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It is feasible to get a home loan after bankruptcy. However, the length of time you must wait after your bankruptcy is dismissed or discharged depends on the type of bankruptcy and the loan you took.

FICO says that bankruptcy can damage your credit scores by anywhere from 130 to 240 points, depending on the circumstances. Lenders are often happy about helping borrowers re-establish themselves through several processes, like refinance, after bankruptcy.

If you want to buy a house after going through bankruptcy, it’s vital to understand how the bankruptcy process affects your chances of obtaining a home loan as well as which mortgage companies and loan amounts are open to you.

Mortgage options after bankruptcy

After bankruptcy, obtaining a new mortgage might be difficult, but it isn’t impossible. Many lenders require set criteria for people who have emerged from bankruptcy, completed a waiting period, and fulfilled other eligibility requirements.

Higher interest rates and a costlier mortgage are possible after bankruptcy. Improving your credit score can help offset this.

The right lender will give you a lot of payment options and will talk about the different mortgage programs so you feel safe about asking for a mortgage. If you’re considering getting a mortgage after bankruptcy, read through this article to learn more about a mortgage after bankruptcy.

When you file for Chapter 7 bankruptcy and go to bankruptcy court and receive your discharge, then all of your old unsecured debts are discharged or what may be referred to as canceled, allowing you the financial ability to pay off any new obligations.

Before taking on any new debt, it’s important to keep in mind your financial situation and make sure your monthly income is enough. Not all creditors will be as prompt to offer a loan, particularly if the amount is significant, and the interest rate might go up.

Prepare a written explanation of your financial issues and what you’ve done to avoid such problems in the future when seeking potential lenders. Prepare two years of tax returns, recent paycheck stubs, banking account information, bankruptcy discharge papers, a list of liquid assets, and a written description of your financial difficulties and what you have done to correct them.

Waiting periods for government-backed loans after a recent bankruptcy

Each loan type has its own guidelines for how long you must wait after a bankruptcy. Remember these will not count as a conventional mortgage. You have to wait for an appropriate waiting period.

To qualify for a waiting period, some loans require the borrower to prove that they had a one-time event that caused them to lose income and that it was something outside of their control.

Furthermore, the candidate must demonstrate re-established credit, which means no major negative items on his or her record since the bankruptcy.

If you default on a government-backed loan, you may be added to the CAIVRS (Credit Alert Verification Reporting System) database. The CAIVRS issue must be addressed to obtain another government-backed loan.

Fortunately, you may appeal the status of your CAIVRS findings once you have received them. Many people who are in the system do qualify to be removed.

It might take some time to appeal your CAIVRS denial. If you have any questions regarding your status. Bankruptcy attorneys can help their clients clear questions up before beginning house shopping. It’s always a good idea to get a mortgage pre-approval before looking for houses, regardless of the circumstances.

FHA loans after bankruptcy

The borrower must wait a minimum of two years after Chapter 7 bankruptcy before they can get a loan from the Federal Housing Administration (FHA). Borrowers may also have a longer waiting period, depending on what the mortgage lenders require.

Under FHA rules, a complete explanation must be supplied with the application for an FHA home loan. After Chapter 7, borrowers must financially qualify, show a track record of good credit history in the wake of the filing and fulfill other FHA requirements to obtain a new FHA-insured mortgage loan.

If you have been discharged from a Chapter 7 bankruptcy in the last two years, other lenders may be willing to work with you. However, it is important to note that the waiting period begins from your discharge date, not the time it is filed.

FHA rules permit a mortgage lender to consider an FHA loan application from a borrower who is still making payments in Chapter 13 bankruptcy only if the mortgage payment has been verified for at least one year. The written permission of the court trustee is also a necessary condition of the policy for mortgage approval.

To get home loans, borrowers must write a letter explaining the bankruptcy and submit it with the loan application. Borrowers must have a minimum credit score, a good job history, and other financial qualifications that might differ from those of a conventional loan.

VA loans after bankruptcy

After two years, lenders typically wait another two years before accepting you for a Chapter 7 bankruptcy. With a Chapter 13 filing, you may be eligible for a VA loan just 12 months after the date of filing.

It can take up to 10 years for a person’s credit score to recover after something bad happens. If your credit score is low, you might have to work hard to fix it.

The good news is that for VA borrowers, you will need a lower credit report than what you’ll need for conventional or even FHA financing.

USDA mortgage loan after bankruptcy

In most cases, the USDA loan bankruptcy waiting period following Chapter 7 bankruptcy is three years.

