Filing bankruptcy can be an amazing tool to dig oneself out of debt and hardship, but it has some short and long term affects that should be considered.
Hiring an attorney is a huge step in determining if filing bankruptcy is the right decision for you, as there are many other options out there to assist with financial hardship. If you find that filing bankruptcy is the correct path for you, then you may wonder what effect it will have on your future. Here are some of the most common ways that bankruptcy affects your future, and methods that are used to reduce these effects. Note that these points are general and each case may see different results.
This is probably the most well-know result of bankruptcy, but what many people do not know is that this is just temporary. In the early stages of filing bankruptcy, you may see that your credit score has fallen significantly. After the bankruptcy case is completed, your credit will begin raising back up as you pay secured debts on time and regularly, and as the debts that were discharged cycle out of your credit score over time.
You may have had plans to purchase a home, start a business, or anything else that would require credit. Luckily you can repair your credit, either naturally, or through many credit repair services. Depending on your goal, this may take more time than you had previously planned, but your goals are attainable. As stated before, bankruptcy is not to be used for just any situation, but when it is used appropriately and effectively, it can drastically improve your life in a relatively short time. The time it takes to repair your credit may be a “price” you have to pay, but it can be extremely worth it to do so.
This is a quite common misconception that if you file bankruptcy, you will lose everything. This is far from the truth. In chapter 7 bankruptcy, you are effectively removing all applicable debt from the table. In chapter 7, you will have to give up any property that is not exempt (this may include a car, home, or other essential property required to live normally). Most often, many possessions are exempt simply because selling them would not be worthwhile. However, more expensive items may not be exempt, as they can be used to pay a portion of the debt.
In chapter 13, you keep all your possessions regardless of exemption status. What makes chapter 13 different is instead of completely removing all debt, you must set up a payment plan and pay off some or all debt. Once these repayments have been made, any remaining debt is discharged.
Bankruptcy can be complicated. Figuring out the best method of executing a bankruptcy should be left to professionals. If you have questions about what secured debts are, the difference between chapter 7 and chapter 13 bankruptcy, or any other questions regarding financial burden, please contact us by calling, or use our Contact Form.