The decision to file personal bankruptcy is usually a difficult one. The consequences of a bankruptcy are long-term, since a bankruptcy on your credit report can have an affect on new loans and credit. Bankruptcies open the door to a fresh start, and if you experience hardship after an initial filing, you can file again in the future.
What is a Bankruptcy?
A bankruptcy helps debtors who can't manage or pay their existing debts. Filing bankruptcy can eradicate high credit card bills, installment loans, medical bills and other outstanding financial obligations. Filing bankruptcy can also give consumers the opportunity to reorganize their debts and satisfy the debt through a new repayment plan. Consumers typically consider filing bankruptcy when debts exceed assets, and when they receive constantly harassment from creditors.
Consequences of a Bankruptcy
The long-term consequences of filing bankruptcy are worth considering before meeting with an attorney to start the process. Yes, bankruptcy can stop collection letters and phone calls and provide a clean slate to begin rebuilding your credit history. Regrettably, the bankruptcy will appear on your credit report after a few weeks or months, and the bankruptcy will stay on your report for 10 years. A drop in FICO credit score is inevitable, and it can take several years to re-establish credit and qualify for loans such as mortgages.
Lenght Between Filings
It's possible to file for bankruptcy multiple times. However, the law requires a certain amount of time to pass, and this length of time depends on the type of bankruptcy. For example, if you file a chapter 7 to eliminate your debts, you can file for another chapter 7 in eight years. On the other hand, if you file a chapter 13 to reorganize your debts, you can file for another chapter 13 in two years. Consumers who file a chapter 13 after a previous chapter 7 must wait a minimum of four years, says Bankrate.com.
Bankruptcy Process
An attorney can file a bankruptcy with the courts on your behalf. Shortly after, your creditors receive notification of the bankruptcy. Creditors are not allowed to contact you by letter or phone once you file bankruptcy, nor can they file a lawsuit to collect on a debt. Bankruptcy gives you temporary protection and relief from creditors. Creditors or collection agencies that wish to challenge the bankruptcy can appear at your hearing.
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