If you want to keep your homeownership, a Chapter 13 bankruptcy may be an option for you. This implies that instead of having to sell off your assets, you can submit a payment plan that will allow you to repay debts over three to five years.

Fannie Mae and Freddie Mac mortgages after bankruptcy

After the bankruptcy, Fannie/Freddie loans demand a four-year waiting period; however, under exceptional circumstances, these lenders will approve mortgages on a case-by-case basis after two years.

Fannie Mae requires a four-year waiting period following a Chapter 7 bankruptcy action’s discharge or dismissal date. If mitigating circumstances can reasonably be confirmed, it will allow for a two-year delay.

Remember it is important to keep up to date with the latest mortgage news because debt relief programs, waiting periods, credit scores, interest rates, and mortgage application rules might change from one day to the next.

Bankruptcy might help you get rid of a second mortgage

Many people have a second mortgage on their property. In several of these situations, the loans were not taken because the borrower was experiencing financial problems.

What happens to a second mortgage after bankruptcy?

Second mortgages can be used to assist someone in financial distress, but they are also an investment instrument that allows you to borrow against the equity in your house.

Is bankruptcy a good option to get rid of a mortgage?

Sometimes a family purchased a house that they could afford, took out another mortgage, and discovered that they were unable to pay their monthly obligations. In these situations, bankruptcy may be the best solution when dealing with foreclosure concerns that include another mortgage.

Many bankruptcy attorneys have assisted homeowners in eliminating this other mortgage and halting foreclosure proceedings on their house by utilizing a bankruptcy provision that allows them to do so.

Is bankruptcy a way to get rid of my mortgage debt?

There are different types of bankruptcy, and depending on which one you qualify for, some or all of your debts may be forgiven. However, most homeowners don’t file for Chapter 7 bankruptcy because they want to keep their homes.

However, it is possible to use bankruptcy to get rid of the next mortgage when you file for Chapter 13 bankruptcy. This is different from getting rid of your first mortgage.

When a person has no equity in their home, another mortgage is considered unsecured debt. It is considered unsecured since the value of the home does not equal or surpass the amount owed to the first mortgage company.  In this instance, a Chapter 13 case via an adversary proceeding can effectively remove the second mortgage obligation if you complete the chapter 13 case.

The good news is that bankruptcy can help you restructure your obligations and free up cash to pay off outstanding bills. For people who are underwater, meaning they owe more in mortgage debt than their home is worth, bankruptcy may be an especially beneficial tool.

When their Chapter 13 payment plan is completed, the other mortgage will be canceled, and they’ll have the option of restarting their lives in a house with a mortgage that better reflects the property’s value.

What Is Covid Mortgage Forbearance and How Does It Work?

A loan servicer or lender may delay, suspend, or lower your mortgage payments via a mortgage forbearance. During this period, the bank also agrees not to start foreclosure procedures.

Homeowners with a federally backed mortgage who are experiencing Covid 19 pandemic-related problems could apply for an 18-month forbearance up to Sept. 30, 2021.

What Happens After Covid Forbearance Ends?

The CARES Act’s deadlines are fast approaching. Many homeowners who went through Covid forbearance agreements are now finding themselves stuck with expensive mortgage payments. This could be a huge setback for people who are just starting to get back on their feet.

Thinking About Refinance?

If the homeowners miss payments, they will need to make them up. The missed payments may be put off until the end of their mortgage term or added to the mortgage balance. In these cases, a refinance might help.

Many homeowners can lower their monthly mortgage payments or reduce the length of their loan and make the loan less risky for both the borrower and lender by taking advantage of today’s low-interest rates.

Rules For Covid Refinancing

Now that we’re in a pandemic, the rules are different. How soon you can refinance after forbearance ultimately depends on your loan type.

Freddie Mac and Fannie Mae loans

If you do not know if either Fannie Mae or Freddie Mac owns your loan, you can search them through these links:

• Freddie Mac
• Fannie Mae

To refinance your Fannie Mae or Freddie Mac, you must make at least three consecutive on-time payments following your forbearance term. You can then refinance the complete loan, including any missed payments, into a new loan.

FHA loans

Borrowers with FHA loans, like all other loan types, must refinance their mortgages. To refinance, FHA borrowers will need to get out of their forbearance plans. Borrowers must make three consecutive on-time payments before applying for a new loan is accepted.

To refinance your loan and get cashback, you’ll need to have made at least 12 consecutive payments after finishing your forbearance period.

