Chances are you might be unaware that you are a victim of identity theft until many months have passed. You might find yourself with a frozen bank account, increased minimum payment on your credit account, and increased interest rates. It is invasive, and you might find yourself feeling the adverse effects on your health because of the stress which comes with a stolen identity. Bankruptcy could be the most effective solution because your fraudulent account will be wiped out if you are eligible. Consider consulting with the Los Angeles Bankruptcy Attorney to learn more.
Is it Practical to File for Bankruptcy Following Identity Theft?
If you have significant debt challenges following identity theft, bringing bankruptcy could be a practical remedy. It is because:
You receive a fresh start — Elimination of some debts frees you from liability for your discharged debt.
You keep the future income — Any property you obtain or will obtain following bankruptcy isn't included in your bankruptcy estate. Nonetheless, specific property acquired within six months after filing bankruptcy will be part of your bankruptcy estate. The rule applies to death benefits, life insurance policy proceeds, assets from your divorce settlement agreement or decree, and inherited property.
No limits on your debt amount — Per Chapter 7 bankruptcy, there is no restriction on the amount of debt you might have.
Debt discharge happens quickly — Typically, debt discharge will occur within sixty to ninety days after filing for bankruptcy. Once your trustee distributes your property to all unsecured lenders, the court will close your case.
Bankruptcy triggers an automatic stay that stops your creditors from taking action to collect the debt or repossessing assets like motor vehicles. It also prevents creditors from sending you letters, pressing charges against you, or calling you.
It puts a stop to foreclosures, utility shutoffs, wage garnishment, and evictions.
Although a bankruptcy record will be effective for seven to ten years, you can start improving your credit rating.
There is no repayment plan.
What Bankruptcy Cannot Do
Filing for bankruptcy does not resolve all your debt challenges. Here is what it does not do:
Stop Secured Creditors from Repossessing or Foreclosing Assets You Cannot Afford
Although a discharge eliminates your debts, it does not eliminate liens. Liens allow your creditors to take assets, sell them, and apply these proceeds to the credit balance. The liens stay on the assets until the debts are paid. That means if you've secured debts, bankruptcy could eliminate the responsibility to clear the debts, but it will take the lien off the asset, and the lender can recover the collateral. Per Chapter 7, you could wipe out your mortgage, but the creditor's lien remains on your home. Provided the loan is not paid, your creditor could foreclose on your property after the automatic stay is lifted.
Eliminates Alimony and Child Support Responsibilities
Alimony and child support responsibilities endure bankruptcy, so you will continue to pay the loan in full.
Eliminates Your Student Loans
A student loan could be discharged only when you prove that repaying your load could result in undue hardships. It would be best if you also established that you couldn't currently afford to clear the loan and are less likely to do it in the future.
Eliminates Other Non-dischargeable Loans
Bankruptcy does not discharge the following loans:
Debts that you forgot to highlight in the bankruptcy papers
Debts for death or personal injury because of drunk driving
Penalties and fines due to criminal restitution and traffic tickets
Steps of Filing Chapter 7
If you're contemplating filing Chapter 7, below is a summary of what is required of you:
Classify the Debts
In bankruptcy cases, debts are classified into unsecured debts and secured debts. Secured debts are debts where you use an asset as security for payment. On the other hand, unsecured debts are unconnected with any property. Perfect examples include medical bills and credit card debts.
Moreover, debts can be dischargeable and non-dischargeable. Many consumer loans are dischargeable, while student loans, alimony, and child support are non-dischargeable debts.
Determine Property Exemptions
All states have exemption laws that outline what property and the equity in the property you have a right to keep. You could retain retirement accounts, a car, some home equity, and household furnishings.
Ensure You Qualify
To be eligible for Chapter 7 bankruptcy you:
Can't have brought a bankruptcy petition in the last six months that was dismissed because you did not adhere to court orders, failed to attend a court hearing, or you dismissed the petition because lenders sought court relief to recover assets they had liens on
Can't have completed a Chapter 13 within the previous six years or Chapter 7 in eight years
Should pass the mean test (The mean test looks into your debts and income and determines if you have enough disposable income to pay some of the unsecured debts for five years. If you have any disposable income, you should bring Chapter 13).
