Many people ask whether they will be able to rent a home or apartment after filing for bankruptcy. The answer to that question is yes. It’s a common requirement to fill out an application with the property manager and have them run your credit history.
Within a short period of time after receiving your discharge your credit score should continue to improve if you are making timely payments to your obligations such as your car payment. You also have more disposable income after filing your bankruptcy case because you will be debt free. Landlords are more likely to have an issue with prior evictions than a bankruptcy filing.
A few things can help you during the application process to help assure the landlord you would not be at risk for default. If you have lived in your existing rental and have paid on time for at least a year that’s helpful. Even better if you can use your current landlord as reference. Additionally, if you have had a consistent job history with the same employer that is also helpful with no gaps of unemployment.
If you have a lower credit score you may be required to pay a higher security deposit or have a co-signor on the lease. Typically, rent does increase each year so keep that in mind when you begin to rent to make sure it’s affordable long term. Ask what items are included in the rent such as water, cable or trash or if that and additional cost. Having a roommate at least temporarily could help defray some of the cost as well.
There are several rules you have to be careful to follow when you are giving or receiving gifts before filing your bankruptcy case. You must disclose any gifts over $600 to any one person two years prior to filing your bankruptcy case. For that reason, it is best to keep the gift giving to a minimum to avoid having to pay the trustee.
You may give towards charitable contributions such as your church up to 10% of your income. It is fine to receive monetary gifts. For example, if your uncle gives you two thousand dollars to help you pay bills, you can that use money on reasonable living expenses without it being a problem.
If you receive regular financial contributions on a monthly basis, that money might have to be considered as income for the purpose of determining your eligibility for a Chapter 7.
I would recommend consulting with an attorney prior to receiving a gift that would be considered an asset like a car. For example, say your parents buy you a $10,000 car that is now titled in your name. That asset would not be fully exempt and that might require you to pay the trustee several thousand dollars.
That could have been avoided by keeping the car in your parent’s name. Do not transfer property out of your name to avoid paying the trustee because any transfers of property would still need to be disclosed for up to two years.
We generally recommend not making any property transfers before filing your case if you can avoid it or definitely get advice prior to doing so.
It is quite common for bankruptcy clients to have friends, family members, or significant others as co-signers due to their inability to obtain credit without co-signer.
Our clients are oftentimes concerned about how their decision to file for bankruptcy might affect their co-signer’s credit. If you have a credit card with a co-signer, you can still get that debt discharged by filing for bankruptcy. However, your co-signer would still be responsible for paying the balance if you do not pay it or if that debt is discharged.
If you have a co-signer on your motor vehicle, you could sign a reaffirmation agreement and continue to make the payment. Those payments would be positively reported to the credit bureaus. Then your co-signer would not be affected by your bankruptcy filing.
If you are in a Chapter 13, the automatic stay would protect your co-signer from any collection efforts by the creditor while you are in the Chapter 13 plan. However, if the creditor is ultimately not paid in full then the creditor could try to obtain the balance from the co-debtor. As long as the co-debtor or you are current on the payment, filing for bankruptcy should not adversely affect their credit.
Generally, if spouses are co-debtors and have a lot of joint debt it is more practical for both to file for bankruptcy so one spouse is not stuck with the debt. A co-debtor being on a loan or credit line raises a lot of concerns and questions on the impact a bankruptcy filing will have.
If you have any questions about how filing your bankruptcy could potentially affect a co-debtor, feel free to contact me at (813) 463-8000.
If you sell your homestead prior to filing your bankruptcy case, the trustee can look to see how that money was spent.
For example if two years ago you received $50,000 from proceeds from the sale of your house, how was that money spent?
Did you use the money on reasonable expenses? Did you pay back your creditors? Did you spend it frivolously? Did you incur debt at the same time or after receiving that money? Your case filing has to be in good faith where you didn’t incur debt with the intention of filing for bankruptcy.
You have to make an effort to pay off the debt but genuinely be unable to do so. Taking that example, if you took that $50,000 and gifted it to a family member the trustee could go after your family members for repayment of the $50,000 and use that money to pay your creditors.
If you took a vacation or spent the money frivolously instead of paying your creditors, the trustee would argue that you did not file the case in good faith and you would need to repay that money to the trustee. Generally, it’s better not to transfer property just prior to filing your bankruptcy case. Make sure any profits are accounted for from the sale. Keep receipts.
If there is a divorce order requiring that the property be sold, that is fine, but the money would still need to be accounted for. If you split the homestead profits with an ex, we would need to look too see if that person was also on the deed to the property and determine if they were entitled to 50% of the equity. If they have a 50% interest in the property but you give them 100% of the home sale proceeds without a divorce order that could be construed as a gift. The trustee could reverse the sale or go after your ex-spouse to receive your portion of the sale proceeds to pay your creditors.
If you are considering selling your home its best to wait until your bankruptcy case is concluded or you can potentially waive your homestead exemption by putting your property on the MLS or under contract. If you bankruptcy case is pending, you would need the court’s permission to sell the property. The trustee or any creditors could potentially object to you using the homestead exemption. Before deciding to transfer any property its always best to consult with your attorney prior to doing so.
People often ask how to rebuild their credit after filing bankruptcy or how bankruptcy will affect their credit. I am often asked if filing for bankruptcy will destroy credit for 10 years. Most clients are surprised at how quickly their credit rebounds after filing their cases. The ability to get a credit card or loan after filing is relatively easy to do. Of course, we don’t recommend incurring debt during or immediately after filing but getting a credit card is typically achievable. By getting a small secured credit line at your bank where you are putting in a collateral of cash in a deposit account can rebuild your credit. Additionally, becoming an authorized user on someone else’s credit card will also help build good credit history.
Making other payments such as your car payment on time will help rebuild your credit. While it’s not unheard of to get a car loan upon filing for bankruptcy, most car lenders will require a discharge which happens 90 days after filing your case in order to get a car loan. Bankruptcy allows you to surrender a car that is underwater without having to pay anything to the lender. This allows people to buy a car outright or get new financing and a lower car payment without having to trade in a car with negative equity.
Regarding home loans, there are different types of home mortgages that you could be eligible for. In order to qualify for a conventional mortgage, it can take anywhere from 2 years to 4 years from the date of your discharge. To qualify for an FHA or VA loan, it may take as little as 1 year and up to 2 years from your date of discharge. I recommend once some time has passed after you receive your discharge to contact a licensed mortgage broker to see what type of loan you might be able to qualify for.
Should you have any questions, feel free to contact my office at (813) 463-8000 and we would be happy to answer any of your questions or concerns.