If you want to explore a streamlined refinance, lenders will expect you to have made six or more consecutive payments.

USDA and VA loans

Contact your loan servicer using the Mortgage Electronic Registration Systems to review your options after forbearance.

After a period of deferment, VA borrowers may be eligible for a loan modification. There’s also a chance that USDA borrowers’ monthly payments might be delayed until the end of their loan term.

If you were unable to continue making payments during forbearance, you will be able to refinance your mortgage after 3 months have passed and 3 consecutive mortgage payments have been made.

Why Go Through Refinance With A Lawyer?

No two borrower circumstances are alike, especially when forbearance is taken into account. That’s why it’s critical to understand your financial situation and long-term goals hand in hand with an expert before applying for a refinance.

There’s never been a better moment to refinance your mortgage. Those who qualify may save hundreds of dollars each month.

Go Through Refinance With A Forbearance Attorney

There are regulations to follow if you’ve been in forbearance. An expert law firm can help you figure out your best options and make sure the process goes as smoothly as possible.

To be eligible for a new loan, you must make three months’ worth of payments before being released from hardship. These circumstances might cause issues if not handled properly.

You must make your payments on time. If you make three payments on time, you can refinance.

If you put your loan on forbearance, you must notify the lender and prematurely terminate the suspension. When this happens, you’ll want to get in touch with your lawyer.

An attorney might also assist you in avoiding making another error by not simply getting a letter, but having your property evaluated, and so on.

FAQ

Do self-employed borrowers have trouble obtaining loans?

Lenders put in place new policies during the pandemic. Some of these policies were for self-employed borrowers. These borrowers will now see some of these policies phased out. However, self-employed borrowers still require more work to be approved.

How much money could you save by refinancing your mortgage?

If you are considering refinancing, a new home loan at today’s historically low mortgage rates could save you a lot of money.

If you refinance your 30-year fixed-rate mortgage in 2020 when mortgage rates are at all-time lows, Freddie Mac found that you would save an average of $2,800 each year.

According to the report, refinancing your mortgage can lower your mortgage rate by more than 1%.

What other options do I have apart from refinancing?

The first obvious option would be to continue to pay the original rate as well as the same amount. Talk to your lender to see if it is possible and under which conditions.

A loan modification is another good option. With it, you can lower your term or your rate. Just make sure you understand a mortgage modification, which is not the same as a loan refinance.

One final resort would be to sell your home. Yet this can help to pay off your loan and forget about any foreclosure.

Is refinancing a fast option?

In some situations, it’s feasible to refinance right after and even during forbearance. However, you must fulfill the criteria to show that you are in excellent financial condition either before or after the forbearance for this to be possible.

To refinance, you’ll want to keep up with payments, boost your credit score, and minimize your debt.

Many measures have been implemented in reaction to COVID-19 to assist those who are having difficulties.

The option to seek forbearance, or a delay in mortgage payments, was made available to anyone who had been affected by the virus or its repercussions on the economy.

COVID-19 forbearances, which Congress stated were meant to be non-credit impacting, are included in the same category as other natural disaster grants.

What Is a Mortgage Forbearance?

To provide relief for people who are financially distressed for any reason, a mortgage forbearance program is available.

Congress has given Americans impacted by COVID-19 the option to ask for up to a year of mortgage payment forbearance as part of the CARES Act.

A forbearance provides the necessary support for those who need it so they don’t worry about missed payments for a while.

It’s important to note that forbearance doesn’t forgive outstanding debts. When you’re exiting forbearance, you’ll want to chat with your mortgage servicer to see whether other choices are available to resolve the outstanding forbearance amount as the mortgage company will ask that you repay the entire outstanding forbearance amount in one payment. A lawyer that knows your financial situation may also be of help for exiting forbearance more smoothly.

What Happens With Your Mortgage Payments If You Get a Mortgage Forbearance?

If you are having difficulty making your mortgage payments, you may temporarily pause or reduce them.

Forbearance is a period in which your mortgage servicer or lender permits you to cease or decrease your mortgage installments while you build back up your finances.

Remember: under the CARES Act, help is available. It is not an automatic program and it may not cover the entire loan amount. Nevertheless, you can ask for up 1o 180 days (and even 180 days more) to stop any regular monthly payment.

Your missed payments still need to be repaid, so this is where it can get complicated.

There will be no additional costs, penalties, or extra interest added to your account as a result of this loan (beyond scheduled amounts).

