What You Need To Know About Bankruptcy
People who are in financial trouble should consider bankruptcy as an option of last resort. Although bankruptcy can help you to get your finances in order and may even give you a fresh start, it can also have serious repercussions that could cause damage to your property and make it difficult for you to obtain credit for the long term.
Here are some things you should know before you file.
What happens after you file for bankruptcy?
Bankruptcy allows you to forgive some or all of your debts if you are facing financial difficulties.
Filing for bankruptcy will result in an automatic stay. This prevents creditors from trying to collect your debt. They cannot take money from your account, garnish your salary, or seize any of your possessions.
You’ll then have the opportunity to meet with the court and your creditors to determine next.
Do I have to Sell My Home?
Your property will be affected by whether you declare bankruptcy chapter 7 or 13. If you aren’t sure which option is right for you, see “Bankruptcy Chapter 7 vs. chapter 13”. Depending on which path you choose, here’s what you can expect.
Chapter 7
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a type of bankruptcy that you will most likely need to liquidate assets to pay at least some of your debts.
State regulations protect certain assets from being liquidated, including your retirement funds, vehicle, and home. Consult a bankruptcy lawyer in your state to find out which property you are allowed to keep.
Chapter 13
Chapter 13 bankruptcy will not require you to sell any of your own belongings to repay your debts. Instead, your debts will be restructured so that you can pay them off partially or entirely over the next three to five years.
Remember that creditors could have the right to seize your property if you fail to adhere to the payment schedule.
What happens to my credit after I file bankruptcy?
Declaring bankruptcy means that you aren’t paying your debts as promised. This could harm your credit score. However, the two types of bankruptcy are different. Chapter 7 bankruptcy can leave your credit report for up to ten years because it eliminates all the debts you mentioned when you filed.
Chapter 13 bankruptcy may not be the best option for your credit score, but it can be a good alternative. You’re still paying off some of your debts, and they will remain on your credit report for up to seven-year
Although it may seem difficult to get credit, especially with favorable terms, you will be able to accept credit shortly after the court has discharged your bankruptcy. This means that you no longer owe any obligations listed in your petition. In addition, some lenders specialize in helping people with bankruptcy or other credit problems, so you have options.
Credit scoring algorithms also prefer new data to old data. So your credit score could improve even if your bankruptcy remains on your credit report.
Is the public allowed to file bankruptcy papers?
Although bankruptcy filings are public records, it doesn’t mean everyone will have access to them. Bankruptcy cases can be filed using a system called PACER (Public Access to Court Electronic Records).
This system is more popular among creditors and attorneys to obtain information about bankruptcy cases. However, anyone can register and request to check their information if they wish. In addition, access to case information costs only ten cents per webpage.
Public notifications in your local newspaper may be distributed to inform people about your bankruptcy.
Employers, landlords, creditors, and others may be able to see your credit report if you have declared bankruptcy.
If I file bankruptcy, will my future job and employment be affected?
CareerBuilder’s study found that 29% of companies perform credit checks on potential job candidates. Filing for bankruptcy can hinder your ability to get new employment, especially if you are in the financial sector or working with a government agency.
This is done to make sure you are a good fit for the job you are applying for.
Your bankruptcy will not be found if your employer conducts a regular criminal background check.
Employers are less likely to conduct background checks on employees. Bankruptcy will not have any significant effect on your career if you do not intend to change jobs.
Keep track of your credit during the process
Bankruptcy can harm your credit history and your ability to do certain activities in the future. Therefore, it’s important to track your credit scores throughout the process and while you work to recover.
You should also keep track of how different activities affect your credit scores. Also, be alert for potential mistakes and bad information that could harm your score. You can dispute any information on your credit reports that you find to be incorrect.
If you keep track of your credit scores throughout bankruptcy, you’ll be able to learn more about ways to improve them over time.
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