What Happens When You Declare Bankruptcy

Although bankruptcy can offer a fresh start and an opportunity to reorganize your finances, there are also drawbacks. For example, credit may be very difficult to obtain. Read on to learn more.

What Happens When Declaring Bankruptcy?

Bankruptcy can reduce the debt total you have to pay or in some cases have debt eliminated. An “Automatic stay” is put in place that forbids collectors from attempting to obtain repayment in any manner. This gives you the time to organize your finances with the bankruptcy court and your creditors.

Chapter 7

In this form of bankruptcy, it is probable you will have to liquidize some assets to pay a portion of what is owed. Some states have laws saying certain assets, such as a car, house or retirement account are not eligible for liquidation.

Chapter 13

This is a reorganization of existing debt so they can be paid off either in full or partially during a three to five year window. But if you do not maintain payment, creditors may try to liquidate your assets.

What Happens to My Credit if I Declare Bankruptcy?

Undoubtedly, your credit will be damaged by filing for bankruptcy. With Chapter 7 bankruptcy it may remain on your credit file for ten years. Chapter 13 is slightly more preferable from a credit standpoint as at least you will be paying some of your debt, however it will still stay on your credit report for up to seven years. Once your bankruptcy is complete and you no longer owe any debts, obtaining credit will be difficult. Certain lenders do work with people who have faced bankruptcy but usually at less favorable rates. 

Are Bankruptcy Filings Publicly Available?

Bankruptcies are considered a public record and copies can be obtained through the court system software known as PACER.

Will Bankruptcy Affect My Job or Future Employment?

Some employers, especially those in Government or financial sectors do run credit checks and it is conceivable your career may be negatively impacted by a poor credit report following bankruptcy. However, it will not show up when an employer does a regular criminal background search prior to your employment.

Source: https://www.experian.com/blogs/ask-experian/what-happens-when-you-file-bankruptcy/