can fare better and you will recover faster than filling bankruptcy. Sometimes there is no choice. At least now you know a few more options before signing on the dotted line. If you need help with this process, even if you don’t want to sell your home, GIVE US A CALL!! We have help a few people stay in their house. It’s worth a shot.