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Credit After Bankruptcy: Why Choose a Secured Credit Card Offer

Virtually everyone I meet with to discuss the filing bankruptcy is worried about future credit. Is it possible to reestablish credit after filing bankruptcy? It is. It might take a year or two after bankruptcy to rebuild yourSecured Credit Card After Ban credit score, but imagine how long it will take if you continue to struggle with your existing debt. One good way to start rebuilding your credit score after bankruptcy is by getting a secured credit card.

Unsecured or Secured Credit Cards after Bankruptcy?

When looking for a credit card after bankruptcy, you will receive piles of credit card offers from different companies. Choosing the right card can be a daunting task. Should you apply for a secured credit card or an unsecured credit card? Secured credit cards are often better deals than unsecured cards because the fees and interest right are usually lower that the unsecured cards you can qualify for immediately after a bankruptcy.

What is a Secured Credit Card?

A secured credit card requires a cash deposit as collateral for the credit line. Your credit limit is either the amount of your deposit or some percentage above that amount. Secured credit cards are designed for people with a poor credit score, such as bankruptcy. They may charge higher fees, but in many circumstances, they will less expensive.

Top Tips for Finding a Secured Credit Card after Bankruptcy

1.            Check the fees involved with the credit card offer, because regular payments such as annual fees or processing fees may have to be made. Remember, annual fees differ significantly between various banks.

2.            Apply for a secured credit card that doesn’t charge an application fee.

3.            Because the card is secured by a deposit, you should not have to pay a high interest for a secured credit card you get after bankruptcy.

4.            Make sure that the credit card company reports your payment history to the three credit bureaus. If they don’t, it will not help rebuild your credit.

5.            The company should not report that you are holding a secured card to the bureaus, which can adversely affect your credit score.

6.            Watch out for companies that use deceptive practices. Research the company and make sure that it does not have a history of consumer complaints.

Bouncing back from a bankruptcy does not have to be hard. My firm offers our clients free enrollment in a 14 Week Program that will teach you how to rebuild your credit the right way and how to re-establish your credit after a bankruptcy.

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Deciding on Chapter 13Why would anyone want to file a Chapter 13 bankruptcy? When you are struggling to make ends meet it may seem odd that filing a bankruptcy that requires making payments to your creditors can be a better deal than Chapter 7. It often isn’t, but here are three situations where filing Chapter 13 can save you a lot of money and aggravation:

1. Chapter 13 can save your house from foreclosure. Once you fall behind on payments it is tough to get back on top of things. When you are facing foreclosure a Chapter 13 will stop your house from being sold out from under you. Chapter 13 gives you a chance to get caught up on payments. These catch up payments can be stretched out over a five year period.

2. Get rid of a second mortgage. Chapter 7 will discharge a second mortgage. That does not do you much good when you want to keep the house. The second mortgage lien survives the Chapter 7 discharge. Chapter 13 is often a better deal. The rules are different in Chapter 13. When your house is worth less than the first mortgage, Chapter 13 allows you to discharge the second mortgage and have the second mortgage lien removed.

3. Save your car. In this town a car is a necessity for most of us. When you are behind on payments you are in danger of having the car repossessed. Chapter 7 might slow down repossession, but it won’t stop it unless you can get caught up on payments fast. Chapter 13 will allow you to keep the car and pay it off in a payment plan that can last as long as five years. Many times we are able to reduce the amount owed and have a lower interest rate set.

4. Force the IRS into a payment plan. It is hard to imagine a worse creditor than the IRS. Even if you are able to work out a payment plan with the IRS they will continue to add penalties and interest to the amount owed. Chapter 13 will allow you to pay back taxes and stop additional penalties and interest from being added.

Even when you meet the rules for filing a Chapter 7 bankruptcy there may be good reasons to consider a Chapter 13 instead. Chapter 13 will often save you money and the loss of valuable property. To learn more, give us a call at 480-820-0800 and talk to an experienced Arizona bankruptcy lawyer.

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Filing Chapter 13 bankruptcy will soon be an option for people with larger debts. On April 1, 2013 the law will adjust to allow people with unsecured debts of up to $383,175 and secured debts of up to $1,149,525 to file Chapter 13.

Chapter 13 Not For Everyone

Chapter 13 is not for everyone.  By design, not everyone meets the rules for filing a chapter 13 bankruptcy. Chapter 13 bankruptcy law is designed to be limited to simpler, Chapter 13-Debt-Limits-Increasestraightforward debt reorganization. For that reason only people and married couples may file Chapter 13. Your corporation or limited liability company are not allowed to file Chapter 13. The Chapter 13 debt limits are another method of excluding more complex cases from Chapter 13.

Option for More People

Many more people who want to take advantage of the benefits of a chapter 13 bankruptcy and get caught up on back house payments, get rid of second mortgages, or protect property that would be lost in Chapter 7 will soon meet the rules and be allowed to file Chapter 13.

Debt Limits Increase April 1, 2013

Every three years the debt limits for chapter 13 change. These revisions are based on changes in the consumer price index. Effective 04/01/2013 the new limits for unsecured debt are $383,175 and the limit for secured debt is $1,149,525.

Debt Limits Subject to Dispute

Anyone who has more than than these limits may not file a chapter 13 bankruptcy. However, as with anything in the law, it’s not always clear whether a particular debt should be counted toward these limits.

The bankruptcy code provides that a debt be non-contingent and liquidated to count toward the unsecured debt limit. Plenty of legal battles have been fought over whether a particular debt meets this rule. Before making a hasty judgment that you do not qualify for chapter 13 be sure to talk to an experienced Arizona bankruptcy lawyer.