There are a number of ways that you can rebuild credit by making payments on time. In order to make payments on time you must first be aware of when your payments are due and your billing cycle. If you know, you cannot make a full payment in a lump sum consider making multiple payments over the month with the final payment being made on time. One of the ways to make sure your payments are received on time is to submit your payments using your credit card website or the website of the company to which you own money. Most companies, like the power company, phone company, even department or store companies have online options for paying your bill. These usually post right a way or within a day, so that you can be sure your bill is on time.

Another option is to pay over the phone. This usually comes with a fee but also is usually credited to your account as soon as you call it in so it might be worth the fee for rush or an emergency to make sure your payment gets in on time. Something else to consider is using an automatic bill pay this will automatically debit your account each month on a date you specify and the amount you specify.
This can help ensure your payment is always made on time and thereby helping you to rebuild credit. Automatic bill pay is easy to sign up for through most of the major credit card companies and a lot of utility companies, as well. You won’t have to worry about writing down a bunch of dates and remembering to make payments on those days.

Finally you can mail your payment in but it should be mailed in at least seven to fourteen business days in order to make sure it arrives on time and is credited to your account when it’s suppose to and you end up with on time payments even if the post office is a little late. It is also a good idea to contact customer service as soon as you send the payments so they can make a note of when you mailed it out. This can help if for some reason your payment does not arrive on time. Different credit card companies have different rules for when a payment is late. Some will credit your account if the payment is received in the afternoon, while others will charge you a late fee. It is important to find all of this information out in order to make informed decisions regarding when to mail the check.

It is not difficult to rebuild credit if you make payments on time and in the proper amounts. Following this method, you can easily raise your credit rating a little very month to every six months depending on when the companies report to the credit agencies. While it may take time and just a little effort, it is well worth it in the end as more and more opportunities and doors open for you.

The court will assign a bankruptcy trustee to your case. The responsibilities of this person include determining which of your properties are exempt (that which the court allows you to keep) and nonexempt (those that will be taken to pay your creditors). You are required to surrender nonexempt properties to the trustee or you may provide its equivalent value in cash. The trustee may decide that a property is not worth selling so you get to keep it even though it is nonexempt. In most Chapter 7 cases, the properties are either exempt or are basically worthless in terms of raising money for the creditors. If the trustee has determined that all properties are exempt, a no distribution report will be submitted to the bankruptcy court. If there are nonexempt properties, the trustee will collect and sell these and give the proceeds to your creditors. The trustee should also ensure that you have properly reported all your assets. If your creditors think that you have not been truthful in declaring your financial status, it is the duty of the trustee, as the representative of your creditors, to ask the judge to deny your discharge.

Not everybody however can file for Chapter 7 bankruptcy. In the new bankruptcy law, you will be required to take the “means test” before filing. This is to determine if you have enough disposable income (income after expenses for the basic necessities and other debt repayments has been deducted) to repay your creditors. If the court has determined that you have a stable and adequate income to pay your creditors, you will be forced to use Chapter 13 bankruptcy if you insist on filing. You also will not be allowed to file if you have been granted a discharge from your debts within the last eight years if the bankruptcy was filed under Chapter 7 and within the last six years if it was filed under Chapter 13.

When the court has recovered evidence that you tried to defraud your creditors or that you have not been truthful in reporting all your assets, it may dismiss your case and the creditors may continue the process of collection before you filed for bankruptcy. Worse, you may be charged and prosecuted for fraud.

Eligibility

Since Chapter 13 requires you to pay off your creditors using your income, the most important criteria for filing bankruptcy under this chapter is to have a stable income and an adequate disposable income. If you don’t have a regular income or if it’s too low, you may not be allowed to file for Chapter 13. Likewise, if your debts are too large, you are ineligible. Your secured and unsecured debts must not exceed certain amounts which are adjusted regularly based on the consumer price index.

How Does It Work?