To qualify, you do not need to provide any additional documentation. Simply state that you are having financial difficulty as a result of the epidemic.

Any federal government-backed mortgage or loan terms can enter this program, even conventional loans with private insurance.

For example, if you have your loan term under Fannie Mae or Freddie Mac, or if you have a USDA loan, FHA loan, or VA loan like many homeowners, your loan servicer can help you through the CARES Act loan program.

What Happens After My Mortgage Forbearance Is Over?

If you did request forbearance under the CARES Act (Coronavirus Aid, Relief and Economic Security), you can extend it up to a year.

This may mean your forbearance term may be coming to an end soon. What happens next? You will have to resume payments and take care of your new financial situation.

A mortgage refinance can lower your monthly payments and make your home loan more affordable even when interest rates are still historically low.

Mortgage Forbearance Repayment Under COVID-19

Once your forbearance has come to an end, you must make up for the missed payments. Your loan officer will work with you to determine whether there are any loss mitigation options available to assist you in regaining financial security.

You must be current or keeping up with your payments under any post-forbearance workout program that you may have.

Payments missed are damaging to your credit score, which might or may not have already been harmed by the forbearance.

May I Refinance my Mortgage Loan After Finishing a Mortgage Forbearance Plan?

In some cases, it is possible to refinance right after and even during forbearance.

You’ll have to fulfill the criteria to demonstrate to your mortgage lenders that you’re in good financial condition, either during or after the forbearance.

Can Mortgage Forbearance Affect Refinancing?

Fortunately, after you’ve been out of forbearance, you may refinance. However, there are some restrictions to bear in mind.

To refinance and obtain a loan modification, you must continue to pay your mortgage payments on time and improve your credit score.

An Excellent Idea Before Exiting Your Forbearance Program

Even before you exit forbearance, one excellent idea is to decrease your loan debt. Forbearance will not diminish your current mortgage repayment plan. It will only make it longer.

If your mortgage servicer requires you to pay back the forbearance in one lump sum, then it is recommended that you hire an experienced law firm that handles loan modifications and retain them to prepare a loan modification application right before the expiration of your forbearance.  

This will delay any foreclosure action that may be taken by the mortgage company, which will allow you the necessary time to submit your completed loan modification application. 

Why Do I Need to Do Three Consecutive Payments?

Refinance after forbearance is possible.

Your refinance timetable is determined by the type of mortgage loan you have.

If you have a regular loan backed by Fannie Mae and Freddie Mac, you must make three consecutive payments after exiting forbearance before even thinking about refinancing.

This means the three payments have to be consecutive on-time payments.

If you have a government-backed loan, such as FHA, USDA, or VA loans, the terms may differ.

Covid-19 Help Can Also Help You Refinance

Until Before 2020, homeowners had to wait 12 months after completing a forbearance plan before applying for a refinance.

The new rules after this international financial hardship enable borrowers who have experienced financial strain to obtain reduced rates, resulting in additional economic assistance and a better opportunity to make timely payments.

Will I Be Able To Ask For A New Loan After a Forbearance Period is Over?

Yes, it’s entirely feasible.

But before you make a decision, you should first calculate how much you’ll be paying each month and whether you can afford a new loan.

You may use a mortgage refinance calculator to compare your current loan and rate to a new one to ensure you’ll save money over time and can pay the same monthly amount on your mortgage rates.

Before submitting a mortgage application for new loan options, be sure to obtain a copy of your credit report and double-check your FICO score and payment history.

Why Think About Cash-Out?

Cash-out refinancing is a loan modification in which an old mortgage is replaced by a new one with a higher amount than what was owed on the prior loan, allowing consumers to use their home mortgage to acquire cash in their wallets.

Benefits From Cashing Out

In a cash-out, you receive more money in exchange for your current mortgage amount than your old one was worth. The difference is given to you in cash.

You often pay a higher interest rate but have direct access to funds you may need for an emergency. This might imply a greater monthly payment, but it may also assist you in overcoming your financial difficulties.

With cash-out refinancing, a lender will assess your borrowing limitations based on bank rules, the loan-to-value (LTV) ratio of your property, and your credit history.

Put your property to good use for you. Contact your attorney and inquire about options.

Remember…

In conclusion, keep in mind that any missed payments from your forbearance period will have to be made up.

There are several alternatives for refinancing, so be sure to inquire about them with your servicer.

Depending on the terms of your current plan, forbearance may or may not affect your ability to refinance and affect your credit report.

