Filing for bankruptcy is a legal process that can help individuals get relief from debts that they cannot repay. However, it is typically considered a last resort option for people suffering financial hardship. Heres what happens when you file for bankruptcy:
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Automatic Stay: When you file for bankruptcy, an automatic stay is granted, which is essentially a block on your debt to keep creditors from trying to collect. They cant deduct money from your bank account, garnish your wages or go after any of your other assets.
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Debt Relief: Bankruptcy gives you the opportunity to pay down a portion of your debts over time or have some of them eliminated entirely. When the bankruptcy court issues a discharge, you are relieved of your liability to pay back the listed debts.
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Credit Score: Bankruptcy can do severe damage to your credit score and should be considered a last resort. Bankruptcy will remain on your credit report for 7-10 years, affecting your ability to open credit card accounts and get approved for loans with favorable rates.
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Property: In a Chapter 7 bankruptcy, many of your assets will be sold off to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period.
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Liability: You cannot use bankruptcy to discharge overwhelming debt again for at least four to eight years, depending on what type of bankruptcy you filed.
Its important to note that bankruptcy may have other financial and personal impacts, and it is crucial to understand the consequences before filing. It may be helpful to consider alternatives, such as negotiating with creditors and working out a payment plan or other solution.
