How Does Filing For Bankruptcy Affect My Credit Report?

An individual’s credit score is considered the most damaging adverse event that can appear on a credit report. However, it is not permanent in terms of the future effect that a bankruptcy will have on an individual’s credit score. Filing for bankruptcy will definitely reduce your credit score, but it is not a fixed variable affecting the score if credit is reestablished over time after a bankruptcy discharge is granted.

Will I Have To Pay Income Taxes On Any Debt Discharged In A Bankruptcy?

Debt that is discharged in a bankruptcy under specific IRS code provisions is not taxable to an individual. Individuals who have large credit card debts who achieve debt forgiveness outside of bankruptcy through debt consolidation services or on their own may receive a 1099 form from the creditor. The 1099 indicates the amount of any debt that was extinguished. For instance, if an individual has $70,000 in credit card debt, and is able to achieve settlements reducing total debts to $40,000, some creditors can send a 1099 miscellaneous income notice to the debtor. The 1099 will make it seem as if that individual made an additional $30,000 in income for the debt that was forgiven. One of the major benefits of bankruptcy is that debts that are discharged is not a taxable event.

How Long After Filing Bankruptcy Might I Qualify For A Mortgage Or Other Loan?

There is no specific guidelines as to when individuals are able to repair their credit score to be considered for a mortgage post-bankruptcy. In my experience, generally two years after a bankruptcy discharge the lending institutions view applications more favorably. I always advise my clients that credit is a privilege. It is not a right. The best thing you can do after a bankruptcy discharge is to enter into new credit card agreements and be scrupulous about making the payments on-time to demonstrate a positive post-discharge credit history. The most common scenario where I see positive outcomes is when higher income individuals who have been stable in their jobs and can verify stable income seem to have a better result when applying for a new mortgage or refinancing after bankruptcy.

Would Having A Bankruptcy On My Record Or Credit Report Affect Job Opportunities?

A bankruptcy on a credit report can affect job opportunities. Unfortunately, employers, with your permission, can do a credit check and in most circumstances a bankruptcy filing will be listed. For debtors seeking a change in employment, in most instances, where the job does not include responsibility for accounts and transactions that involve money, many employers will not do a credit check. It can also be a red flag if you’re applying for a job, and when requested you do not give permission for a credit check. But, I think the pendulum is changing a little bit. Companies are beginning to understand that certain personal information should remain private and the laws are becoming a little more helpful.

However, if you are currently employed, 11 USC §525 of the Bankruptcy Code prohibits private employers from terminating employment or discriminating with respect to current employment against an individual who is or has been a debtor under the Bankruptcy Code. This is a significant protection since many clients are concerned that their employer can fire them simply because they filed bankruptcy. The clear answer is no. Proving discrimination as a result of an employer finding out about a bankruptcy can be more challenging. But the reality is that the Bankruptcy statute provides significant protection for debtors. I do not hear of many instances of clients claiming their employer has been discriminated against them after a bankruptcy filing.

In General, How Soon Can Someone Finance A Car After Going Through A Bankruptcy?

After a discharge, individuals can promptly attempt to finance a car. In my experience, the interest rates the auto financing companies charge individuals after bankruptcy are extremely high. Nonetheless, if it’s possible to get a family member to be a co-signer the rates are much better. Post-discharge, you can try to finance a car. Sometimes to avoid the exorbitant interest rates in excess of 15 to 18%, it is advisable to buckle down to buy a used car so you don’t have to deal with financing issues.

What Are Some Of The Last Steps That I Need To Take To Finish Up My Bankruptcy?

After the debtor education course is completed and a certificate is filed with the court by counsel, a debtor has completed their case. Sometimes, if a family has moved after the filing of their bankruptcy case, a change of address form should be filed with the bankruptcy court. That way, the information on record has been updated and notices can be sent to the proper location. Aside from that, there is no reason to contact your creditors who receive notice through the bankruptcy.

My recommendation for individuals at the conclusion of their case is to: 1) keep a full copy of their bankruptcy petition in a safe place that’s available for reference; and 2) keep a copy of their bankruptcy discharge together the bankruptcy petition. Sometimes, an individual will be sued after the bankruptcy, as a result of a mistaken name or identity or creditor oversight. At that point, they can refer back to their bankruptcy and see if that creditor was identified.

Occasionally, I get clients calling about a creditor that mistakenly brings a lawsuit after a bankruptcy discharge. When that occurs, I write to that creditor and in nearly every instance, they have agreed promptly dismiss the lawsuit and apologize. Creditors are fallible, and sometimes they do make mistakes that are technically a violation a discharge injunction. But having the complete bankruptcy Petition and discharge to refer to after bankruptcy is paramount.

For more information on Bankruptcy In New Jersey, a consultation is your next best step. Get the information and legal answers you are seeking by calling (908) 373-8500 today.