Finally, make sure you are prepared to submit a loan modification application if the mortgage company is asking you to repay the entire forbearance amount in one payment and you cannot afford to pay it.

The coronavirus/Covid-19 epidemic has caused significant economic uncertainty, putting millions of Americans in financial distress and forcing them to cope with bills they were unprepared for, such as rent and insurance premiums.

A lot of people have lost their jobs, been furloughed, or had their pay cut because of Covid-19. For these people, lenders and creditors are offering a lot of different ways to repay debt.

One of your choices may be forbearance, which is an agreement with a lender or creditor that enables the borrower to delay or suspend loan payments for a set amount of time.

In this article, we will talk about how Covid-19 hardship forbearance may affect your credit score. Many people are struggling during the pandemic and have had to put their loans into forbearance. This means that they are not making payments on their loan for some time.

We will go through the ins and outs of forbearance and how it can benefit you or harm your credit score.

What happens if you have missed payments in your mortgage payments?

Missed payments can result in a tremendous drop in your credit score, resulting in increased late payments and fees.

Your lender will report your failure to pay your mortgage to the three main credit bureaus if you don’t make timely payments. Your credit score will be lowered as a result.

Also, a late charge will be assessed on the payment you failed to make. Late fees are usually charged after a seven- to 15-day grace period following the due date.

If you miss one mortgage payment, will you lose your financial footing?

On the bright side, failing to make a single mortgage payment seldom results in foreclosure. You usually have to fall at least three months behind and fail to communicate with your lender for this to happen.

Multiple missed payments might result in foreclosure, further damaging your credit. There can also be penalties or additional interest added to most mortgages.

What is forbearance in the US?

If you’re having trouble making your mortgage payments, you may stop or reduce them temporarily. This is called forbearance.

The forbearance period is a time in which your mortgage servicer or lender permits you to pause or lower your mortgage payments while you restore your finances.

What mortgage forbearance does NOT mean

Forbearance does not imply that your debts are forgiven or erased. You remain liable to pay any payments, which in most situations may be paid back gradually or when you refinance or sell your property.

Your loan servicer will contact you before the end of the forbearance to let you know how to repay the missed payment.

What is financial hardship in the US?

When the debtor’s current and projected income and liquid assets are insufficient to meet basic living expenses at present and anticipated ordinary intervals over the anticipated period of collection, hardship is assumed.

Financial hardship is an unfavorable event that has harmed your finances beyond your control and for which you may ask for suspended payments or reduced payments.

Layoff or a reduction in salary, significant sickness or injury, new or worsening disability, imprisonment, natural disaster, and long-distance job transfer are all examples of financial difficulties that a lender might consider making a repayment plan.

Will your credit scores be affected by forbearance?

You can’t just neglect a payment and expect no consequences without discussing your issue with your lender.

If you agree to forbearance with your lender, they may report it to the credit agencies. However, as long as you stick to the agreement and make all of your payments on time, your credit score will not be affected.

If you are having trouble making your payments on time, or if you think you might lose your home, one thing you can do is to ask for help. You can ask your lender to work with you, and they may be able to help you avoid late payments or foreclosure. This will help protect your credit score.

Before canceling any sort of loan, you’ll need to work out a bargain with your lender — otherwise, your credit score may be harmed.

What is the COVID forbearance plan?

If you have a federally backed mortgage and are having economic hardship as a result of the coronavirus pandemic, you might be eligible for COVID hardship forbearance under the CARES ACT.

What are federally backed mortgages?

These mortgage loans include HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans. They can enter loan forbearance programs by your loan servicer.

What if my mortgage payments are not federally backed?

Servicers may provide comparable forbearance choices for mortgages that are not federally guaranteed. It is possible to reach a forbearance agreement with your servicer.

If you are struggling to make your monthly mortgage payment, your servicer is required to discuss payment relief options with you, also known as loss mitigation options. This is regardless of whether or not your loan is federally backed.

There will be no more fees, penalties, or extra interest (beyond expected amounts) charged to your account as a result of this pandemic, and you do not need to submit any new documents to qualify. All you have to do is tell your servicer that you’re having difficulty with the financial situation due to a pandemic. It is improper for the mortgage company to charge you late fees and penalties if you have received a forbearance due to Covid-19.

Will Covid-19 count as forbearance?

The term “forbearance” is commonly linked to home mortgages, but any loan agreement you’ve signed up for can be accepted. There can be many forbearance options for a home loan that can avoid foreclosure actions.

