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Originally Posted by irishgrl
oh BOY are you wrong about THAT one (the ch 11 or 13 "pennies on the dollar" spiel)
my best bud did a ch 13, paid 80% of his debt, the trustee made about 50k off of him, and at the end, his credit score is the same as if he had discharged the whole thing. People dont realize that for the most part, they wont qualify for a ch7, and yet, even if they pay their debt, creditors look at you like you DID file ch7. Plus, anyone can come in any time until your debt is discharged and put a lien on your assets. It totally sucks now how the system is set up. I highly recommend people find any other way out of a financial mess than bankruptcy. The chances of people qualifying for a ch7 are pretty slim unless you make squat in the job dept.
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Ummm -- I did it for a living
If he was able to pay 80% of his debt as well as $50,000 to the trustee ($833 a month is not really accurate unless his debt was huge and he still amde a ton of money - - he had no business in a Ch. 13 plan. He likely should never have filed. But, there could be facts untold, etc.
Also, FHA does not look at credit scores for the most part when lending money. Go here for some info. - to wit:
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A last option, and perhaps the best one, is an FHA loan. FHA’s approach to bankruptcy allows a borrower to purchase or refinance a home after one year of perfect payments into the plan as long as you have perfect credit outside the plan and have the trustee’s permission. Also, if a borrower has an existing FHA loan, they can streamline-refinance it as long as they have been no more than 60 days late in the last year. In addition, this method actually keeps the bankruptcy in force, preserving the plan’s payment schedule and protection.
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http://abiworld.net/crackingthecode/index.php?p=34 Obtaining the Trustee's permission is not that difficult as long as you have the income to support the payment. I know many people who have done this and when they emerge from the Ch. 13 plan, conventional mortgage companies are willing to deal with them, though the FHA loan was at the market rate of someone with good credit. FHA loans are slightly more because the borower has to pay an insurance fee per month of roughly $50, which allows the FHA to loan to people not based solely on the credit score.
See also --
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How long after filing bankruptcy will I be able to get a loan to buy a house? Will the interest be "sky high"? What are some of the other credit effects of filing bankruptcy?
The short answer to your question is that you may be able to finance the purchase a home two years after you have gotten your discharge in bankruptcy, but you may qualify as early as one year after filing Chapter 13, or one year after discharge in Chapter 7.
Since a large proportion of home loans depend on FHA or VA loan guarantees, your ability to qualify for those guarantees may determine when you are able to obtain a home loan.
FHA will insure mortgages to individuals who have filed Chapter 7 liquidation bankruptcy two years after the discharge if "the borrower has re-established good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs."
To obtain a loan within one year after the discharge, the borrower must show that "the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited an ability to manage financial affairs and the borrower's current situation is such that the events leading to the bankruptcy are not likely to recur."
FHA regulations also specify that a borrower still in a Chapter 13 debt adjustment who has satisfactorily completed one year of plan payments and gets court approval of the transaction. [U.S. Department of Housing & Urban Development, Office of Housing, Handbook No.: 4155.1 REV-4 CHG-1, September 28, 1995. Chapter 2-3, E]
VA has similar regulations. The VA handbook for lenders includes provisions that "If the bankruptcy was discharged more than 2 years ago, it may be disregarded."
If the discharge was between 1 and 2 years, the guarantee may still be granted if the applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period and the bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, etc.
VA regulations allow granting of the loan guarantee to a person in a Chapter 13 when the plan payments are finished satisfactorily, or after 12 months payments and the Trustee or the Bankruptcy Judge approves of the new credit. [Veterans Benefits Administration VA Pamphlet 26-7, Change 34, November 13, 1997]
If you obtain home loan financing with a loan guarantee, the loan rate should be based on the guarantee status of the loan. As a result, I would not expect that the rate would be affected by the bankruptcy.
Other effects of bankruptcy on credit are difficult to assess. Credit is extended by individual lenders, and is not generally regulated by law. Lenders do not generally make their criteria public. We do know that there are two factors which are important to creditors in extending credit.
Ability to make payments. Any lender will want to be sure that you have the ability to pay back a loan before extending you credit. The discharge in a bankruptcy should improve your ability to make payments. You will no longer owe the debt that you did when you filed, and you will no longer be subject to judgments, garnishment and other collection activities which would impair your ability to pay back the new loan. In addition, the restriction against you filing a Chapter 7 for 6 years from the filing of your previous case may give the creditor some assurance of their ability to collect new debt.
Credit history. Lenders look at the way you have paid your bills in the past as an indication of how you will pay your bills in the future. A bankruptcy is an adverse rating in this respect, but creditors can also see how your credit was before the circumstances which caused the bankruptcy. If you had a good credit history and paid your bills on time before the bankruptcy, you may find that it is easier to re-establish credit than if you were perpetually behind on your payments and had judgments against you.
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http://doney.net/faq_credit.htm
Finally, your statement:
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Plus, anyone can come in any time until your debt is discharged and put a lien on your assets.
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is wholly incorrect unless the creditor moves for relief from the automatic stay in place immediately after the bankruptcy is filed - also student loans (for the most part) and other things like income tax non payment are exempt for the most part - though they can usually be included for 100% payment in a Ch. 13 plan. But, usually, only mortgage companies can get a motion for relief granted and then only when the homeowner intends to surrender the property in lieu of paying the secured debt.
Here is some general info on the differences between Chpaters 7 and 13.
http://www.totalbankruptcy.com
here is another
http://www.expertlaw.com/library/ban...ankruptcy.html
to wit:
Chapter 13 Bankruptcy - "Wage Earner Bankruptcy"
By Aaron Larson
Law Offices of Aaron Larson
April, 2005
Contents
Introduction
Is Chapter 13 The Right Choice?
