Buy a home after bankruptcy?  Seems like a stretch for all but those who win the lottery once the discharge is issued.  But play your cards right and you could be worrying about scheduling a closing date sooner than you ever thought possible.

After filing bankruptcy, you’re debt free.  No more calls, no more lawsuits.  Suddenly, the world feels a bit brighter and filled with possibilities.  You start looking around your rental and thinking you might want to buy a home.

In order to buy a home after filing bankruptcy, you’re going to need to worry about two things.  They are:

1. Your level of savings; and
2. Your credit score.

Your Savings Account (The Downpayment)

In order to buy a home, you must have a downpayment.  Though the land of $0 down mortgages was wonderful for a time, it’s gone now.  And if there’s a broker willing to do the deal for you, run the other way.  When you don’t have a downpayment, you run the risk of going upside down on your mortgage the first time the Federal Reserve Bank chairman catches the sniffles.  Definitely bad idea.

Spend the first year or so after filing bankruptcy focusing on your savings account.  Sock away every spare dollar, and then some.  Cut your cable or satellite television, consider ditching the landline phone in favor of the cell, and turn off your lights when you leave the room to save on electricity.

Clip coupons.  Lots of them.

If you can, grow something useful in the garden rather than pretty flowers that can’t feed you.

If you want to buy a home, you need money.  Lots of it.  Save every dollar you can.

Your Credit Score

Going through bankruptcy will hit your credit score to the tune of about 150 points. Doesn’t sound like a lot, but when you remember your credit score tops out at 850 and seldom goes below 400 unless you’ve somehow lost your pulse, it’s pretty big.

You’re going to want to get to work on repairing the damage, and fast.

First thing to remember is that you must continue to pay your debts on time. If you’ve got student loans or a car loan, make those payments without fail. The student lender will report that positive payment stream, though the car lender may not unless you reaffirmed the debt. No reaffirmation? No problem – just keep copies of the cancelled checks and ask the finance company for a payment history before you go to the mortgage broker.

Next is that different mortgage companies may look to different credit reporting agencies – each of which may list different obligations. Some may list your utility payments, others may have the rent bill to the landlord. Keep on top of it all after filing bankruptcy to maximize the chances you can buy that dream home. You also want to check your credit reports after bankruptcy to make sure they reflect your debt-free world.

Finally, consider a single credit card after bankruptcy. Use it every month, then pay it off over a 2-month period to ensure that the payments show up on your credit report. That’s going to raise your score as well.

You can buy a home after filing bankruptcy, but the upshot is that you need to take some time to build yourself back up. Don’t rush it – Rome wasn’t built in a day. With hard work, however, you’ll get there just fine.

Jay S. Fleischman is a bankruptcy lawyer who helps people fight back against debt collection harassment.

John Morley said, “Evolution is not a force but a process. Not a cause but a law.” Given the fact that this is a site about the law, we thought it necessary to continue our evolution.

Today we took off the wraps to show you the next step in the evolution of Bankruptcy Law Network.

The look is cleaner and lighter, allowing us to show off our content rather than letting you get mired in overpowering graphics. We’ve laid out more information on each page in a way that helps you get to the bottom of it all with a minimum of muss and fuss.

In case you’re keeping score, the site was designed by Cynthia LaLuna and the team at Rowboat Media. It’s a tricked-out version of The Thesis Theme for WordPress.

Lots of our readers are our colleagues, people who print out our articles and hand them to clients as a way of helping to educate them. We’re grateful you’ve placed your confidence in us.

Many of you are also people who are having bill problems and who need to find a lawyer in your area to help. You don’t want an advertising site that will shuttle you to someone who’s paid their fee for a listing; you deserve a lawyer who you can check out on your own, read his or her words and make a decision as to whether there’s a good fit between you.

That’s why this is just the first step to greater interactivity here on Bankruptcy Law Network. It’s a delicate balance, to be sure; we want to give you the tools you need to get some help, but it’s important that we do it without turning the site into some ad-fest that makes you want to run screaming.

So take a moment to subscribe to Bankruptcy Law Network by email by entering your email in the form to the right. You’ll never miss an article, and you’ll be the first to find out about new developments in the law.

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You filed for Chapter 7 bankruptcy and something went wrong.  Maybe you didn’t have a lawyer, or perhaps something went awry in your case.  Whatever it was, you want to get out of the case as quickly and easily as possible.

You need to know that you don’t have an automatic right to dismiss your Chapter 7 bankruptcy.  Once you file for Chapter 7 bankruptcy, you’re in it for the long haul unless the court allows you to walk away.  You’re still going to have the evidence of filing on your credit report – remember, the credit report shows that you filed even in the absence of a discharge – but depending on your reasons for seeking a voluntary dismissal it may not be a big deal to you.

