As scary as people believe bankruptcy to be, it’s actually a powerful solution for counteracting immense financial devastation. However, bankruptcy is never something that should ever be taken lightly. To help you thoroughly understand what you might be getting into, we’ve compiled a list of all the best information on what bankruptcy is from beginning to end, and how it might affect you!
The Basics Of Bankruptcy
At its core, bankruptcy is the official legal process for dismissing your debts because you can no longer afford to pay them. Of course, it isn’t as easy as simply waking up and tossing your bills out the window with a smile and exclaiming, “not today!” There’s actually a lot that goes into filing for bankruptcy. For starters, there are two primary types of bankruptcy a person can file.
- Chapter 7 bankruptcy will often involve the repossession or sale of a debtors assets to help pay off outstanding debts. All debts are wiped away within a few months and the debtor is free to enjoy their clean slate with virtually no strings attached.
- Chapter 13 bankruptcies allow debtors to maintain possession of their assets so long as they agree to a fair repayment schedule lasting at least 3-5 years. This type of bankruptcy will fall off a debtor’s credit report after only seven years, which is much faster than with Chapter 7, which takes 10 years.
When To Start Considering Bankruptcy
Between the legal fees and the frustration of it all, deciding when to finally throw in the towel and declare bankruptcy can be difficult. Most of the time you’ll need to consider how much debt you actually have, what kind, and how likely you are to be able to pay it off alone. If you only have student loan debt, even if you have a lot of it, you will not be able to have your debt discharged through bankruptcy since student loans do not qualify as dismissible. If you have applicable debt, and there’s a good chance you can get it paid off within at least 5 years all on your own, bankruptcy is probably not for you either since the cons will outweigh the pros in your situation. If, however, you are drowning in debt, and unable to live a normal life because of old credit cards and/or medical expenses, bankruptcy could potentially change your life.
The Long-Term Effects Of Bankruptcy
Having bankruptcy on your credit report can sometimes feel hopeless, but it doesn’t have to feel that way. Once you’ve filed, although your financial state will get better, it will take some time before the world see’s the new, capable you. Potential employers, financial lenders, and even landlords who run credit checks on you may be more hesitant to hire, lend, or lease to you. The good news is, you cannot be kicked out of your home or fired from your job because you filed for bankruptcy. All you have to do is make sure you wait a few years before you try to get a new job or move to a new place, just in case.
What To Expect After Bankruptcy
If you are committed to making good financial choices, life after bankruptcy can actually be pretty great! Suddenly all those debts and pressures are off your back, and you can finally focus all of your attention on making your future better. With your debt to income ratio dramatically altered, you may even see a dramatic rise in your credit score.
Recovering From Bankruptcy
Securing the best life for you and your family after bankruptcy can be easy. All you have to do is make sure you:
- Always pay your bills on time and in full. If you have trouble remembering which bills are due when, try downloading a free financial organization app, getting a datebook/planner, or setting your bills online to auto-pay.
- Avoid falling into debt again. Create a strict budget for yourself and stick to it. Make sure your bills and utilities are deducted from your income first, followed by your essentials, like food, gas, etc. If you have any amount leftover, try putting it into a savings account rather than just spending it right away so you can watch the interest grow!
Filing for bankruptcy can be one wild and crazy ride, but it’s not one you have to endure alone. For greater details on how bankruptcy might impact your life, we implore you to reach out to our competent bankruptcy attorneys at Church and Korhonen, PC, today! Call Church and Korhonen, PC, toll-free at 1.800.758.5611 or simply fill out the form in the sidebar to begin taking steps to a more sound financial future, greater peace of mind and a fresh start.