You will be allowed to keep all of your property but upon declaring bankruptcy you have to include a plan to pay your creditors over three to five years. Such plan is distributed to creditors who have the right to make objections if they think it is unjust. When the court approves the plan, you will have to commence monthly payment to your creditors. A bankruptcy trustee appointed by the court to collect your payment and distributes these to your creditors, may or may not be involved in a Chapter 13 bankruptcy although it is a must for Chapter 7. Either way, creditors are prohibited to collect any claim from you if it is not according to the plan. If you are able to complete the plan as is ordered by the court, you will be discharged from all your debts. If not, the plan may be modified depending on your reasons for non – completion. If your reasons are unjustifiable, your creditors may request the court to have the Chapter 13 proceeding terminated. If this is approved, your assets may be collected as before you filed for bankruptcy.

Advantages

Those who apply for Chapter 13 bankruptcy gets to keep all of their properties. If you think that you have a lot of property to lose but you have enough monthly income to pay off your debts, then Chapter 13 is a better option than Chapter 7. Furthermore, as long as you follow the payment plan ordered by the court, you will be given a full plan discharge. Another advantage of filing under this chapter is that the payment plan may be approved and enforced by the court even if your creditors object to it. But of course, the court also allows them to file any objections, if they have any.

• Make sure that you have gone over all the other alternatives. Bankruptcy should not be taken as an immediate solution but as a last resort. If all the other options proved unsatisfactory to you, then proceed. Besides, if your credit is in a really bad shape, bankruptcy is a way for you to start afresh.
• You may file for bankruptcy without the aid of a lawyer but it is a wise decision to obtain the services of one. Ask family members, friends and colleagues if they know a trustworthy lawyer who has an extensive experience on bankruptcy proceedings. If you choose a large law firm to represent you, most probably you’ll be dealing with a paralegal rather than a lawyer. It is always preferable if you can have direct contact with a lawyer.
• Meet with your lawyer and present to him all your bills, bank statements, copies of mortgages and loans, and tax payments. This will help you both determine if you’re going to file a Chapter 7 or a Chapter 13 bankruptcy. Don’t hesitate to ask questions from your lawyer. All your legal inquires must be answered before you make your final decision. Even questions about the cost of his services should be addressed as early as possible. It is also important that you trust your lawyer and you feel comfortable discussing your financial issues with him. Remember that you’ll be working with each other for some time.
• Once bankruptcy has been filed, automatic stay goes into effect and you should refer all your creditors to your lawyer. He will answer all inquiries from them. Remember that when creditors still contact you even after automatic stay has been enforced, you should inform your lawyer as damages could be assessed against them.
• When you filed a Chapter 7 bankruptcy, a trustee is assigned to your case. This person represents the interests of the U.S. Bankruptcy Court and they should ensure that your bankruptcy petition has been answered truthfully and that you fully understood what you have signed. The trustees are also responsible to collect and sell your assets (that which the court allows) and distributes the proceeds to your creditors.
• After your lawyer has submitted the petition, you will be scheduled to attend a meeting of creditors. When your hearing goes smoothly and you are able to accomplish the tasks set by the court, you will receive a discharge from the bankruptcy court.

ADVANTAGES

• You will be able to start anew financially as you will be discharged from most of your unsecured debts (especially when you filed a Chapter 7 bankruptcy). Secured debts have personal properties attached to the debt, such that when you’re not able to pay, the creditor may repossess the property. Common secured debts are home mortgage and car loan. Most consumer debts are unsecured and can be cancelled.
• You will be freed from the stress of dealing with so many creditors – some of them may harass you if your payment is long overdue. Once bankruptcy is filed, there is a law called automatic stay which prohibits creditors from filing lawsuits, repossessing your property, and foreclosing your home. Furthermore, if you have filed with an attorney, all inquiries from creditors will be channeled to him.
• You will be able to keep most of the essentials such as your home and car, so you will have a roof over your head and you will still be able to get around.
• You can keep your job as filing of bankruptcy cannot be a ground for dismissal.

DISADVANTAGES

• A record of being bankrupt is a blemish on your credit file – such a record stays on the files for 10 years. As a consequence, mortgages will be very difficult to obtain, so are bank accounts and credit cards. The loss of credit cards may be a good thing though because they are a common cause of being buried in debts. If you do obtain a credit, it may still reflect the record of bankruptcy as it will most probably carry a higher rate than before you filed for bankruptcy.
• Not all debts can be written off. Domestic (child) support obligations, debts acquired through fraud, fines, and secured debts still need to be paid even after filing of bankruptcy. The rights of secured creditors are not affected by bankruptcy.
• If you own a business, it will most probably be sold off and the employees dismissed.
• The names of those who become bankrupt are in the court records and in the newspapers.
• Bankruptcy is an admission of failure and can be a source of disgrace.