Consider The Reason: If you want to dismiss your Chapter 7 bankruptcy, you’re going to need a good reason to do so.  The judge is going to need to know why, and the trustee is going to have the opportunity to object to the dismissal.  If you have assets that you can’t protect in your Chapter 7 proceeding, you may not be able to dismiss the case.

Consider Conversion: If you can’t dismiss, you may be able to convert to a Chapter 13 bankruptcy.  For many people, this is a good way to get out of a bad situation and still be able to resolve their debt problems effectively.

Make Your Motion For Voluntary Dismissal: Assuming there’s no prejudice to your creditors if your Chapter 7 is dismissed (for example, if you file to discharge tax debt but realize that you’re not going to be able to do so), make your motion to dismiss.  You should be prepared to serve the motion on the Chapter 7 trustee, Executive Office of the U.S. Trustee, the court, and all creditors.  In addition, you’ll have to attend the motion hearing and argue your position to the judge.

By far the most common fear that people have when contemplating Chapter 7 bankruptcy is the impact it will have on their credit report in the future.

There’s bad news and good news here.  The bad news is that your bankruptcy filing can show up on your credit report for as long as ten years from the date of filing.  So if someone looks at your credit report in the next decade, they’re going to learn of your bankruptcy case.

There is, however, good news.  Credit reporting is always an issue of recency – in other words, what you’ve done in the recent past is weighed far more heavily than events long ago.  When you file for Chapter 7 bankruptcy, that filing is fresh.  The negative sting, if any, on your report is raw.  But as time goes by and you have the chance to put new, positive payment information between you and the bankruptcy you will see your score inch up.

That’s one of the silver linings of student loans not being discharged in a routine Chapter 7 bankruptcy case.  So long as you continue making payments in a timely manner post-bankruptcy, that positive payment stream will help to raise your score.

But the question of your credit report after Chapter 7 bankruptcy fails to recognize one major sticking point, and that’s your current credit score.  If you’re walking into Chapter 7 bankruptcy then chances are good that you’re behind on your bill payment.  Your credit likely looks like swiss cheese, and no decent lender is going to consider extending credit to you.

So let’s say you don’t file for bankruptcy.  What is your credit score going to look like in two years?  More to the point, will you likely have any money saved in two years, thereby reducing the chances that you’re going to need to borrow money in the first place?

If you do nothing, your credit score will remain awful indefinitely.  But if you file for Chapter 7 bankruptcy and cut the losses now, at least you’ve got a fighting chance.

It’s your choice.  But if you’re looking at a long-term personal finance recovery, the decision should be obvious.

Jay S. Fleischman is a bankruptcy lawyer in New York who focuses primarily on helping people fight back against debt collection after bankruptcy.

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The client came to see me on a sunny Thursday in the middle of an otherwise cold winter, wondering what had happened to her ordinary Chapter 7 bankruptcy case.  I hated to be the bearer of bad news, but there it was.

This kind and gentle man had filed for bankruptcy with another (very competent) lawyer, listing a debt of $27,000 to a (former) friend of his.  The money had, predictably, gone to pay the gentleman’s debts in the months leading up to his bankruptcy filing, an attempt to avoid what turned out to be unavoidable.

About a month after the case was filed, my potential client received notice that he was being sued in bankruptcy court.  His old buddy was asking the bankruptcy judge to declare the $27,000 debt exempt from discharge on the basis that he had allegedly taken the loan on false pretenses.

The original bankruptcy lawyer took no action, this not being part of the original retainer agreement.  The debtor didn’t have the financial ability to hire a lawyer for a defense, and so he went it alone.

You know where this is headed, right?  Yup, he lost the case.  Judge deemed the $27,000 debt exempt from discharge.  So now the man comes to me pleading for a solution.

What If The Bankruptcy Court Orders Repayment?

If a debt is deemed nondischargeable in a Chapter 7 bankruptcy, that debt survives until it is paid in full – period.  You can’t file another Chapter 7 bankruptcy later on and hope to wipe it out.

There is, however, an option for handling these debts.  That option is Chapter 13,which will allow you to repay the debt out over time.  Though you won’t qualify for a discharge of the debt at the end of the Chapter 13 Plan, you will be able to create a payment plan based on your income and expenses.  If there’s an unpaid balance at the end of the Chapter 13 case then you can either pay the balance off on your own or file another Chapter 13 until it’s paid in full.

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Remember when Eddie Murphy was Eddie Murphy, not some cut-rate actor in a collection of kid’s movies? I mean, when he was fall-off-the-chair hysterical that involved language to make your parents blush?

It turns out that the New York bankruptcy courts do, too. And they’re using him as a guide when it comes to allocating tax refunds for people who file for bankruptcy in New York.

Allow me to explain. In 1987, Eddie came out with a concert video called Raw. If you’ve never seen it, you need to. Very good stuff.

