Having to make the decision of whether to declare bankruptcy is never easy. If you are considering filing for bankruptcy, your head is likely spinning with questions. How does declaring bankruptcy affect my credit? Do you get out of all debts if you declare bankruptcy? Will I be able to afford my payments if I declare bankruptcy?
The answer to all these is that it depends on your situation. However, declaring bankruptcy brings a major sense of relief to those who are struggling with debt. By filing for bankruptcy, you take the first step towards getting back on your financial feet. You can eliminate all or some of your debt and start to rebuild your credit.
If you need to declare bankruptcy, you are going to be dealing with a lot of big changes that require you have accurate information.
Bankruptcy is a legal status that requires you to repay some (or none) of your debts. There are two main types: Chapter 13 and Chapter 7. Each of these types has different consequences for your debts, so it is important to understand the differences before you file.
Most of your debt will go away. The most important thing that happens when you declare bankruptcy is that your unsecured debt (credit cards, medical bills, payday loans) goes away. Unfortunately, you still have to pay back any secured debt (car loan, house mortgage) that you owe, but there are still options to ease this burden.
Generally speaking, the most important thing to know about declaring bankruptcy is that it will get you out of most (if not all) of your debt. Declaring bankruptcy also gives you a chance to start building credit again after the bankruptcy is discharged.
Property that you own is subject to liquidation, which means that you must either pay back the money (on a house or car loan) or sell it and use the proceeds to repay your creditors.
When you declare bankruptcy, there is a period of time that the court has to review all your paperwork and make sure everything is accurate. This process usually takes about four months, although it can vary if you have a complicated financial situation.
Initially, declaring bankruptcy is bad for your credit rating. It will stay on your report for several years, although the impact it has after the first two to three years will start to lessen. Your credit rating can be a little misleading after declaring bankruptcy, however. The negative information on your report is not always a true reflection of your ability to repay debt. The bankruptcy stays on your record, but it doesn’t necessarily mean you are a bad credit risk.
After bankruptcy, it takes about three years (or longer) to start rebuilding your credit. This is sometimes a hard pill to swallow, as it can take years before you are able to qualify for a loan or a new credit card. However, you can start the process of rebuilding your credit history soon after filing bankruptcy by using a secured credit card and paying it off in full each month.
The best way you can get help with your bankruptcy is to connect with an attorney who specializes in bankruptcy. At Steele Law Firm, all we do is bankruptcy, which allows us to completely focus on this field and provide the top-notch legal services you need to start on your new path to financial freedom. Contact us today to get started.