For anyone experiencing financial difficulty, filing for bankruptcy is an act of last resort. Doing this, provides an opportunity to get one’s finances sorted in the attempt of setting the slate clean. However, there is a price to pay for declaring oneself bankrupt, with it impacting upon all of your possessions, as well as making it incredibly difficult to get any form of credit for many years to come.
The process involves paying down a certain amount of the monies owed over a set amount of times or even having a proportion of the debts completely cleared altogether. Doing this grants something that is known as an automatic stay – a block placed on the debts so that the creditors are not able to collect them. The creditors are not able to take money from directly out of a bank account, garnish wages, or go after any assets that are owned.
Instead, a plan is worked on, with the help of the courts and the creditors for what the next steps are in paying back the monies owed.
Losing property while Bankrupt
The impact of filing for bankruptcy on property / properties owned is dependent upon whether it is a chapter 13 or a chapter 7 than is filed. This is what can be expected from pursuing either route:
- Chapter 13 – thanks to how this process works, there is no requirement to sell off any assets in order to fund paying back monies owed. Instead of this,the outstanding debts are organized in such a way that allows them to be paid off either in part or in full over the 3 – 5 years to come. Where repayments are not made on time or in line with the designated repayment plan then the creditors are able to then come after any assets that are owned.
- Chapter 7 – this process is sometimes referred to as liquidation bankruptcy, as there is a requirement to sell off assets owned in order to pay off a proportion of debts. There are some assets that cannot be touched during this process and include things such as cars, properties, and retirement accounts. However, there are nuances that exist in each and every state so it is best to get the advice of a specialist Bankruptcy attorney.
Credit rating
Filing for bankruptcy has a serious negative impact on credit ratings. This inability to pay off debts stays on credit historys for as long as ten years. In order to best protect credit ratings, filing a chapter 13 bankruptcy is the ideal option as doing this still sees some of the debt paid off over time. For this reason, a chapter 13 bankruptcy only stays on credit histories for 7 years.
This will make applying for and getting credit much more difficult than normal. Where granted, the terms will not be favorable either. That being said, there are some lenders out there that do specialise in working with those who have previously filed for bankruptcy so it is not that there are no options out there.
