my friend filed for bankruptcy and she got out of debt and now she has a new car and a new house. How is this possible? Dont you have to pay some back?
2006-09-26 09:44:51 · 17 answers · asked by nashvillekat 6 in Business & Finance ➔ Credit
Chapter 7 Bankruptcy relieves, not pays off, all of your debts - but it can only be obtained if your debts greatly - and I mean greatly - outweigh your assets. You could put down to exempt certain assets, like your house or your car so long as you are able to continue the monthly payments, but chances are if they could be sold to help pay a good portion of your bills, you would not qualify for a Chapter 7. Also, it takes 7 years for a Bankruptcy to disappear from your credit record. Your friends are an anomaly. Surely they had a co-signor or a hidden pile of cash for down payments if they got a new house and a car.
2006-09-26 09:50:24 · answer #1 · answered by fearslady 4 · 0⤊ 3⤋
No, for the most part it just means your creditors have to suck up and eat it--you are no longer obligated to pay your bills.
There are certain bills that can not be bankrupted such as taxes and student loans.
In order to keep a creditor from taking your house or car you can enter into an agreement to pay certain debts even though you file bankruptcy--this is called "reaffirmation" and has to be approved by the court.
Bankruptcy can be filed every six years.
The minute you file for bankruptcy there is a thing called an "automatic stay" which means creditors must stop trying to collect any debts or harrassing you until the court proceeding is closed.
There are a few other recent changes to bankruptcy law that effect the procedure and what can be done--but that is a summary.
2006-09-26 09:55:49 · answer #2 · answered by beckychr007 6 · 0⤊ 1⤋
By filing bankruptcy it does not always pay off all of your debt, first it depends on which type of bankruptcy she filed. If you did Chapter 7 than she would have been paid a fair amount to the lawyers and been discharged in about 6 mths or so, does remain on credit for up to 10 years. If she did Chapter 13 she will have to pay a monthly payment for a percentage of what she owed can take no more than 5 years to pay on. will also remain on credit for up to 7 to 10 years depending on the credit agency. Chapter 7 most people are able to purchase things the day after being discharged however with Chapter 13 you have to wait a little while.
2006-09-26 10:27:35 · answer #3 · answered by Sandi H 1 · 0⤊ 2⤋
Don't do it--it wipes you clean, but you're stuck with the BANKRUPTCY stamp for life.
On job and loan applications when it asks if you've ever filed for bankruptcy, you have to mark yes. Not exactly a positive start to a loan or a job application.
A bad credit stays there for 7 years.
Instead of filing, work OFF your debts (Dave Ramsey's book, "Total Money Makeover" will help), and start over WITHOUT having to file for bankruptcy. You'll have a better start.
You NEED to learn how to manage your money, not just get out of debt.
2006-09-26 13:37:19 · answer #4 · answered by FaZizzle 7 · 0⤊ 1⤋
LOL LOL LOL .. your friend is fooling you!!! She is just in debt again.. she may have filed a CH 7 .. which wipes off debt.. not a good choice and will stay on your credit for at least 7 years. You can no longer just file a CH 7 .. must be a CH 13 which is organization of debt and you have to make a payment to the BK court. You can later request to convert the CH 13 to a CH 7... but the judge has to approve.
She is fooling you... her credit is shot... and must have TERRIBLE interest rates!! Ask her what they are!! They will be high if she's not lying to you!! The car is probably just leased.. and not purchased.. the House is the easiest thing to get a loan.. because you can't just pick it up and leave... I am sure she didn't have much money down on it.. so maybe she has at least a 80% loan and a 20% loan.. making it 100% .. check at the recorders office for the Deed Of Trusts against the property.. oh and you might just discover .. she doen't own it she is renting.. maybe!
Just to clarify, your bills don't get paid off.. they become protected under BK law... and then can be wiped off... under a CH 7.. not paid off... so looks bad on credit. And to wipe off debt means you don't own much.. She couldn't wipe off debt if she had $100,000 in equity in her home.. generally...
Don't let her fool you!!!
2006-09-26 09:52:16 · answer #5 · answered by Jennifer M 2 · 1⤊ 1⤋
Depending on the type of bankruptcy, all the bills which she filed for were probably discharged. As soon as that happened, her debt to income ratio improved. Since you can only file bankruptcy once in a seven year period, her creditors are more assured of repayment of loans. I'm sure she is paying higher interest on some of those loans.
2006-09-26 09:49:04 · answer #6 · answered by ©2009 7 · 1⤊ 1⤋
Regarding a chapter 7...they do not get paid off.. they get discharged. In other words, the creditor cannot no longer persue collection activities on your.
In Chapter 13, you enter a "repayment plan" and so yes they would get paid off, at usually a lower amount that what you owed (negotiated by the court).
In either event a BK affects your credit report in a negative way.
You can get houses and cars, but you will pay a higher interest rate.
And the negative black mark of BK stays on your credit report for a FULL 10 years !! Think it over before considering it because the laws HAVE changed.
2006-09-26 11:02:04 · answer #7 · answered by CactusFlower 4 · 0⤊ 1⤋
There are different types of Bankruptcy. The bills don't get paid off. They get dismissed. The lenders eat it and are not happy. New credit is difficult to come by and it stays on your credit record for 10 years. Many employers feel it shows you are irresponsible as well. There is a pretty high cost.
2006-09-26 09:48:44 · answer #8 · answered by Steve M 3 · 1⤊ 1⤋
The law change that took place a year ago changed the way bankruptcy works. You now have to make an attempt to pay off your debts by reorganizing your finances. The old way of wiping them away is much harder.
2006-09-26 09:49:36 · answer #9 · answered by united9198 7 · 0⤊ 2⤋
Once the bankruptcy is discharged you can start all over again. It is a good way to give someone a fresh start. I am going to have to file because of $30,000 in meidcal bills and I have insurance go figure! =)
2006-09-26 09:47:15 · answer #10 · answered by Derick Graham 2 · 1⤊ 1⤋