Bankruptcy is usually considered as the very last option for anyone suffering from financial downfall, and for a positive future. Going through Bankruptcy can open up new chances to settle down your finances, and probably even get rid of all your debt and have a clean slate. But the Bankruptcy also has some negative consequences that can, however, affect your assets and make it hard to get approval for credit for years.
We have below highlighted some essential points you need to know before you file for Bankruptcy.
If you’re stressed out financially, Bankruptcy can become a way to get relief from debts. It can work as an opportunity to pay off a significant portion of your debts over time or have some of them removed completely.
Either way, declaring bankruptcy can awards what’s called an automatic stay, which is a block on your debts to keep the creditors from their demands. Moreover, then they cannot deduct any amount from your bank account, or go after any of your other essential assets.
You will then be given time to work closely with the court and your creditors to determine a better strategy to pay off all your debts.
Whether your property is at risk or not depends on whether you file chapter 7 or chapter 13 bankruptcy. If you have no idea which option will suit your case, see Bankruptcy: chapter 7 vs. chapter 13. This will, however, clear what to expect from the Bankruptcy.
Chapter 7 bankruptcy is known as liquidation bankruptcy because you will probably have to sell out some of your valued assets to fulfill at least a share of your debts.
According to the state bankruptcy laws, some of the assets, such as your house, car, and retirement accounts, are exempt from liquidation bankruptcy. However, it is advised to take the assistance of a bankruptcy attorney Fort Lauderdale to find out what assets you would be allowed to keep.
If you are filing for Chapter 13 bankruptcy, you don’t have to sell any of your property to pay off your debts. Instead, all your debts will be reorganized so that you can pay them off partially or within the next two to five years.
Remember that if you fail to fulfill the payment plan, your creditors will be allowed to satisfy your debts by using your assets.
When an insolvent bankruptcy is announced, you are no longer paying off your loan as initially agreed, and this can seriously damage your credit history. No two types of Bankruptcy are considered the same. Chapter 7 covers your credit report for up to 10 years, as it completely eliminates the debts you include when filing for Bankruptcy.
Although a Chapter 13 bankruptcy is not ideal from a credit perspective, its setup is more favorable because you are paying off some of your debts and have been on your credit report for seven years.
As soon as your bankruptcy is discharged by the court – which means that the debts you include in your filings no longer exist – especially with favorable terms, it is difficult to get approved for a loan. However, there are some financiers who work specifically with people who have gone through bankruptcy or other difficult credit events, so your options are not entirely gone.
In addition, credit scoring models favor new information rather than old information. So after going bankrupt with positive credit habits, your credit score will recover over time, but bankruptcy is on your credit report.
Almost thirty-eight percent of employers credit checks on new job applicants, according to a CareerBuilder survey. As a result, declaring bankruptcy can affect your ability to find a new job, especially if that new job is in the financial services industry or with a government agency. Like managing company finance – and you’re not financially stressed, it increases the likelihood of theft or fraud.
If an employer only performs a simple criminal background check, your bankruptcy will not be visible. Employers are less likely to do background checks on current employees. So if you don’t plan to change jobs, you don’t have to worry much about a bankruptcy affecting your employment.
Since declaring Bankruptcy will definitely affect your credit history and capacity to take specific steps in the future, it is imperative to monitor your credit scores during the whole process as you put effort on the road to recovery from the ordeal.
As you take this step, look closely how every specific actions affect your credit score. Moreover look for possible errors and information in the credit report that could leave negative impact on your score and if you find something that is missing from your credit report, take a step to file for a dispute with credit reporting agencies.
When you track your credit score during and after bankruptcy, you’ll learn how to improve and keep it in good stead over time.