Bankruptcy is a term that gets tossed around pretty commonly. People tend to know the general idea behind it: get rid of your debt and start to rebuild your credit but possibly risk losing your personal property to collectors. However, bankruptcy is far more complicated just beneath the surface, whether you are talking about Chapter 7 bankruptcy, Chapter 13, or one of the numerous other Chapters that remain in anonymity. If you are thinking of filing for bankruptcy, the last thing you should do is rush into it, as that is an easy way to crash straight into a lesser known complexity or roadblock.
Here’s five things you should know about bankruptcy before you file:
- It leaves a mark: There’s a lot of rumors about bankruptcy you can come across in day-to-day life, but one of them that is true is that it lingers for quite a while. Seven to ten years to be more precise. If your credit score is affected by bankruptcy, those effects could last up to a decade.
- It isn’t private: Legal processes of all kinds are input into public records and databases, and bankruptcy filings are no exception. Once you file for bankruptcy, pretty much everything pertinent to the case can be accessed by the public.
- It doesn’t get rid of all debt: Bankruptcy, especially Chapter 7, has the unparalleled power to wipe out huge portions of overwhelming debt, sometimes at the cost of collateral property, but it never promises to get rid of all debt. Student loans, new tax debts, and other specific forms of secured debt could remain when the dust and paperwork settles.
- It can hamper home loans: If you were thinking about getting mortgage with a good interest rate, think twice after filing for bankruptcy. Approval can be very hard to come by, and, even if you do get approved, the interest rates could soar.
- It also hurts credit lines: Many Americans rely on credit cards to make day-to-day purchases and big expenditures. After filing for bankruptcy, you will get more credit card offers. But they will probably be borderline criminal with the heightened interest rates they’ll offer. Be careful when opening a new line of credit after going through bankruptcy, or else you could end up in financial duress again due to it.
If you would like to know more about bankruptcy or your options as someone in overwhelming debt, contact Jaffe & Erdberg, P.C. Our bankruptcy attorneys in Birmingham can walk you through your options, find a solution that works right for you, and support you even after your debt is addressed.