At any rate, in Raw he talks about relationships and how wives typically get half of their husbands’ belongings. The quote to remember here is, “Eddie, I want half. Half, Eddie!” Here’s the clip to jog your memory.

In the context of a bankruptcy filing, there may be a time when a debtor has a tax refund coming to him (or her) that exceeds the statutory exemption. In the case of In re Spina, 416 NR 92 (Bankr. EDNY 2009) Judge Trust looked at the question of how to divide the refund as between a debtor and his non-filing wife.

As with Eddie, he chose what is called the 50/50 Rule. Previously followed by bankruptcy courts elsewhere in New York State, the 50/50 Rule Rule applies New York state matrimonial law to first establish each spouse’s rights to marital
property, and then considers what the division of
marital property, such as a tax refund, would be in a
divorce proceeding.

The 50/50 Rule creates a rebuttable presumption that each spouse contributed equally to the household, including nonmonetary contributions, and, therefore, the refund should be divided equally between the spouses.

In other words, it applies even when one spouse does not work outside of the home.

As opposed to the world of Eddie Murphy, the 50/50 Rule is of enormous help to people filing for bankruptcy in New York. Rather than walking into bankruptcy court with an enormous non-exempt tax refund and being worried that most of it will be taken, it’s now clear that bankruptcy cases in all of New City and the suburbs can rest a little easier.

I’m a big fan of Home Depot.  I love the rows of lumber, the acres of tools and doo-dads.  Honestly, it makes me feel macho just being there.  It’s as if I could go out and build a home like Michael Landon in Little House on the Prairie.

I mean, just look at all the do-it-yourself books on home renovation and repair!  Shelves and shelves of easy-to-read guides will tell you how to grout, spackle, tile, shingle and do all manner of electrical and plumbing jobs without the need for costly contractors.  Majestic!

But my parents didn’t raise a fool.  I know full well that I’d most likely construct a rickety shack that would blow down in a weak wind.  In fact, I learned my lesson about a decade ago when I decided to strip the old paint off a closet door.  Half a door and three days later, I gave up.  The half-stripped door taunted me for years until I finally re-painted it in shame.

There’s a difference between a how-to book and knowing how to do something.

If you surf online for more than 5 minutes you can find a bunch of sites with do-it-yourself means testing.  Take just a few short minutes and you’ll be able to see if you qualify for Chapter 7 bankruptcy.  If you don’t qualify, you’ll learn how large your Chapter 13 bankruptcy Plan payment will be.

Sounds awesome, right?  The problem is that these calculators don’t come with enough knowledge to help you fully understand all of the deductions and allowances that you can take.  Some of the calculators aren’t up-to-date, and others are just flat out wrong.

In the past few months I’ve had countless consumers come through my doors waving the results of their DIY means testing calculators triumphantly, only to learn that they did not qualify for Chapter 7 bankruptcy at all.  These people end up not only disappointed but also frustrated that wasted their time sitting behind a computer when they could have gotten some answers from me more quickly.

I’ve even taken the liberty of running my own clients through these calculators after manually doing a means test on their behalf.  The results range from laughable to absurd, though once the DIY folks came fairly close to hitting the mark.

So if you’re considering doing a do-it-yourself means test, remember that it’s a useful exercise to get a sense of your financial situation – but don’t rely on it.  Doing so may lead to bad things in your bankruptcy case.

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You’re at home one evening, sitting down to a pleasant dinner with your family.  The kids are chattering, your spouse is listening to you talk about your day, and the food is on the table.

It’s like Norman Rockwell popped up from the grave to arrange the scene.  That is, until the phone rings.

You pick up the line and are greeted by a bill collector asking about a past due debt.  Calmly and politely, you tell the collection agent that he should stop calling you, lose your phone number and move on.  You’re refusing to pay the debt, and no amount of pressure will cause you to change your mind.

Breathing slowly so as to calm your brittle nerves, you sit back down at the table.  At least you handled that well, and the calls will stop.

Ten minutes later, the phone rings again.  Same debt collector, same debt.  Same demand to pay.

Wait a minute – didn’t you just tell this jerk to stop calling?

Before you rush to a lawyer’s office with a claim under the Fair Debt Collection Practices Act for violating your rights, realize that the debt collector hasn’t done anything wrong by calling again.  He’s wasting his time by dialing your number after being told in no uncertain terms that you refuse to pay, but that’s about it.

Under the law, a debt collector must cease communications with a consumer only when the consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer.

Your voice means nothing, and won’t stop the calls.

So what’s to be done?  Get out a piece of paper and write a letter to the debt collector.  In that letter you should write the following:

I refuse to pay the alleged debt.  Please cease further communication with me.

Now go over to a fax machine and fax the letter to the debt collector.  Make sure you’ve got your complete information (name, account number, and address) on the letter.  Save the fax transmission receipt in case the phone calls keep coming.

