Most people understand that when they file for bankruptcy, they will have their debts discharged and will no longer be responsible for them. Although being free of debt is one impact that bankruptcy will have–and the reason why most people file–there are others as well.
It is important to understand the full impact that filing for bankruptcy will have on your life, so you do not face any surprises once your bankruptcy case is final. While there are many ways a bankruptcy will affect your life, below are the top five impacts you will feel.
1. Personal Discharge
The most positive impact declaring bankruptcy will have on your life, and the one most people think of when they consider bankruptcy, is the personal discharge of your debts. A discharge occurs when a judge issues a permanent order that prevents creditors from collecting on debts you incurred in the past.
Credit card debt is one of the most common types of debt discharged in bankruptcy. Generally speaking, the courts believe that the credit card companies can afford to absorb one person’s debt and that it will not put them out of business. On the other hand, the courts also believe that individuals are able to be more productive if they are not in an immense amount of debt.
However, while credit card debt and other debt may be discharged in bankruptcy, there are some debts you will still be considered responsible for. These include alimony payments, child support obligations, and current tax liabilities. Still, if you have these types of debt, a Chapter 13 bankruptcy can help you restructure your debt so it is easier to pay off.
2. Automatic Stay
Once you file for bankruptcy, a judge will issue an automatic stay. The automatic stay protects you from creditors calling seeking to collect on their debt while your bankruptcy case is ongoing. An automatic stay also prohibits creditors from sending you collection notices in the mail.
Generally speaking, an automatic stay will remain in place until your bankruptcy case is over, but there are times when it can be lifted. If you are going through a divorce at the same time as your bankruptcy case is proceeding, that can affect what the automatic stay will protect. Additionally, an automatic stay on your home may be lifted if your debt on the property is greater than its value.
3. Your Credit Score
Filing for bankruptcy and getting your debt discharged by a court will certainly cause your credit score to take a hit. It is important to remember that even when your debt is discharged, the debts will remain on your credit history. That, combined with a Chapter 7 or Chapter 13 bankruptcy, will tell creditors that you are a risky borrower. In turn, you will likely have a hard time applying for loans and additional credit cards.
Although this is somewhat discouraging to consider, it is important to remember that bankruptcy is still often the right answer. A bankruptcy on your credit report will cause your score to sink, but so will drowning in debt. You must consider whether it is worthwhile to allow your credit score to drop temporarily so you can start rebuilding it now, or whether you can pay off your debts, which will help rebuild it.
Bankruptcy records are public records, which means employers and anyone else that wants to dig into your financial history can find it and learn of the debt discharge. For some people, this is enough to keep them from filing for bankruptcy. However, there are many reasons why this public filing should not stop you from filing for bankruptcy.
The courts recognize that you still deserve some degree of privacy, even if you have filed for bankruptcy. For this reason, only the last four digits of your Social Security number will be shown on court documents, and the names of any minors will only be shown by their initials. Any other identification numbers will also only list the last four numbers.
Those reasons aside though, it is important to remember that very few people will go digging through public records trying to find information about you. Although certain employers may conduct these searches, such as when you are applying for a job in a financial position, there is little chance that your friends and family will conduct that type of search. As such, you can still keep your bankruptcy case fairly private.
5. Loss of Property
The bankruptcy courts do think that you will be more successful and more productive if you are not drowning in debt. However, the courts also realize that when you file for bankruptcy, you should pay back as much of your debts as possible. Due to this, if you have valuable property, such as a luxury sports car, the court may order that it be sold with the proceeds going to your creditors to try and pay off your debt. Still, not all property is subject to being sold and there are several exemptions that could help you keep your property.
Also, even when certain types of property are considered non-exempt, it still may not be worthwhile for the bankruptcy trustee to try and sell it. For example, if you have a car that is worth $800 but it will cost the trustee $1,000 to auction the car off, the trustee will likely determine that it is not worthwhile to sell that particular piece of property and will allow you to keep it.
Our Florida Bankruptcy Lawyers Can Help with Your Case
It is true that filing for bankruptcy will have several different impacts on your life, with some being good and others being fairly negative. At Loan Lawyers, our Fort Lauderdale bankruptcy attorneys know how to minimize the negative effects and maximize the positive. If you are considering filing for bankruptcy, do not go it alone. Call us at (954) 523-4357 or contact us online to schedule a free consultation and to learn more about how we can help with your case.
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Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.