Reaffirm or Redeem Your Secured Debt
If an asset was used as security for your loan, you should continue paying your lender if you want to keep it. When filing bankruptcy, you will be asked whether you want to:
Surrender the property and allow your lenders to have it
Redeem your debt and pay the lender the property's replacement value
Reaffirm your debt and continue paying under a contract with your lender
Fill Out Your Bankruptcy Forms
You should fill out forms that describe your income, previous transactions, income, debts, and property. It would help if you outlined your lenders' names, income, property, property exemption, and how you intend to do with the secured debts. You will also reveal property transactions that happened ten (10) years before filing your bankruptcy case.
Enroll in a Credit Counselling Course
It would help if you enrolled in a credit counseling course before bringing a bankruptcy case. The program enables you to decide whether an informal repayment plan will work for you or whether you should file a bankruptcy case. Counseling is mandatory whether you are paying debts due to identity theft or it is clear that your repayment plan is not feasible.
Usually, the counseling authority prepares your budget founded on your expenses and income and then analyzes the options for repaying your debts. The agency will verify that you do not have alternatives to handle the debt apart from filing a bankruptcy case.
Bring Your Forms
Bringing the petition starts the case. Although many people file bankruptcy forms simultaneously, you could choose emergency bringing by completing a few necessary forms if you are pressed for time. You should file your remaining bankruptcy forms within 14 working days.
Request a Fee Waiver or Pay Your Filing Fee
You should pay filing fees when bringing your petition. If you cannot pay the full amount, you could request the bankruptcy court to divide it into four.
If you cannot afford it, you should apply for a fee waiver by filling out an application brought together with the petition. A bankruptcy judge will analyze it and then issue a fee waiver provided you satisfy all the requirements. To qualify, you should not have enough income to foot the installment payments, and the household income should not exceed one hundred and fifty percent of the federal poverty guidelines.
Submit Your Documents to a Trustee
You will be required to submit documents that establish the correctness of the details in the forms. You should provide the trustee with documents like:
Attend a Meeting
After meeting with a bankruptcy trustee, you should go to the bankruptcy court. The trustee will confirm your identification. They will also ask you both general questions and questions concerning your forms.
File Motions or Objections if Required
If a debtor wants to eliminate any lien or disagrees with their creditor's claims against them, they should address the issue before the case is closed.
Wind Up the Secured Debt
When filing your petition, you should complete forms that indicate how you'll handle the secured debt. Before the bankruptcy case is resolved, you should act on the matter. For example, if you stated that you would return your motor vehicle, you should avail it to your creditor.
Complete Your Debtor Education Course
Following filing the paperwork, you should complete a debtor education course before receiving a discharge. Failing to submit the certification early will cause the bankruptcy court to close the case without the discharge.
Fixing the problem could be costly since you have to bring a motion and pay additional filing fees to reopen your case. That is why you need a skilled bankruptcy attorney.
Obtain the Discharge
The bankruptcy court will issue a discharge order that wipes out all your debts. After your discharge, you are no longer obligated to pay your debts, and your creditor should not collect them.
Why You Require an Attorney Following Identity Theft
If your bankruptcy case is straightforward, you can self-represent and save on attorney's fees. However, it is not advisable.
Your lawyer will identify any challenges that could arise during the case and should plan accordingly. Here is how an experienced advocate will help you:
Bankruptcy may not be the only method to realize relief and peace of mind. Your attorney could suggest other options like negotiating with your creditors, stopping creditor harassment, debt counseling, and seeking assistance from a credit counseling agency.
Your skilled attorney will also help you decide which bankruptcy type to bring. It is achieved after considering your needs and wants and then recommending a move to achieve your goals. Chapter 7 is the best option following identity theft because it will wipe your debts in the shortest time possible.
Help You Bankruptcy Preparation
As previously mentioned, a mean test shows whether you are eligible for Chapter 7. Your experienced attorney knows how to use your unique circumstances.
Different states have different exemption systems to keep assets in bankruptcy. The lawyer knows how to use exemption guidelines to protect your property.
Are you aware of the value of your television or car? The legal expert will ensure you reveal and value the property realistically.