Because of the massive and immediate economic impact of the Covid-19 pandemic, several creditors and lenders are providing unique debt repayment choices on many obligations. This includes mortgages, student loans, auto loans, credit card bills, utility bills, property taxes, and small business loans.

Depending on what agreements you reach with your creditors, they may agree to allow decreased or delayed payments for a specific time of up to 12 months. Paused payments or deferred payments until your forbearance period ends might not affect your payment history nor your credit report if you come to an agreement that is financial hardship-related.

Some companies may offer to reduce the interest rate on your debt. However, there are no specific federal guidelines that all companies must follow when it comes to forbearance agreements. You will have to request forbearance to learn what additional resources can your lender directly give to you for late payment.

Mortgage requirements for requesting forbearance plans due to Covid-19

The eligibility requirements for debt forbearance vary depending on the type of debt you have. Each lender and creditor has its program with its own set of rules.

For example, most mortgage forbearance programs require that you are experiencing a “financial hardship” due to the pandemic of Covid-19. This could be due to job loss, reduced hours, or illness.

You may be asked to provide documentation of your financial hardship, such as pay stubs, bank statements, or doctor’s notes.

Borrowers who have conventional mortgages guaranteed by Fannie Mae or Freddie Mac, which underpin the majority of loans in the United States, or the U.S. Department of Veterans Affairs (VA), Federal Housing Administration (FHA), or USDA can get assistance as well as deferment and postponed payments options.

What if my loan is not federally backed up?

If your loan isn’t federally backed, you can still have a payment deferral. You will need to contact your mortgage servicer to learn if they provide any Covid-19 pandemic relief.

Check with your monthly statement or go to the website of your mortgage servicer for information on how to reach a customer service representative.

What if I don’t know if my mortgage is back up federally?

If you’re a homeowner who isn’t sure which corporation guarantees your mortgage, go to the US Department of Housing and Urban Development’s website for more information on Coronavirus/Covid-19 actions.

What are the drawbacks of Covid-19 loan forbearance?

Although forbearance can help you deal with your short-term money problems, it has some disadvantages. For example, if you use a forbearance period, your credit rating and credit scores could be affected.

You’re not receiving “free money” if you enter into a forbearance agreement for your mortgage loans. Depending on the repayment plan you choose with your lender or creditor, you may have to pay back the interest that accumulates during your approved deferral period, and late charges might still apply.

You will also have to repay the forbearance amount at the end of the forbearance, which may in itself cause a new hardship for you.  

If that’s the case, then you need to make sure to seek a loan modification to account for the forbearance amount.

Notify your lender if you’ll still be charged late fees, when and how they will be levied, and how your forbearance agreement will be recorded with the national credit bureaus.

Covid-19 pandemic forbearance for mortgages

For those who are having trouble making mortgage payments, the federal government has announced a temporary nationwide moratorium on foreclosures and evictions. This has also expired.

People who have lost their jobs as a result of the Covid-19 epidemic can qualify for payments to be halted or reduced for up to 180 days, depending on their circumstances.

To qualify for this forbearance, you must contact your loan servicer and request it.

You can look up your loan on FannieMae.com and FreddieMac.com to see whether one of them purchased it from your original lender, or contact your mortgage servicer directly if you have questions about your payment status.

In addition, Fannie Mae and Freddie Mac have halted foreclosures and evictions during the Coronavirus/Covid-19 pandemic, so visit their websites for regularly updated information on how to get relief.

Covid-19 pandemic forbearance relief for credit cards

Every credit card company has different options and eligibility requirements for forbearance or payment deferrals on your credit card debt. If you are thinking or asking for payment forbearance for your credit card balances in a way that will not affect your credit reports, ask your servicer for their relief options.

To find out what alternatives are available and what you need to do to get assistance, go to the website of your credit card company. Even if yours doesn’t currently offer a solution that meets your needs, it may add new choices shortly, so keep an eye on updates.

Card issuers generally provide forbearance on a case-by-case basis, and they may not give all relief possibilities to everyone who qualifies.

Your credit card companies will have specific choices accessible to you based on how long you’ve been a cardholder, how serious you’ve been about making timely payments, and the amount of your outstanding credit card debt. So your credit history might help get you more options for monthly payments.

Filing for bankruptcy is not something to be done lightly, and it is far from the only solution for every problem. Filing for bankruptcy is not the best option for everyone, and it’s not a quick fix.

However, if you are having trouble making ends meet due to an overwhelming number of creditors as well as difficult-to-pay medical bills, filing for bankruptcy may be the best option for you.