• Reduce Debt

There are effective ways for you to lessen your debt. For one, you have to cut monthly expenses in order to allow more cash flow that will be used to pay off debts. Analyze your personal budget and find areas where expenses can be lessened. Luxuries will have to take a backseat to the needs. Impulse purchases and frequent dining out can be done away with. Little steps taken everyday can have a huge impact on your overall financial health. You could also consider other ways of earning money – a part time job or a better – paying primary job for example.

• Out-of-Court Settlement

It is always better to negotiate with creditors first before taking any legal action. This avoids disputes which could turn really ugly. Creditors understand that while bankruptcy is an option for the debtor with excessive debts, they risk losing everything when it is filed. Most would rather settle on a plan that would enable them to get back a portion of their money. Professional help should be sought in order for the negotiations to be handled properly.

• Debt Counseling Programs

Participating in a debt counseling service is a good start in addressing your financial difficulties. A little bit like filing for Chapter 13 bankruptcy, debt counseling agencies will help you come up with a plan to pay your creditors. This option both has its advantages and disadvantages: no bankruptcy record will appear on your credit file (a good thing of course), but you will not be protected from harassing creditors if you miss a payment. A creditor may not honor your plan and you therefore have to resort to other measures.

• Live Simply and Do Nothing

If you are buried in debt but are living a relatively simple life, you can do nothing about your excessive debts. Anybody who sues you will most probably take nothing from you because you do not have anything they can legally take in the first place. In ordinary cases, you can’t be thrown into jail for your inability to pay debts (except if you’ve defrauded your creditors, refused to pay taxes or willfully failed to fulfill child support obligations). So you may not file for bankruptcy if you do not have a steady income or properties your creditors can repossess. Most probably, they’ll just write off the debt and treat it as deductible business loss. After several years, the debt will become legally uncollectible and after seven years will disappear from your credit record.

Although automatic stay does not relieve one of his child support obligations, it nevertheless makes it easier for him to pay off the support. This is because, upon enforcement of the automatic stay, creditors are prohibited from claiming payment; thus, the debtor, having “fewer debts”, can easily plan how to pay off his child support debts. The parent having custody of the child should not be too worried about the long – term effects of bankruptcy on child support payments. On the short – term basis though, problems may arise as the debtor may not have enough money at present to fulfill his domestic obligations.

There are cases wherein the debtor may be exempted from paying for child support. The United States Bankruptcy Code, in Section 523, states that a) the debt will not be paid when it has been assigned to another entity, voluntarily, by operation of law or otherwise; or b) when such debt includes a liability designation as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support .

For example, Joe owes Lisa $1,000 every month for child support. Since Joe wasn’t able to pay, Lisa borrowed the same amount from a friend. The friend now has the right to claim that amount from Joe. However, since the debt was assigned to a third party, the debt can be discharged if Joe applies for bankruptcy.

Joe is also not liable to pay Lisa in this case: During divorce, a decree states that Lisa be paid a certain amount as marital debt. If Lisa claims the money, indicating that the money will be used as child support, Joe may argue to discharge the debt as it was not originally a child support debt.

An unsecured debt on the other hand is a debt acquired by borrowing from creditors without any personal property being used as collateral for the debt. When payment for this kind of debt is overdue, creditors may take legal measures against the debtor but will usually arrange a debt resettlement scheme. Common examples of unsecured debts are credit card loans, medical bills, commercial debts and personal loans.

A secured debt may however turn into an unsecured debt. This happens when the sale of the property does not cover the full amount of the debt. The deficiency will still be paid by the debtor and since he does not have any more property attached to the debt, it has become an unsecured debt. Just like most unsecured debts, this is usually resolved through a debt resettlement program.

The difference between the two types of debts also becomes relevant when someone is applying for bankruptcy. When someone has applied for a Chapter 7 bankruptcy, he can choose not to give up the property and instead pay the debt in some other way. However, if he cannot do so, the bankruptcy court will have to take away the property (and even some of the properties not attached to the debt), and the debt is paid off that way. As discussed earlier, when the sale of the property that has been repossessed is inadequate to cover the debt, the debt becomes unsecured.

