People suffering financial hardship consider bankruptcy to be their last resort. You might be able to sort out your finances and start afresh after going through bankruptcy. It would be best to approach attorneys who are experts in personal bankruptcy to help you with your case. However, it has negative consequences; your possessions could get affected, and you may find it challenging to get credit approval for years. There are a couple of things you should know before filing for bankruptcy:
What Happens When You Declare Bankruptcy?
Bankruptcy gives you the chance to get some of your debts entirely eliminated or pay a portion of them over time if you are struggling financially. Declaring shortened bankruptcy will grant you an automatic stay, which is a block on your debt. This will prevent your creditors from attempting to collect the debt. They will not be able to go after your assets, garnish your wages or get money from your bank account. You will then have to work with your creditors and the court to plan your next steps.
What Happens To Your Property?
What happens to your assets would depend on whether you filed chapter 13 or chapter 7 bankruptcy.
Chapter 7 bankruptcy is also known as liquidation bankruptcy, as you might have to satisfy a part of what you owe by selling off a portion of your assets. However, according to the law, some assets like your house, car, and retirement accounts are exempt from liquidation. You will have to check with a bankruptcy lawyer in your state to know what assets you will be allowed to keep.
You will not have to sell off any part of your assets to satisfy your debts with a chapter 13 bankruptcy. Instead, you will have to pay off your entire or a portion of your debts over the next 3-5 years. If you fail to comply with this payment plan, your creditors could take action against you.
What Happens To Your Credit If You Declare Bankruptcy?
Declaring bankruptcy indicates that you are unable to pay off your debts as agreed originally. This can cause severe damage to your credit history. However, the kinds of bankruptcies are treated differently. A chapter 7 bankruptcy can stay on credit reports for up to a decade as the debts included while filing are eliminated.
On the other hand, a chapter 13 bankruptcy gives you the freedom to pay off a part of your debt. This type of bankruptcy stays on credit reports for a maximum of seven years.
Shortly after the court discharges your bankruptcy- that is when you no longer have to pay off the debts included in your filing- it might be challenging for you to get credit approval, especially with favorable terms.
However, some lenders specifically work with those who have gone through complex credit events or bankruptcy. Also, new information is favored over old information by credit scoring models. So, even with a bankruptcy on your credit report, you can recover your credit score over time if, post-bankruptcy, you develop positive credit.
Will Bankruptcy Affect Your Career?
According to a CareerBuilder survey, 29% of job applicants have a credit check run over them by employers. Consequently, declaring bankruptcy might affect your chances of getting a new job. Getting a job in a government office could be even more challenging.
Employers run credit checks to determine if you are a good candidate for the job role, especially those involving handling money. To reduce the probability of fraud or theft, employers would prefer not to hire financially stressed people. However, if the employer only runs regular criminal background checks, your bankruptcy will not show up.
Also, employers do not usually run background checks on their current workers. Hence, you need not worry about your bankruptcy affecting your work if you do not plan to switch jobs.
What Should You Focus On After Declaring Bankruptcy?
As your bankruptcy will affect your ability to do several things in the future, along with your credit history, you need to monitor your credit scores as you recover from your ordeal. If something does not seem to belong on the credit report, approach the credit reporting agency to dispute it. A good bankruptcy lawyer can help prepare you for what lies ahead after you declare bankruptcy. Visit https://www.thepopefirm.com/ if you require legal representation for yourself.