Once the debt collector receives the letter, all communications must cease (except in some very limited situations).  But until you say so in writing, the phone’s going to keep ringing.

Write the letter, then go back to dinner before it gets cold.

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When I had a cavity last year I was struck by a distressing thought: not only did I not have a good dentist, I didn’t have one at all.  And so began a quest that took me from website to website, friend to relative, neighbors and colleagues in a quest for the right dentist.

It took awhile, but I finally found an awesome dentist.

And as I sat in the chair, my mind clouded with nitrous oxide to help me get through a particularly painful procedure, I wondered how someone would go about finding a good bankruptcy lawyer.  After all, it’s not as if most people have one on speed dial (at least, I hope not).

So how would a consumer with bill problems go about the process of finding someone who is not only a good lawyer but also a good fit to help out?  After the nitrous haze cleared, I settled on these 5 steps:

Begin With Google. Start out by searching for consumer bankruptcy lawyers in your area.  Weed out the directories for now, though; you’re looking for names, addresses and the like.

Who’s Committed? Look for bankruptcy lawyers who are members of the National Association of Consumer Bankruptcy Attorneys.  This doesn’t mean that the lawyer is good, but it does serve as an indicator of whether he or she is serious enough to commit some money to being educated about the field.  The American Board of Certification administers an exam that lawyers can take to demonstrate their expertise in, among other things, consumer bankruptcy law.  Of course, a specialist may not be certified for one reason or another; though it’s improper for a lawyer to be a “specialist” unless he or she is certified as such, look for someone who concentrates in the field.

Ditch The Myopics.  When all you’ve got is a hammer, everything looks like a nail.  So, too, with lawyers.  Not every potential client is a candidate for bankruptcy, which is why you want to check out the lawyer’s track record.  Does he or she belong to any professional organizations that deal with personal financial issues and/or consumer protection law?  Does he or she write on topics concerning personal finance or consumer protection?  After all, you’re looking for a professional who can assess your situation honestly and completely.

Sniff Around. There are so many places to find an honest assessment of the bankruptcy lawyers on your short-list, and you should look into all of them before making a decision.  Check Avvo, Yelp, and run the lawyer’s name through Google to get a sense of what others in your community think.  If someone’s got a pile of awful reviews then it may be best to go elsewhere.

Interview Candidates. You wouldn’t expect an employer to hire the first job applicant, would you?  Same thing goes for people looking to hire a lawyer.  Sit down with a few attorneys to see if your personalities mesh.  After all, this lawyer is going to be your partner in making some big financial changes.

As you can imagine, this process will likely take a bit of time and effort on your part.  But remember that this is a big decision in your life; having the right professional to help will mean the difference between success and failure.

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Our economy is in the toilet, I don’t care what anyone says.  I’ve got well-educated, worldly friends who have been unemployed for well over a year, colleagues reporting that their divorce practices are flailing (people tend to remain together during hard times because they don’t have the money to live separately), and others reporting that real estate transactions aren’t going anywhere unless they involve short sales or foreclosures.

Why, then, aren’t bankruptcy filings still going through the roof?

If you find yourself in bankruptcy court you may hear it whispered in the hallways.  Filings are down, and the lawyers are wondering why.

It’s simple, actually.  Sad, but simple.

We’re in the calm before the storm.

Unfortunately, the problem is that consumers are still in debt up to their eyeballs but simply don’t have anything left to protect.  Their money has run out, their credit is shot to ribbons, and the house is in foreclosure.  There’s no job to worry about, no bank account to protect, and every spare penny is going towards living expenses.

Already, the news is pouring in that filings nationwide are flat or declining.  Rochester (NY)  is flat.  So is Indiana, give or take a bit.  Same with Hawaii.  In fact, nationwide numbers are down 8% from the same period last year (though from January to February 2011 the filings ticked up a bit, that’s because January is usually a slower month for filings overall).

Homeowners, rather than filing for bankruptcy, are enticed by mortgage loan modifications that mysteriously fail to materialize months down the road.  Some banks have halted foreclosures due to (ahem) irregularities with their paperwork (cough cough), but those moratoria aren’t going to stick around forever.  Debt collection lawyers are treading lightly when it comes to enforcing their judgments, knowing full well that aggressive action will merely force their targets into bankruptcy.

In other words, we’re in a holding pattern right now.

Personal bankruptcy filings for 2011 won’t be nearly as high as they were into 2010; some places may see an expansion, but overall the numbers should be pretty flat.  Economists will trumpet the filing numbers as heralding a grand era of prosperity, bank executives will raise champagne glasses in celebration.

Then 2012 will roll around, and all hell will break loose.  Unless something happens to alleviate the foreclosure and consumer credit crisis, that is.

If things remain unchanged, remember Margo Channing’s words:  Fasten your seatbelts, it’s going to be a bumpy night!

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