The Long-Term Effects of Bankruptcy
Bankruptcy can sound scary but it can be a financial solution to resolving debt. While discharging debts through filing for bankruptcy can help you get out of overwhelming debt, there are some long-term effects to consider as you decide whether to pursue bankruptcy or other debt relief solutions. In addition to the bankruptcy filing and resolution process, you need to consider how filing for bankruptcy will affect your long-term creditworthiness.
When you are facing overwhelming debt, bankruptcy may be the correct solution for you to restore your financial health. Depending on the Chapter of the Bankruptcy Code that applies to you and your financial situation, the process of filing for bankruptcy and resolving your debts can take as little as a few months up to a few years if you are on a repayment plan. However, there are other long-term effects of bankruptcy you should consider when discussing your options with your debt relief attorney. Depending on your financial goals and anticipated needs over the next few years, you may decide to pursue bankruptcy or other debt relief solutions. Georgette Miller & Associates can explore and explain your options to you and help you determine the action you should take to achieve your financial goals and relieve yourself from the burdens of debt.
Understanding Bankruptcy Timelines After Filing
People often have questions regarding how soon filing for bankruptcy can resolve their financial concerns due to debt. These questions are best answered after a meaningful discussion with a bankruptcy attorney. Georgette Miller & Associates will take the time to understand your financial situation and objectives and present your bankruptcy solutions to you, including how long to expect your bankruptcy resolution to take.
One of the other things people need to understand is that the Bankruptcy Code will determine which chapter you need to file under according to your financial situation. Some people may wish to file under Chapter 13 but the bankruptcy court may determine you need to file under Chapter 7. There may be some instances where it is a close call to determine the appropriate bankruptcy chapter. There could be some back and forth with the bankruptcy trustee if they need additional information to correctly apply the bankruptcy code to your case. This could prolong your debt resolution while you wait to get your filing approved, so any information that can help your proceeding move smoothly will be important to provide upfront. While it can be frustrating to have your own timeline for bankruptcy and debt resolution affected, bankruptcy is a legal process with certain procedures and requirements to follow. At the end of the day, you and your lawyer need to follow the directive of the federal bankruptcy law.
How Bankruptcy Affects Credit Scores
Filing for bankruptcy will have an impact on your credit score. Each situation is unique but generally filing for bankruptcy will damage your credit score. A bankruptcy filing will stay on your credit report for seven to ten years, depending on the chapter filed under. Your credit score may also decrease if your debts are discharged and you do not have to make payments, as on-time payments are part of credit score calculation. Absent payments, even if excused through bankruptcy, are an absence of data used to show you are able to make payments, so the lack of payments does not improve your credit score.
Obtaining New Credit After Bankruptcy
After bankruptcy, your credit report will show that you have a bankruptcy filing and will show the debts that were discharged in the bankruptcy. This means that for years your potential new lenders will be able to see this part of your credit history, and it may adversely impact your ability to get new credit. If the lender decides to extend credit to you after bankruptcy, you may not get as favorable terms to your new loan or credit line. You may face higher interest rates or receive a lower credit limit. It depends on the lender and their analysis of your credit history and credit score as found in your report.
If you are seeking new credit after bankruptcy, you should be mindful of how you are planning on using it. Setting a budget and paying bills on time will help you manage your financial health and also prompt lenders to select you as a borrower in the future as you repair your credit. Another tool for rebuilding credit after bankruptcy is a secured credit card. A secured credit card functions like a credit card but the borrower has put up a security deposit that covers the amount available to borrow. This financial tool lessens the risk to the lender and allows them to extend credit to riskier borrowers and allows borrowers to demonstrate their ability to pay their account. The credit rebuilding process can be lengthy, but you can do it!
Losing Assets During Bankruptcy
While Chapter 7 is a quicker process than Chapter 13 and discharges your debts quickly, it still comes with long-term consequences. For example, certain assets may be seized in order to pay off creditors in the bankruptcy proceeding. Losing these assets can affect you emotionally and financially down the line, so you want to be sure to have a good understanding of what assets can be exempt and what assets can be seized so you can prepare yourself for this outcome. Repossession of assets will also depend on whether your debts are secured or unsecured, meaning some debts are related to an asset that can be taken to satisfy a past due debt while others such as credit cards are not. Your attorney at Georgette Miller & Associates can identify your secured vs. unsecured debts and evaluate what assets may be eligible for seizure. Depending on how important it is to keep certain assets among other factors, your debt relief attorney may recommend other debt relief solutions.
Contact Georgette Miller & Associates for a Free Evaluation
If you are considering filing for bankruptcy or exploring other debt relief solutions, you should contact a debt relief attorney to review your options. Schedule a free evaluation with Georgette Miller & Associates by calling 866-964-6529 or contacting us online.