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What Happens When You Declare Bankruptcy?
If you’re struggling with debt, bankruptcy might be a last resort to consider. It can help you reorganize your debts to make them more manageable or eliminate them after paying off what you can. Understanding the bankruptcy process can help you decide if it’s the right choice for you and how it will impact your future.
Chapter 7 Bankruptcy
Also known as liquidation bankruptcy, Chapter 7 involves selling certain assets to pay off eligible debts, with the remaining debt being canceled. Before filing, you must complete a credit counseling course and pay a $338 filing fee. A meeting with your creditors will occur within 21 to 40 days to discuss your petition. Your non-exempt assets will be liquidated, and the proceeds distributed to creditors. Typically, your remaining debt will be discharged within four to six months.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy helps you reorganize your debts to pay off some or all of what you owe over three to five years. You must complete a credit counseling course and pay a $313 filing fee. Plan payments start within 30 days of filing, even if your petition hasn’t been approved. A meeting with creditors occurs within 21 to 50 days, followed by a confirmation hearing within 45 days to approve or deny your repayment plan. The plan lasts three to five years, after which any remaining debt is discharged.
What Debts Can Be Discharged in Bankruptcy?
Most consumer debts can be included in a bankruptcy filing, such as:
- Unsecured and secured loans and credit cards
- Medical bills
- Collection accounts
- Business debts
- Private loans to family or friends
- Past-due utility payments
- Back rent
However, some debts cannot be discharged, including alimony, child support, certain tax debts, government fines, and student loans (which are difficult to discharge).
Will I Lose My Property if I File for Bankruptcy?
Chapter 13 bankruptcy usually doesn’t require you to sell personal assets, as the goal is to pay off debts over time. In Chapter 7 bankruptcy, you may need to sell some assets, but state laws exempt certain properties like retirement accounts, your home, and your car. Consult a bankruptcy attorney in your state to understand what property you can keep.
What Happens to My Credit if I Declare Bankruptcy?
Bankruptcy indicates that you are no longer paying your debts as agreed, which can severely damage your credit history for years. Chapter 7 bankruptcy remains on your credit report for 10 years, while Chapter 13 stays for seven years. The impact diminishes over time, especially if you take steps to rebuild your credit.
Are Bankruptcy Filings Publicly Available?
Bankruptcy filings are public records, accessible through the Public Access to Court Electronic Records (PACER) system. While anyone can register for PACER, the service charges a small fee per page. Local newspapers may also publish public notices, and employers, landlords, and creditors can see your bankruptcy on your credit report.
Will Bankruptcy Affect My Job or Future Employment?
Employers can find out about a bankruptcy through a federal bankruptcy search or credit check. While it may not impact most job applications, it could be a deal-breaker for positions involving financial information or security clearance. Current employers are less likely to conduct background checks without your permission.
Monitor Your Credit Throughout the Process
Bankruptcy can affect your credit history and future opportunities, so it’s crucial to monitor your credit scores during and after the process. This helps you understand how actions impact your credit and provides insights into improving your credit post-bankruptcy.
For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with expert advice and support.
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