What Happens After You File for Bankruptcy?
If you’re swimming in debt and looking for a fresh start, declaring bankruptcy has probably crossed your mind. Just be aware that bankruptcy isn’t an “easy way out.” It may be better than having your wages garnished or your home foreclosed, but you should only consider it as a last resort. Learn more about what happens after you file for bankruptcy so you can go into the process feeling more informed.
Your Creditors Leave You Alone
When your case enters the court, you are immediately protected from the aggressive collection efforts of your creditors. This bankruptcy benefit, known as the automatic stay, prevents creditors from harassing you over the phone, at your door, via email, or by sending letters.
Your Credit Score Takes a Hit
Bankruptcy leaves a big black mark on your credit history that lasts up to 10 years. Of course, if you’re considering this option, your credit score is probably mediocre to begin with. Once you file and get creditors off your back (and out of your bank accounts), you can begin rebuilding your score.
You Could Lose Your Property, Including Your House
If you file for Chapter 7 bankruptcy, the process includes working with a trustee to liquidate (sell) your non-exempt items—which may include your house, car, family heirlooms, and other valuable assets—to repay your creditors. If the sale of these items doesn’t cover your entire debt, the remainder is discharged (forgiven).
You May Still be Required to Repay (Some of) Your Debt
If you file for Chapter 13 bankruptcy because your income is too high to qualify for Chapter 7, you will work with a trustee to reorganize your debts into a feasible payment plan based on your income. Your assets aren’t liquidated, meaning you get to keep your house, but you must stick to a strict repayment plan for three to five years. After this time, your remaining debt is discharged.
Not All Debts are Forgiven
There are some significant exceptions regarding which debts can be discharged by filing for bankruptcy. For instance, student loan debt, child support, alimony, taxes, and fines and penalties most often won’t be forgiven. In the case of recent expensive purchases, such as jewelry or a new car, you can either reaffirm the debt, which means you remain responsible for paying it off, or you agree to have it repossessed and sold to help pay off your other debts.
The Details of Your Bankruptcy are Made Public
This negative consequence of filing for bankruptcy means that family, friends, and future landlords, lenders, or employers can find out the details of your court proceedings, including how much money you owed and whom you owed it to. The loss of privacy could be a deal-breaker for some people.
GCS Credit Union offers banking solutions to help you rebuild your credit and get your finances back in order after declaring bankruptcy. To learn how you can become a member, please contact us at (618) 797-7993 today.