Bankruptcy is truly a last-ditch effort to get your finances back on track, and it’s great for doing that. However, before you choose bankruptcy, you should learn more about the types there are and what they can do for you.
Did you know that there are two main types of personal bankruptcy you could apply for? These include Chapter 7 and 13, both of which can help you get your finances back under control. If you don’t qualify for Chapter 7, liquidation bankruptcy, due to your income, then Chapter 13, which allows you to make payments on a schedule for the next three to five years is a good choice.
When should you turn to bankruptcy?
No one turns to bankruptcy frivolously, thinking that it’s the easy way out. Most people have major life events that have affected them so significantly that they have few other choices. For instance, The National Association of Consumer Bankruptcy Attorneys’ former president stated that around 50 or 60 percent of cases result from people struggling with medical problems. Other common causes of bankruptcy include divorce and unemployment.
Can you keep any of your assets when you go through bankruptcy?
Yes, you can. You can keep assets with both Chapter 7 and Chapter 13 bankruptcy. While all of your assets are protected with Chapter 13 (you make payments to satisfy lenders with this form of bankruptcy), Chapter 7 has several exemptions that can help you keep things such as your vehicle, work clothing, jewelry and your family home.
How long will bankruptcy affect my credit report?
Bankruptcies go on credit reports, and they stay there for up to 10 years. However, time makes a difference. If the bankruptcy is older, lenders will consider it less than if it’s a new event in your credit.
After around one to two years, you’ll see that you can build your credit back up, and you’ll be able to begin obtaining credit cards and even home loans. With more time, you may find that your credit improves far beyond what it was in the past and that your financial security is better than it ever was. This is what creditors like to see when you apply for loans or seek new credit cards.
Bankruptcy will affect you, but it may be much more positive than you think. With the right type of bankruptcy, you’ll be able to rebuild your life with better financial footing.