Women & Money: When to File Bankruptcy

Chapter 7 and Chapter 13 should be your last resort

hefreeman01262Savvy money management skills are a necessity to weather these tough economic times. BlackEnterprise.com has got you covered with our supplement to the magazine’s three-part “Women & Money” series.

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: What advice do you have for women who might need to file for bankruptcy? And if they proceed with bankruptcy is there a right or wrong way to do it?

Harrine Freeman: Bankruptcy should be a last resort. You should only file for bankruptcy when you have exhausted all other options or in extreme cases such as long-term unemployment, long-term illness, or death of a spouse who had a large amount of debt.

Chapter 7 bankruptcy forgives all debt included in the bankruptcy, reports a zero balance on all accounts, and stays on your credit report seven years from the date of discharge. Chapter 13 bankruptcy sets you up on a repayment plan with your creditors and stays on your credit report for 10 years from the date of discharge. Filing for bankruptcy greatly lowers your credit score and can prevent you from getting approval in the future.

A benefit of bankruptcy is that as soon as you file the petition, your creditors are notified and are required to update the status of your accounts that were included in the bankruptcy on your credit reports. Filing for bankruptcy also prevents creditors from contacting you for payment. In some cases unscrupulous creditors may still contact you for payment, but you must  inform them that the account(s) are included in your bankruptcy filing.

You can file for bankruptcy if you meet the following conditions:

–You have resided in a state for at least 90 days prior to filing (this may vary in each state)

–You have a total unsecured debt of $290,525 or less or a total secured debt of $871,550 or less

–You attend financial counseling from a government approved agency within 180 days before you file for bankruptcy

–You provide a certificate indicating completion of the financial counseling course.

–If you earn more than the median income in your state and can repay at least $6,000 over a five-year period, you can file for Chapter 13.

If you make less than the median income in your state, you can file for Chapter 7 bankruptcy. Student loans, tax liens, child support, and alimony cannot be included when filing for bankruptcy.

You have two options when filing for bankruptcy: You can file on your own or hire a bankruptcy lawyer. If you file bankruptcy on your own, you can go to your state bankruptcy court to fill out the necessary paperwork. Do research at the library or online to find out the requirements in your state to file for bankruptcy. You will have to bring a copy of all of your debt, assets, monthly income, and monthly expenses. Create a budget of all of your

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  • anthony justice

    Ms. Freeman,

    I wrote a response early today, regarding yesterday’s credit issues article. WHat is the effects of Bankruptcy on future credit? How does an individual recover and adjust lifestyle habits that contributed to their financial situation? Could you view my response from yesterday and include that reply with the all encompassing answer.

    Anthony Justice

  • Renee Jones

    Hello can you tell me how bankruptcy affects a homeowner. Would Chapter 7 or Chapter 13 be better as a homeowner? I’m contemplating filing bankruptcy but I want to be able to keep my home but at $1,600.00 a month payments it’s really becoming hard to manage.

  • trina

    The amount on my credit report only totals to about 3,000 dollars but I cannot get any loans because of bein delinquent. What could I do to get help.

  • http://www.hefreemanenterprises.com Harrine Freeman

    Hi Renee, a bankruptcy stays on your credit report for 7 to 10 years. I recommend contacting your mortgage loan servicer, http://www.hopenow.org or a HUD counselor at http://www.hud.gov/offices/hsg/sfh/hcc/fc/ to get assistance.

  • http://www.hefreemanenterprises.com Harrine Freeman

    Hi Trina, there are several things you can do to pay down the debt.

    1. Pay your bill as soon as you get it and then continue to send payments as you get extra money to pay the debt down faster
    2. Reduce expenses as much as possible
    3. Get a part-time job
    4. Sell unused items on eBay
    5. Buy used vs. new
    6. Buy items in bulk, on sale, use coupons or shop at discount stores
    7. Buy needs vs. wants
    8. Follow the Voluntary Simplicity theory – don’t buy anything new except for food and other basic necessities
    9. Use recycled items at http://www.freecycle.org
    10. Prepare comfort foods such as: soups, stews, casseroles, meatloaf, tuna salads, breakfast food for dinner, sandwiches for dinner, Ramen noodles, etc.
    11. Live like a college student

  • Deborah Ketter

    Hello, I am writing because I have filed bankruptcy twice, the last time was in 2004. Both were Chapter 7 and had been discharged. I had family issues and had to move back to Delaware and I went from a $48,000 a year job to a $7.00 an hour job and ended up back in the toliet again. Upon moving back here, I found out that I had a personal injury case from 1995, that I wasn’t responsible for but the person used my car and that totals over $40,000 a year,not to mention the bills that I had in Georgia and student loans and day to day living. I so desperately want to own my own home, one day, but I feel like I’m drowning because I make enough money just to maintain my living expenses and not much more. I had gotten my score up to almost in the 700′s in less than a year. Now, I don’t even know where to begin and I know that I can’t file again until 2010. I am not a dead beat on paying my bills, but when family emergencies come up, I have to be there to take care of my kids. Please help. I’m looking thru tear stained eyes because I don’t want to continue putting my money in the drain paying rent to someone and not able to invest like I know I should be able to. I’ve been looking everywhere for a part-time job or even another full-time job, but no one’s hiring and the last time I tried working two jobs, I almost lost my life in a car accident.

  • dwill1999@hotmail.com

    What can you do to rebuild your credit during that seven years the bankruptcy is on your record?

    • http://blackenterprise.com Alfred Edmond, Jr.

      The single most important thing you can do is to pay all of your bills and debts (especially any remaining credit accounts you may have) ON TIME (ideally 2-3 days before due) and EVERY TIME. That way, as the seven years passes, the bankruptcy looks more like an exceptional aberration, and that you have a track record of being trustworthy and responsible with your financial and debt obligations. Making this your permanent approach to how you handle your money will also reduce the likelihood that you will ever have to file for bankruptcy again.