The Automatic Stay
The Chapter 13 Bankruptcy Process
Dismissal of the Petition
Summary
Notice: Due to the complexity of bankruptcy law, and the difficulty of determining which form of bankruptcy will apply to any given situation, most people will benefit from consulting with a qualified bankruptcy lawyer before filing for bankruptcy.
Introduction
In simple terms, a Chapter 13 bankruptcy involves the reorganization of a debtor's financial affairs. The goal is to create a payment plan for the benefit of the creditors, while protecting the debtor from foreclosure, garnishment, levy, or similar consequences.
In order to qualify for Chapter 13 bankruptcy, the debtor must have an income that exceeds the debtor's reasonable living expenses, as it is necessary that the debtor have sufficient means to provide repayment to creditors of past debts. In some cases repayment may be for the full amount of the debt, while in others the debtor may pay off only a small percentage of certain debts - perhaps as little as ten percent. Debtors must also meet with a credit counselor at some point during the six months prior to applying for bankruptcy, and must attend money management classes at their own expense before a final order will be issued by the bankruptcy court.
This form of bankruptcy is commonly referred to as a "wage earner plan".
A Chapter 13 bankruptcy will appear on your credit report for up to ten years.
Is Chapter 13 The Right Choice?
Most debtors will benefit from consulting with a qualified financial professional before considering a Chapter 13 filing, and create a list of obligations which will be subject to repayment under a Chapter 13 plan, and map out a possible budget. Some debtors will realize at that time that they cannot realistically live under that type of budget. Others may discover that they will be better served by trying to resolve their debts with their individual creditors outside of the bankruptcy process, as opposed to going through a formal bankruptcy.
The Chapter 13 bankruptcy tends to be favored by debtors who have fallen behind on secured loan payments, such as mortgages and car loans, as it enables the debtor to keep possession of the property while catching up on payments through a court-approved repayment plan. It may also be preferred by a debtor who has valuable non-exempt property that would be liquidated in the course of a Chapter 7 bankruptcy.
Some debtors will choose not to file for Chapter 13 bankruptcy, as they do not wish to live under the scrutiny of the bankruptcy court which will result from a successful petition. Many debtors lack the discipline to abide by a Chapter 13 repayment plan. Only about 35% of debtors successfully complete their plans. If you do not think that you can live under the plan's budget, you may wish to reconsider a Chapter 13 filing.
Under recent reforms in bankruptcy law, effective in October, 2005, many debtors are disqualified from filing for Chapter 7 bankruptcy protection, and thus will have to file for Chapter 13 protection. If the debtor earns in excess of the state median income, and is able to repay 25% of his or her "nonpriority unsecured debt", the debtor will be ineligible for Chapter 7 protection and must proceed under Chapter 13.
The Automatic Stay
Once a debtor files for bankruptcy, the debtor's estate is protected by the "automatic stay", which bars creditors from trying to collect debts without the permission of the bankruptcy court. This provides immediate protection against foreclosure, repossession of your car, eviction from your apartment, garnishment of your wages or bank accounts, cut off your electricity, or other measures creditors may take to try to recover monies owed.
The Chapter 13 Bankruptcy Process
After filing for Chapter 13 protection, a debtor will propose a repayment plan for any debts and obligations. The proposal will be reviewed by a bankruptcy court. If the plan is approved, the court will appoint a trustee to collect the debtor's payments, to distribute them to creditors, and to supervise the debtor's compliance with the court-approved repayment plan. The debtor will be required to pay the trustee's fee.
During the repayment period, the bankruptcy trustee will have control over the debtor's personal finances, and the debtor must submit any credit-related matters to the trustee for review and approval.
The repayment period typically lasts from three to five years. During this time, the bankruptcy court will not permit the debtor to spend money on anything it deems "nonessential", and the debtor will have to live under a strict, court-imposed budget.
Dismissal of the Petition
Some persons who file for Chapter 13 bankruptcy protection simply wish to buy some time in order to prevent a foreclosure, or repossession of a vehicle. If the debtor is able to regain firm financial footing before the bankruptcy is resolved, the debtor may opt to petition for discharge of the bankruptcy petition and then to pay off the arrearages in full. In the alternative, a debtor may use the time to sell certain property, such as a house, prior to foreclosure or repossession, as foreclosure sales often do not result in the recovery of full market value.
Summary
In a "Chapter 13" Bankruptcy:
You will propose a repayment plan for your debts;
If approved by the court, a trustee will be appointed to collect your payments, distribute them to your creditors, and to supervise your compliance with the repayment plan.
You will have to pay the trustee's fee, which can be substantial.
Debtors whose debts exceed certain limits are barred from seeking Chapter 13 bankruptcy. (At the time of this writing, in order to file a "Chapter 13" bankruptcy, you must owe less than $269,250 in noncontingent, liquidated, unsecured debts, and less than $807,750 in noncontingent, liquidated, secured debts. You will most likely be unable to file a "Chapter 13" bankruptcy if you have filed and dismissed a "Chapter 13" petition in the last 180 days, and should discuss any prior filing with your attorney. You should also take care to propose a reasonable budget, as most debtors find themselves unable to comply with the strict enforcement of their "Chapter 13" plans, and end up dropping out of bankruptcy before their plan is completed.
This type of bankruptcy can be particularly useful when a debtor believes that his financial crisis is temporary, and that his income will continue to grow in the future. Corporations and partnerships cannot file a "Chapter 13" bankruptcy.