Bankruptcy is a tough subject because many people feel as though they have all the facts; however, in reality, there are quite a few myths surrounding bankruptcy. Should you choose to file for bankruptcy, there are some consequences that need to be taken into account. Keep in mind that some of the results are positive, some are negative, and some are fairly neutral. Just like any legal process, there are some serious considerations you should take into account before filing. Also, be sure to contact a bankruptcy attorney to assist you should you choose to take this path.
Personal Discharge
The discharge is a permanent order from the bankruptcy court that forbids your creditors from trying to collect on the debts you accumulated before filing for bankruptcy. This gives many people the financial relief that they need. However, keep in mind that there are some exceptions to this, including recent taxes, child support, alimony, and a few others. Others can only be discharged under specific circumstances, such as student loans. The personal discharge is usually the main goal of filing bankruptcy and is, by far, the most beneficial part to the debtor.
Keep in mind that this discharge does not include property. If there is a lien on your home, the lien will remain even after you file bankruptcy. Should you default your loan, your lender has every right to foreclose on your home. Some people do have the ability to make a reaffirmation, or agreement to take the loan out of bankruptcy. However, that means that you will need to keep paying.
Automatic Stay
The automatic stay is another major benefit of declaring bankruptcy, as it prevents creditors from trying to collect the debt from you in any way. This includes letters, phone calls, lawsuits, and more. This stay remains in effect until the bankruptcy court discharges you and the case is closed.
Your Credit Score
The effect on your credit score will be damaging at first, but keep in mind that many people go on to raise their credit score to a point that is higher than it was before they filed for bankruptcy. Just keep in mind that your credit score will likely drop significantly when you leave bankruptcy court, so you will need to take extra care to rebuild this score. While a bankruptcy can remain on your credit report for a long time, it can end up having a positive effect eventually.
Your Privacy
Unfortunately, there is very little that is private about filing for bankruptcy. Your personal financial information is available to the public, as well as everything else you file with the court. However, keep in mind that, unless someone knows you’re in bankruptcy, it’s unlikely that anyone other than a creditor will see this information. For some people, this lack of privacy means that bankruptcy is not a choice. However, many people find that this is a price they are willing to pay for financial relief. Keep in mind that very sensitive information will still be protected, such as your social security number, your financial account numbers, and the names of your children.
Possible Property Loss
Many people have found that the most negative consequence of declaring bankruptcy is the possibility of losing property to a bankruptcy trustee. This is not something that will for sure happen, but it can. For those of you who successfully exempt your property, your property is safe. Plus, the trustee will likely only sell what they believe to be profitable. This means that, if it would cost $1,000 to auction off a car only worth $750, then the trustee will probably leave that item alone.
Contact a Bankruptcy Attorney in Covington
We hope this information has been helpful to the possible outcomes of declaring bankruptcy, but keep in mind that everyone’s situation is different. This article was intended to be solely educational and provide basic insight into the possible outcomes. You may have a special case that requires a professional’s help. Please contact the Smith Law today to schedule your appointment and see how we may be able to guide you through your bankruptcy. We look forward to helping you seek the best possible outcome in your case