Common questions about filing for bankruptcy

Before you decide to file for bankruptcy, you must ask yourself the following questions:

1. Do I understand what filing for bankruptcy will do?

If you file for bankruptcy, it might be possible to stop the foreclosure on your property or mobile home and allow you to catch up on past payments.

Bankruptcies may also stop wage garnishment, debt collection harassment, and other creditor actions to recoup a debt.

A bankruptcy “discharge” of obligations occurs when you finish the bankruptcy. It may be possible for you to get rid of the obligation to pay most or all of your bills after bankruptcy. The discharge of debts is intended to provide you with a fresh financial start.

The ins and outs of filing bankruptcy

A bankruptcy will allow you to refute claims filed by creditors who have committed fraud or are attempting to collect more than you owe.

However, there are a few things that people frequently say bankruptcy will assist them with, such as eliminating your property’s obligations and liens, which is not the case.

The solution is to engage a reputable bankruptcy lawyer who can assist you in determining whether or not personal bankruptcy is appropriate for you based on your current financial situation.

2. Will bankruptcy give me the fresh start I need?

In Michigan, most unsecured debt may be canceled.  However, this is not the case for all debt obligations.

Alimony and child support are two examples of this. Almost recent outstanding income tax liability is also included in this category.

Unsecured debts like fines and penalties for breaking the law, luxury goods or service purchases made right before the bankruptcy filing, and most tax debts on your bankruptcy petition will not be erased.

It is a good idea when you file for bankruptcy and debt relief to have an attorney that understands bankruptcy cases to help you file correctly. Look for a small law firm that can offer you a free evaluation and where you can build a real confidential relationship.

3.  Can I afford to file for bankruptcy?

It is critical to understand how much it will cost you to file for bankruptcy in Michigan and how to pay for it.

The Court filing fee for a Chapter 7 bankruptcy in Michigan is $338. The Court filing fee for a Chapter 13 bankruptcy is $313 in Michigan. 

Other options

If you can’t afford to pay and owe money, you may ask for payments or the fee to be waived completely if you meet certain income requirements set by the federal government.

You may apply for a fee exemption if your annual income is less than 150% of the poverty level in Michigan. You can discover more about it on this site: https://upsolve.org/mi/.

How to manage to pay for filing bankruptcy in Michigan

If your court waiver request is denied or you are unable to pay the full fee, you may apply for installment payments.

This is an alternative that individuals employ when they need to file fast to avoid creditor action, such as wage garnishment. The automatic stay goes into force as soon as you submit your case, preventing wage garnishment and other collections.

If you miss a payment, the court might dismiss your bankruptcy case and you will not get your money back. That is why it is important to wait until you have enough money to pay the full court fee so you don’t risk a dismissal.

It pays off to have a good attorney-client relationship through bankruptcy

Once again, even if you have to add the attorney fees, having a professional bankruptcy attorney guide you through the bankruptcy process is your best bet so creditors stop calling you and you receive bankruptcy relief soon.

4. What are the long-term effects of bankruptcy?

The procedures you select will produce varied outcomes, depending on the type of operation you pick.

The goal of bankruptcy is to eliminate debt, but the amount of debt that can be canceled varies based on each person’s circumstances.

One, future credits

In the long run, each bankruptcy type has a different impact on the individual, with credit being one of them. After a person files for bankruptcy, their capacity to get new credit from financial institutions is typically diminished.

It’s possible that taking out another loan will be difficult for you. Financial institutions are typically hesitant to lend money to someone who has gone bankrupt.

Two, marks on your credit score

If you file for Chapter 7, it will be recorded on your credit report for the following 10 years. The debtor is liquidated through Chapter 7.

Nevertheless, when you check your score in the future, it will take into account all the good things you’ve done to improve your credit since bankruptcy.

Three, the law that governs bankruptcy is complicated.

When you file your bankruptcy petition with a law firm by your side, you will know that the specific bankruptcy questions for your case will have been well answered.

Not only that, attorneys evaluate all your monthly income, how much debt or medical bills you have, whether it is a car loan or monthly expenses.

Do not face the bankruptcy courts alone if you can prevent it

With this information, including your retirement funds, your business debt (if it is such), and any other personal loans or credit card debt you might have, they can offer solid legal advice that will guide you safely through a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

How to file bankruptcy in Michigan?

In Michigan, bankruptcy is filed under federal legislation rather than state legislation.

Filing bankruptcy relieves you of your obligations to creditors, which is what gives you a second chance.

