‘sGoing through difficult financial times can be incredibly challenging. Loss of income, mounting debts, and unmanageable bills can push individuals and families to their breaking point. If you’re facing a severe personal financial crisis, bankruptcy may provide the relief and fresh start you need.
Table Of Contents
How Bankruptcy Stops Collection Efforts
One of the immediate effects of filing for bankruptcy is that it triggers an automatic stay. This is a legal injunction that stops all collection activities against you, including:
- Phone calls from creditors and debt collectors
- Wage garnishment
- Lawsuits and judgments over debts
- Foreclosures
- Repossessions
- Utility shut-offs
The stay provides breathing room free from harassment and creditor actions to seize your assets. This gives you time to get back on your feet financially.
Discharging Overwhelming Debt
A major advantage of bankruptcy is discharging qualifying debt. Bankruptcy can eliminate:
- Credit card balances
- Medical debts
- Personal loans
- Utility bills
- Certain taxes
Discharge provides a clean slate by releasing you from legal responsibility for eligible debts. This enables starting over financially rather than drowning under crushing debt that can’t be paid back.
Keeping Exempt Property
Filing bankruptcy allows you to keep exempt assets under state and federal law, such as:
- Homestead equity in your primary residence
- Vehicles up to a certain value
- Retirement and pension accounts
- Household goods and furnishings
- Tools and equipment used for work
Exemptions are designed to help preserve your means of shelter, transportation, and earning income after bankruptcy. You get a fresh start while keeping essential property.
Stopping Foreclosure on Your Home
If you fall behind on mortgage payments, lenders can foreclose on your home. Filing bankruptcy halts any foreclosure in its tracks due to the automatic stay. This freezes efforts to seize your property.
Chapter 13 bankruptcy can also let you become current on a delinquent mortgage by paying past-due amounts over time through your repayment plan. This can reinstate your loan and allow keeping your home.
Preventing Repossession of Vehicles
With bankruptcy, you can stop vehicles from being repossessed by creditors and lenders. This includes protecting your car, truck, motorcycle, or other financed property.
Like mortgages, Chapter 13 bankruptcy allows catching up on past-due auto loans by making payments through your plan. Alternatively, you may be able to discharge the debt while keeping the vehicle if you’re current on payments.
Qualifying for a Mortgage After Bankruptcy
Reestablishing your credit and finances after bankruptcy takes time. However, it is possible to qualify for a mortgage within as little as 12-24 months after your bankruptcy discharge.
FHA loans only require two years of reestablished credit post-bankruptcy. This makes homeownership feasible if you work to rebuild your credit profile after filing.
In Summation
When bills become unmanageable and creditors won’t stop calling, bankruptcy offers critical protections. From halting collections to discharging debts and preserving property, it provides a route to regain financial stability. If personal hardship has you struggling, realize bankruptcy can help you get back on your feet. Seek out knowledgeable bankruptcy counsel to explore if it’s the right choice for your situation. With help navigating the process, you can experience the relief and fresh start bankruptcy makes possible.
FAQ’s
How long does bankruptcy stay on your credit report?
Chapter 7 bankruptcies remain on your credit report for 10 years from the filing date. Chapter 13 bankruptcies remain for 7 years from the filing date. The bankruptcy will be removed from your credit report once these time periods have elapsed. However, the effects on your credit score may persist longer.
Can I keep my house if I file for bankruptcy?
In many cases, yes. Bankruptcy allows eligible homeowners to keep their primary residence thanks to homestead exemptions that protect equity. The automatic stay also halts any foreclosure. Chapter 13 further helps catch up on mortgage payments. Consulting a bankruptcy attorney is key to use exemptions and bankruptcy tools to successfully keep your home.
What debts cannot be discharged in bankruptcy?
Some debts that cannot be discharged through bankruptcy include student loans, child support, alimony, taxes less than 3 years old, and court fees. Fines, penalties, and debts from fraud also cannot be discharged. A bankruptcy attorney can provide a full list of non-dischargeable debts based on your specific situation.