Your attorney will help you complete schedules and all paperwork. Per penalty of perjury, you should submit information about your income, assets, debts, expenses, and financial transactions. The advocate knows what you should reveal, how to value the assets, necessary and reasonable expenses, your tax returns, and income. You should sign the paperwork, claiming the information provided is accurate. During a meeting of creditors or in court, you will affirm or swear that you are telling the truth. The lawyer will stand with you and make sure the testimony is complete and correct.
Your qualified attorney will also handle lenders who break the automatic stay order. If your creditor tries collecting the debt after filing your case, the lawyer could request the bankruptcy court to hold your lender in contempt or demand compliance.
Finally, your lawyer could negotiate a redemption or reaffirmation agreement with secured creditors, allowing you to have your asset.
Rebuilding Credit Score After Filing Bankruptcy Due to Identity Theft
Identity theft can result in significant debt amounts, and filing a bankruptcy case is an overwhelming process. The effect that bankruptcy has on your credit score and credit report could last for years and impact applying for mortgages and auto loans. However, rebuilding the score isn't always impossible. It's a matter of time. Here are some of the methods to get back on track:
Saving aids to avoid using credit cards for financial support. It could prevent debts that you cannot pay. Instead, create a budget to assist set aside required money for monthly bill repayment.
Assume after food, transportation, and living expenses, you have one hundred dollars left for the month. If you follow the budget, you will know your bill, and you will have money to foot the bills on time.
You should adhere to your budget. Each coin counts, and it is a significant step towards achieving your financial goals and recovering from identity theft.
Use a Secured Credit Card
Another way to work towards restoring credit score is by getting a credit card. It shows your lender that you're responsible with credit and can pay debts in time. You might be surprised to learn that receiving a credit card offer is not as difficult as you would think.
Usually, the offers start reappearing a couple of weeks after filing for your bankruptcy case. It is because you can only file a bankruptcy case after years. For lenders, the offer does not come with any risk, and newly obtained debts should be paid. That means you should be cautious when choosing your credit card and check for rates and fees to be sure you know what you are getting into. Additionally, don't take a loan whose amount you cannot afford.
After getting your secured credit card, deposit money as coverage against your lending. Below are features to consider when choosing your secured card:
Conversion option — The secured card will convert to an unsecured card after a while. When it does, your deposit will be returned provided you have cleared the balance. Moreover, you can continue using your card to rebuild the credit history.
Reporting to a credit bureau — Your card provider should report the account details to major credit bureaus such as Equifax, TransUnion, and Experian.
Fees and rates — Interest rates and fees might be higher than those of unsecured cards. Remember to analyze the annual fee and annual percentage rate and keep the cost low.
Deposit money — The more your deposit on the secured cards, the higher the credit limit. Having more available credit (which you aren't using) builds your score and improves the credit utilization ratio.
Pay Bills on Time and in Full
The credit score depends mainly on paying bills early. By footing your bills on time and in full, you are proving to creditors that you're responsible.
Consider Credit-Builder Loans
It is okay to feel nervous about obtaining a loan following bankruptcy, but a credit-builder loan has features that assist rebuild the credit score with minimal risk.
With a credit-builder, you make payments every month into your saving account managed by your lender. Typically, the payment term is one (1) to two (2) years. At the payment term's end, you will have the money paid into your account.
You could find these loans through a bank, community bank, and local credit union.
Monitor the Credit
After bringing a bankruptcy case, you should regularly keep track of the credit and discharged accounts and ensure they are well reported.
Monitoring the credit catches mistakes and identity theft signs, such as a loan application made using your identifying information before things get out of hand.
Find an Los Angeles Bankruptcy Attorney Near Me
Learning that you are a victim of identity theft is frustrating. Your finances are in shambles, and the credit score is affected by debts you did not accrue, and the creditors might be calling you. Filing a bankruptcy case is an effective way to wipe the credit report’s debts and stop the collection calls. However, building a case is a lengthy and complicated process. At Los Angeles Bankruptcy Attorney, we can provide you with affordable, experienced legal counsel that could help you regain your financial stability. To get answers to your questions and discuss your options, call us today at 424-285-5525.