Michigan’s rules apply in a bankruptcy proceeding to determine what property you can keep.

The majority of consumers file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. If you’re unfamiliar with the distinctions between the two or if you have any other bankruptcy questions when deciding to do your bankruptcy filing, look for legal advice.

Benefits of having an attorney during the bankruptcy process

A bankruptcy attorney can guide you to do what is best to get rid of your secured debts and unsecured debts, as well as explain the bankruptcy code and federal law according to your case.

Many people have discovered that they don’t need to file bankruptcy because there are other alternatives to debt collectors. These alternatives lead you to a repayment plan where you can keep your retirement savings, bank accounts, and personal property intact.

Do student loans end up in bankruptcy in Michigan?

If you live in Michigan, you can discharge your student debts through bankruptcy, but there are a few things to keep in mind first.

With few exceptions, student debts obtained from the federal government and private lenders are not dischargeable in Chapter 7 or 13 bankruptcy without the showing of an extreme hardship that must be proven through a separate lawsuit in the bankruptcy.

If you have any of these obligations, they won’t go away if you write them down in your petition.

Chapter 11 can be the solution

However, if you file for Chapter 11 bankruptcy protection, you may be able to get rid of both federal and private loans that are stalling your progress toward financial independence.

This type of filing lets you keep your assets and repay your debts differently. This includes student loans that were consolidated under one lender’s repayment plan before you filed Chapter 11.

The majority of Michigan citizens who choose Chapter 11 do so because their finances were not bad enough to necessitate the filing.

What is the Bankruptcy Abuse Prevention and Consumer Protection Act?

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) states that student loans are only dischargeable in bankruptcy upon the Debtor proving the inability to repay the student loan due to extreme hardship.

Even though you may owe a lot of money, you may still have to repay these loans. It rendered certain educational debts nondischargeable in bankruptcy.

Don’t go to bankruptcy court on your own

If you are thinking about filing for bankruptcy, it is a good idea to contact an experienced Michigan attorney instead of trying to do it yourself. A lawyer can assess your situation and give you advice based on your individual needs.

What should I know about bankruptcy court in Michigan?

A bankruptcy court is a specialized component of the federal court system.

There are two jurisdictions for federal bankruptcy courts in Michigan: the U.S. Bankruptcy Court for the Eastern District of Michigan and the U.S. Bankruptcy Court for the Western District of Michigan.

There are many of these courts in each district. At least one bankruptcy court exists in every state.

Kinds of bankruptcy

The three most frequent types of bankruptcy proceedings are:

• Chapter 7 for liquidations
• Chapter 11 is most commonly used for corporate reorganization.
• Individuals with steady income might find Chapter 13 debt bankruptcy relief beneficial. It includes re-organizations for people who have regular earnings.

At the end of the procedure, each case aims to get rid of (or cancel) the debtor’s obligations.

When does a bankruptcy begin?

Chapter 7 or 11 bankruptcy may be filed by individuals or businesses. Only individuals are allowed to file for Chapter 13.

When a petition is submitted to the bankruptcy court, the process of declaring bankruptcy begins. There are some court filing fees you have to cover.

How to find the best bankruptcy attorney?

In Michigan, a bankruptcy petition’s debtor is generally represented by an attorney.

An attorney might also act as the Chapter 7 trustee’s representative. However, in many situations, the Chapter 7 bankruptcy trustee is an attorney.

An attorney may represent the creditors’ committee in Chapter 11 proceedings. In most cases, Chapter 13 trustees are attorneys as well.

What to avoid when hiring a lawyer to file for bankruptcy

When looking for a lawyer, beware of paid attorney advertising or attorney listings.

Since you will be sharing sensitive or confidential information (like what you have in your bank account, how much is your tax debt, if you can pay child support or your total monthly income) with your lawyer, it is always better to find someone by personal recommendation.

Tips to hire a good bankruptcy attorney

Although you can file bankruptcy on your own for free in Michigan, using a lawyer referral service is not a bad idea. Any bankruptcy case can get better debt relief when going to bankruptcy court if you have legal advice.

When you give your contact information, choose attorneys to contact you back. Although message and data rates may apply, you will be sure this law firm is interested in representing you.

Ask your attorney the correct questions so you find someone that is on your side, that will be available for you to answer anything, from the court mails to find out about the bankruptcy exemptions that apply for you.

Filing a bankruptcy petition or going through a repayment plan is not the end of the world. With a professional and experienced lawyer by your side, you will be able to get through it and start over.