If you’ve accrued a significant amount of debt you can no longer pay back and have creditors taking legal action against you, you might be considering filing for bankruptcy. While bankruptcy will help you eliminate some of your debt and pay back the rest, there are long-term effects it can have on you which may impact future opportunities. For instance, the type of bankruptcy you file for will remain on your credit report for seven to 10 years which will “affect your ability to open credit card accounts and get approved for loans with favorable rates” [Source: Experian].
Essentially, what this means is that if you intend on embarking on a new business adventure or need quick money, you may not be able to get the amount you need with a bankruptcy listed on your credit report. While there are definitely advantages to filing for bankruptcy, especially if you are being sued by creditors or are constantly being harassed for money you owe with no sight of you being able to pay it back anytime soon, there are additional consequences that come with filing.
What are the consequences of filing for a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, which is the more common type of bankruptcy individuals file for, “allows a federal court trustee to supervise the sale of any assets that aren’t exempt (cars, work-related tools, and basic household furnishings may be exempt) to be used to pay back your creditors. “The balance of what you owe is [then] eliminated after the bankruptcy is discharged.” Although a Chapter 7 bankruptcy will relieve you having to pay back certain creditors, it won’t get you out of having to pay court-ordered alimony, child support, taxes, and student loans.
Aside from this, Experian says that in most cases where a person files for a Chapter 7 bankruptcy, they will lose property and the information will remain on their credit report for 10 years.
What You Need to Know About Filing for a Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, you would be allowed to “keep your property in exchange for partially or completely repaying your debt.” Typically, the repayment plan will last anywhere from three years to five years and once the repayment plan is completed, your debt would then be discharged. You can also expect the Chapter 13 bankruptcy to remain on your credit report for seven years.
While you shouldn’t let the consequences of filing for bankruptcy deter you away from filing as it may actually benefit you to do so, it is important that you understand the repercussions of filing before jumping into it. Now, if you would like to discuss filing for bankruptcy with a skilled Tulsa, OK bankruptcy attorney, the lawyers at the Henson Law Firm, PLLC are ready to address your concerns.
The Henson Law Firm, PLLC is located at:
601 S. Boulder, Suite 600
Tulsa, OK 74119