Those who have a steady income with disposable income, choose Chapter 13 bankruptcy. In this type of bankruptcy, one is allowed to keep the property or product and has to pay back his creditors according to the Chapter 13 plan. Most probably, the court will order that the creditor charge the debtor 10% interest although he was probably paying a much higher interest than that. Usually, the court will propose a repayment plan over a span of three to five years. The ceiling is set at five years and one cannot have a plan that exceeds this period.

Bankruptcy, although allowing an honest debtor to start afresh, does have its negative connotations. Since you are ranked according to your credit rating, your inability to pay your creditors on time will definitely injure your credit rating. This, in turn, will affect your future transactions. This legal measure should therefore be taken only as a last resort – when all other possible actions have been considered but have been found unsatisfactory.

Successful businessmen have stayed away from bankruptcy because of their ability to manage their finances properly. Here are a few financial advices to prevent bankruptcy:

• Spend only according to your means.

Most debtors acquire a lot of liabilities because they spend too much – way beyond what they are getting. If it is necessary for you to have a debt – a car loan or a house loan for example – consider beforehand your other expenses and the income you’ll be getting. Don’t try to overestimate your income and make allowance for instances wherein the income may fall short of the average.

• Set a maximum on debts that you acquire.

Limit yourself by setting a ceiling on the debts that you acquire. If you’re using your credit card for example, set only a certain amount that you can spend and set a pace wherein you can pay and withdraw in between periods. If you have enough debts and you’re having a difficult time handling them, do not accumulate another set of debts.

• Set aside an amount for payment every month.

You can set aside an amount that will take care of your debts every month. Rank your expenses according to priority and pay off that which needs to be paid off first. Remember to pay your debts on time as failure to do so increase the interest on the debt.

• Settle debts and other matters personally with creditors.

Especially when you’re in the verge of insolvency, personal discussion with creditors is one of the best ways to reduce disputes. You can sign promissory notes and waivers just to assure them that you won’t run away from them. One of the most common mistakes that debtors make is to hide from their creditors, which could increase their misgivings on your ability to pay them back. Prevent harassment and abuse from creditors by talking to them and asking for a little consideration. Be sure to stick to your promises however because your inability to do so just might lead to your downfall.

Where can bankruptcy lawyers be found? Usually they get themselves advertised, whether in classified ads or words of mouth. When you look lawyers up in classified ads, they usually give short and concise information about themselves. Find out their fields of specialization, the cases they have handled and the percentage of these they have won. Other lawyers (especially those connected to large law firms) are so popular that they rarely need any advertising. If you’re planning to have a large firm represent you, remember that you’re most probably going to be dealing with a paralegal rather than a lawyer. Try to find ways to have direct contact with a lawyer.

If you are considering a particular lawyer, ask for references from companies and individuals who already had dealings with this attorney. In the field of judicial dealings, a lawyer is identified by the case he handles. You may try to look up the cases this lawyer has handled and how successful he is in handling them.

In your first encounter with an attorney, you may immediately assess them by the way they speak and act. Remember that some lawyers attempt to impress their clients in order to convince them. It is important that you should be critical in your judgment. Even sensitive matters such as fees and payments have to be dealt with during the first meeting, if possible. If you feel comfortable in discussing these subjects with them, it could be a good indication that you can have a satisfactory lawyer – client relationship. If you are pleased with how a lawyer handles his cases, you could seriously consider him to also take your case. Your overall impression of a person can help you figure out if this is the lawyer you wish to help deliver you from your debts.

If you have already made a decision, an initial orientation must take place between you and your lawyer. He should be able to familiarize you with terminologies involved in bankruptcy cases, educate you on bankruptcy laws, and teach you how to personally evaluate bankruptcy. Before you decide on filing for bankruptcy, let the lawyer explain how bankruptcy processes proceeds and ask him how he handled his previous cases. Your lawyer should be able to help you weigh the pros and cons of the legal actions you intend to take. Let him help you clear some of the bankruptcy myths you originally believed in. Make sure that all of your legal questions have been answered before you finally decide on filing.