The short answer is no. This is because while you are in bankruptcy you should not be incurring new debt without court permission. Most of the time a credit card will not issue a card to someone who is in an active bankruptcy case, because they do not want to violate the bankruptcy code and face sanctions from the bankruptcy court. Furthermore any cards that a debtor has prior to filing the case will be discharged in the bankruptcy case, except under rare exceptions. Therefore the debtor will not be able to continue to use their cards.
The entire point of a bankruptcy case is to get a fresh start and to get rid of the debt and allowing a debtor to continue to incur debt while in the bankruptcy case complicates and frustrates this goal. When preparing to file a bankruptcy case a debtor must take a look at their finances and make sure that they are living within their means and question why they would have a need to continue to spend on credit.
While many people are familiar with chapters, 7, 11, and 13 another chapter that is available is chapter 12. A chapter 12 is agricultural and is for “family farmers" or "family fishermen." with "regular annual income." The chapter 12 allows for farmers and fishermen to reorganize their debts in a reorganization plan to pay all or some of their debt. The chapter 12 plan is an installment plan over three to five years. Generally, the plan is for three years unless the court approves longer “for cause." If the plan proposes to pay 100% of child support or alimony if any exist, it must be for five years and must include all of the debtor's disposable income. A case may not exceed 5 years.
In order to file for chapter 12 the debtor must meet four criteria when they file the case:
- The debtor(s) must be engaged in a farming operation or a commercial fishing operation.
- The total debts must not exceed $4,031,575 for a farming operation or $1,868,200 for a fishing operation.
- If a family farmer, at least 50%, and if family fisherman at least 80%, of the total debts must be related to the farming or fishing operation.
- More than 50% of the gross income of the individual or the husband and wife for the preceding tax year must have come from the farming or commercial fishing operation.
When a debtor files for bankruptcy the court charges a filing fee to file the case. For a chapter 7 case the courts charge a $245 case filing fee, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. These fees are paid to the clerk when the case is filed. Although with a chapter 7 case a debtor can request to pay the filing fee in installments or have the fee waived.
In part two of our blog on credit scores, we will discuss how to rebuild your credit score after completing a bankruptcy.
If you have any questions about Chapter 7 or Chapter 13 Bankruptcy, contact the attorneys at Fears Nachawati today. Call 1.866.705.7584 or send an email to email@example.com for a free consultation.
In this series on Credit Scores, I will discuss the various types of credit reports and the factors which influence your credit score. Credit reports consist of detailed information regarding an individual’s current and past financial obligations. Credit scores are essentially a numerical grade of the information contained within the credit report. These scores are used by credit card issuers, auto lenders, mortgage companies, and other lenders to judge the applicants financial responsibility prior to issuing credit. Remember you can obtain your free credit report from each agency one time per year at www.annualcreditreport.com. Contact the attorneys at Fears Nachawati with any questions.
- FICO Scores - FICO (otherwise known as the Fair Isaac Corporation), created the first credit scores in the 1950s. Since their creation, FICO scores remain the most widely used scoring model by lenders with over an estimated 90 percent of the market share in 2010 of scores sold to firm for use in credit related decisions. Although there are different FICO scoring models, the scores generally range from 300 to 850.
- Credit Reporting Agency Scores - Credit Reporting Agencies (Equifax, Experian and TransUnion) each utilize their own scoring model, which causes scores to vary among the three main agencies. These scores were originally created to predict performance on credit obligations. However, today these scores are primarily used as educational scores for consumers. Each agency uses differing ranges of scores. For example:
Equifax’s Credit Score ranges from 280 to 850.
Experian Plus Score ranges from 330-830.
TransUnion TransRisk New Account Score ranges from 300-850.
- VantageScore - VantageScore is produced by VantageScore LLC, which is a joint venture of the three credit reporting agencies. It was developed as a competitor to FICO. VantageScore results range on a scale from 501-990.
- -Payment History (35%)
- Amounts Owed (30%)
- Length of Credit History (15%)
- Types of Credit in Use (10%)
- New Credit (10%)
A lot of my clients have not previously filed for bankruptcy. One of the most common questions is gaining an understanding of the general timeline and process of your typical Chapter 7 Bankruptcy. In general, Chapter 7 is the quickest bankruptcy to complete. The typical Chapter 7 case is completed within three to six months of the filing date. Keep in mind, before you can file a Chapter 7 bankruptcy, you need to complete your pre-filing Credit Counseling Course from a certified credit counseling agency. You must also qualify for Chapter 7 by passing the Means Test, which will be completed by your attorney and filed as part of your petition and schedules.
Many clients I meet with are concerned that they will have to surrender their house and car if they file bankruptcy. As long as you can afford to maintain the payments on the mortgage and car note, you will not lose either in a bankruptcy filing. Most states provide exemptions for your house and car which allow additional protection for these assets.
In addition, for those who have fallen behind on mortgage or car payments, Bankruptcy may actually provide a favorable option to keep these assets and catch up on payments over time. A Chapter 13 Bankruptcy, which typically takes 36-60 months to complete, places debtors on a payment plan which commits their disposable income to their creditors. This is beneficial for debtors who experienced a temporary setback, just as a loss of job, and needs additional time to catch up on car payments or mortgage arrears. In the Chapter 13, the arrears are spread out over the length of the bankruptcy plan, providing a manageable payment arrangement as opposed to trying to catch up in one lump sum. Keep in mind that you are still responsible to maintaining regular monthly payment to the mortgage or car creditor during the bankruptcy in the event these are listed as a pay direct obligation and the monthly payments are not part of your bankruptcy plan, which varies from district to district. If you have questions regarding your assets, exemptions, or Chapter 13 payment plans, contact an attorney today at 866-705-7584 or send an email to firstname.lastname@example.org.
In the event you brought significant debt into your marriage which you incurred before you were married, certain states will consider that your separate debt, including Texas. If your spouse is not liable for your debt, such as it was incurred before the wedding, or they did not co-sign for the debt, an individual bankruptcy may be an option. Married debtors are able to file both Chapter 7 and Chapter 13 Bankruptcy individually. However, your spouse’s income may still influence which Chapter of Bankruptcy you ultimately file. Keep in mind that all household income, which includes your spouse, is used to determine your eligibility for bankruptcy. In the event you do file bankruptcy individually, your filing will not affect your spouse’s individual credit rating. This is a common concern for debtors seeking to file individually. However, joint debts will still include a bankruptcy indication on your spouse’s credit report.