Bankruptcy is a legal procedure that provides debtors a new beginning and alleviation from creditors. The stigma surrounding bankruptcy has promoted stereotypes of irresponsibility; however, numerous Americans encounter bankruptcy due to unforeseen crises, such as divorce, unemployment, or medical emergencies.
If you are struggling with unpaid debt or have a mortgage larger than your property’s value, filing for bankruptcy could be a wise decision. The financial relief obtained is contingent upon the nature of the debt. Bankruptcy does not eliminate child support debt, back taxes or any other legal obligations.
A “stay” from debt collectors brings relief
Most people who file for bankruptcy do so under Chapter 7, typically known as “liquidation” bankruptcy. When you file for bankruptcy, the court automatically puts a stop to any collection efforts, so debt collectors cannot contact you via mail or phone. This stay will protect you from an endless stream of creditors. It also temporarily suspends legal actions such as eviction, repossession of vehicles, foreclosure, debt litigation and orders to garnish wages.
Eligible debts are eliminated
Chapter 7 bankruptcy serves as a swift and effective means of achieving debt relief, generally requiring 4-6 months for completion. Successful filings lead to a bankruptcy discharge order, eliminating various types of debt, including credit card debt, medical bills and personal loans.
How your credit is affected
Initially, your credit score is greatly affected. A bankruptcy can leave a lasting impact on your credit report for up to 10 years. However, rebuilding your credit can begin immediately by obtaining a secured credit card. Filing Chapter 7 bankruptcy means you may be unable to obtain a loan until the debt is discharged, and you must wait two to four years before applying for a mortgage.
Deciding to file for bankruptcy can seem overwhelming. That’s why you should seek legal assistance with the process.