Bankruptcy is a legal process that is overseen by federal bankruptcy courts. It has been designed to help individuals and businesses remove all or part of their debt. Ans also help them in repaying a portion of what they owe.
It can help you get relief from your debt. However, you must understand that declaring bankruptcy has a serious, long-term effect on your credit. Bankruptcy stays on your credit report for 7-10 years and affects your ability to open credit card accounts. it makes loans with favorable rates.
This can be a complex process. The average person may not be wired to go through the process alone. Thus working with an attorney can help. This will ensure your challenge goes as smoothly as possible. And also complies with all the rules and regulations that govern bankruptcy.
You are also required to meet some standards before you can file for bankruptcy. You have to show that you are unable to repay your debts and also complete credit counseling with a government-approved credit counselor. The counselor helps you in assessing your finances, discuss possible alternatives to bankruptcy, and helps create a personal budget plan.
If you are thinking of moving forward with bankruptcy proceedings, you will have to decide what type you’ll file. It Chapter 7 or Chapter 13? Both types of bankruptcy can help you eliminate unsecured debt (like a credit card), halt foreclosure or repossession, and stop wage, utility shut-offs, and debt collection actions. With both types, you will be required to pay your own court costs and attorney fees. Note, however, that the two types of bankruptcy relieve debt in different ways.
How Long Will Bankruptcy Affect Your Credit File?
If you file for bankruptcy, it appears on your credit report for six years, or until you are discharged if this takes longer. Lenders will look at your credit profile when you apply for credit, thus you’ll probably be struggling to borrow money while broke. Also, you must tell lenders about your bankruptcy when applying to borrow over £500. Employers and landlords may also ask to look at your credit information before employing you or letting you rent a property.
Even if you find someone who will lend money to you, they may charge you a higher interest rate as they’ll see you as a high-risk customer. Even after your indebtedness has been cleared from your profile, lenders can ask if you have ever been bankrupt.
How Bankruptcy Affect Your Life?
This can affect your life in various ways:
The passport may be taken away by the courts. This is known as impounded, even though it is unlikely to happen to you unless the courts believe you’ll travel abroad to sell what you have.
Filing for bankruptcy can be quite a stressful experience. Right from doing paperwork to telling friends, it can be a difficult process emotionally.
You may have your bank accounts closed. This can make your day-to-day life difficult since bank accounts are used for everything ranging from receiving your salary to paying bills. However, you may be able to open a basic bank account. This is designed for people with bad credit and enables you to store and pay money. Also, you’ll not access overdraft facilities.
You stand a chance of losing your valuable possessions. However, you can still keep basic items that are essential for living and working. Note also that you may need to trade in these items for cheaper versions.
Your challenge becomes public knowledge. More so, it appears in the London Gazette (or the Belfast Gazette if your bankruptcy is processed in Northern Ireland) and on the Insolvency Register.
These are the ways that it can affect your life. So you have to think it through before filing for one