Although filing for bankruptcy may allow you to start over financially, there are drawbacks that may have a long-term detrimental impact on your possessions and credit.
What Takes Place After Filing for Bankruptcy?
If your finances are in trouble, filing for bankruptcy provides you the chance to gradually pay off some of your obligations or have some of them completely erased.
In any case, filing for bankruptcy results in what is known as an automatic stay, which effectively puts a stop to your creditors’ attempts to collect your debt. They are unable to seize any of your other possessions, garnish your income, or take money out of your bank account.
After then, you’ll have time to decide the next course of action with the help of the court and your creditors.
Will My Property Be Lost?
Bankruptcy is sometimes referred to as liquidation bankruptcy since you will probably have to liquidate some of your assets to at least partially pay off your debt.
Nevertheless, some assets, like your home, automobile, and retirement savings, are shielded from liquidation according to state legislation. To learn what property you might be able to retain, speak with a bankruptcy lawyer in your state.
You won’t have to worry about having to sell any of your possessions to pay off your debts if you file for bankruptcy. Your debts will instead be rearranged so that you may pay them in whole or in part over the next three to five years.
But keep in mind that if you don’t follow the payment plan, your creditors could be entitled to seize your property in order to pay off your obligations.
When I file for bankruptcy, what happens to my credit?
In addition to badly harming your credit history, declaring bankruptcy is a statement that you are no longer paying your payments as initially arranged. Nevertheless, the two forms of bankruptcy are not handled equally. Bankruptcy may remain on your credit record for up to 10 years since it totally wipes the debts you list when you file.
Although bankruptcy is also not the best option for your credit, it is seen more positively since you are still making payments on at least part of your debt, and it will stay on your credit record for up to seven years.
It may be challenging to obtain acceptance for credit, particularly with favorable conditions, soon after your bankruptcy is discharged by the court, meaning you are no longer responsible for the obligations you mentioned in your case. Your choices aren’t totally gone, however; there are certain lenders that deal exclusively with folks who have had a bankruptcy or other tough credit occurrences.
Additionally, fresh information is valued above outdated information by credit scoring algorithms. Therefore, even though bankruptcy is still included on your credit record, with good credit practices after filing for bankruptcy, your credit score might gradually improve.
Are Bankruptcy Filings Open to the Public?
Although bankruptcy filings are regarded as public records, not everyone will be aware of them. The system known as Public Access to Court Electronic Records, or PACER for short, is where bankruptcy filings are made.
The majority of the time, lawyers and creditors are more likely to utilize this system to research information regarding your bankruptcy. However, anybody who wants to may register and check. Access to case information costs 10 cents per page via the program.
If the public notifications are published in your local newspaper, that is another method that others could learn about your bankruptcy.
Finally, whether you apply for a job, an apartment lease, a loan, a credit card, or other financial product, potential employers, landlords, and creditors may be able to discover on your credit report that you have declared bankruptcy.
Will bankruptcy have an impact on my current or future employment?
According to a CareerBuilder poll, 29% of businesses do a credit check on potential new hires. As a consequence, filing for bankruptcy can make it more difficult for you to get employment, particularly if it’s in the financial services sector or with the government.
They do this mostly to ensure that you are qualified for the positions—like those involving managing money—and that you are not under financial hardship, which might raise the risk of theft or fraud.
However, if a potential employer merely does a standard criminal background check, your bankruptcy won’t be discovered.
Employers are less inclined to verify the backgrounds of present workers. Therefore, you probably don’t need to worry too much about bankruptcy hurting your career if you have no plans to change jobs.
Keep an eye on your credit during the procedure.
It’s important to keep an eye on your credit scores during the process and as you strive to recover from the hardship since filing for personal bankruptcy treatment may have an impact on your credit history and ability to accomplish certain activities in the future.
Watch how specific decisions affect your credit scores as you go, and keep an eye out for any mistakes or unfavorable information that might hurt your score. If you do discover anything on your credit report that is incorrect, raise a dispute with the credit reporting companies.
You’ll learn more about how to raise your credit score gradually and maintain it in good standing moving ahead as you monitor it both during and after bankruptcy.