When you declare bankruptcy, the specific consequences depend on the type of bankruptcy you file for. Heres what generally happens when you declare bankruptcy:
Chapter 7 Bankruptcy:
- Many of your assets may be sold off to pay your creditors.
- Most of your debts will be discharged, relieving you of the obligation to repay them.
- Certain debts, such as student loans, child support, and taxes, cannot be discharged.
- It can severely damage your credit score for up to a decade.
- It is generally chosen by individuals with lower incomes and few assets.
Chapter 13 Bankruptcy:
- You keep your assets but must repay your debts over a specified period.
- It also results in a severe impact on your credit score.
- It can lead to higher interest rates when you eventually obtain financing.
General Consequences:
- Bankruptcy can negatively affect your credit history for 7-10 years.
- It can result in the loss of property, such as real estate, vehicles, and other possessions, to repay creditors.
- It can make it difficult to get approved for credit for years.
- Bankruptcy can be a last resort for paying off debts and rebuilding your financial life, but its not an easy fix and should be carefully considered.
In summary, declaring bankruptcy can provide relief from overwhelming debt, but it comes with significant long-term consequences, including the potential loss of assets and a negative impact on credit history.
