Bankruptcy how does it affect you

The bankruptcy court and your attorney will negotiate a three- to five-year repayment plan. Depending on what's negotiated, you may agree to repay all or part of your debt during that time period.

When you've completed the agreed repayment plan, your debt is discharged, even if you only repaid part of the amount you originally owed. While any type of bankruptcy negatively affects your credit, a Chapter 13 may be a more favorable option. Because you repay some or all of your debt, you may be able to retain some assets. What's more, a Chapter 13 bankruptcy will cycle off your credit report after seven years, and you could file again under this chapter in as little as two years.

Throughout bankruptcy proceedings, you'll likely come across some legal terms particular to bankruptcy proceedings that you'll need to know. Here are some of the most common and important ones:. While bankruptcy can eliminate a lot of debt, it can't wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can't eliminate include:. Perhaps the most well-known consequence of bankruptcy is the loss of property. As previously noted, both types of bankruptcy proceedings can require you to give up possessions for sale in order to repay creditors.

Under certain circumstances, bankruptcy can mean losing real estate, vehicles, jewelry, antique furnishings and other types of possessions. Your bankruptcy can also affect others financially. For example, if your parents co-signed an auto loan for you, they could still be held responsible for at least some of that debt if you file for bankruptcy.

Finally, bankruptcy damages your credit. Bankruptcies are considered negative information on your credit report, and can affect how future lenders view you. Seeing a bankruptcy on your credit file may prompt creditors to decline extending you credit or to offer you higher interest rates and less favorable terms if they do decide to give you credit. Depending on the type of bankruptcy you file, the negative information can appear on your credit report for up to a decade.

Discharged accounts will have their status updated to reflect that they've been discharged, and this information will also appear on your credit report. Negative information on a credit report is a factor that can harm your credit score. Bankruptcy information on your credit report may make it very difficult to get additional credit after the bankruptcy is discharged — at least until the information cycles off your credit report.

Lenders will be cautious about giving you additional credit, and they may ask you to accept a higher interest rate or less favorable terms in order to extend you credit.

It will be important to begin rebuilding your credit right away, making sure you pay all your bills on time. You'll also want to be careful not to fall back into any negative habits that contributed to your debt problems in the first place.

Just as bankruptcy can hinder your ability to obtain unsecured credit, it can make it difficult to get a mortgage, as well. You may find lenders decline your mortgage application, and those that do accept it may offer you a much higher interest rate and fees. You may be asked to put up a much higher down payment or shoulder higher closing costs. Rather than give up your home and try to get a new mortgage after bankruptcy, it may be better to reaffirm your current mortgage during bankruptcy proceedings.

You would be able to keep your home, continue paying on your current mortgage — free of other debts — and stay in your current home. When you're struggling with unmanageable debt, bankruptcy is just one solution; there are others to consider. Most will also affect your credit, but probably not as badly as a bankruptcy — plus, these alternatives can allow you to keep your property, rather than having to liquidate it in bankruptcy proceedings.

Be aware that whenever you fail to honor the debt-repayment terms you originally agreed to, it can affect your credit. That said, bankruptcy will still have a more significant negative impact on your credit than will credit negotiation, credit counseling and debt consolidation. Whenever you fail to repay a debt as you originally agreed to, it can negatively affect your credit. Some types of debt relief come with consequences that are more damaging and long-term than others.

Before you make any decision about debt relief, such as declaring bankruptcy, it's important to research your options, get reliable advice from a qualified credit counselor, and understand the impact your choices can have on your overall financial well-being. Regardless of what type of debt relief you choose, you can begin taking better care of your credit immediately by putting simple, responsible, credit-positive actions into practice such as:.

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Home Debt information Debt solutions Personal bankruptcy. Worried about bankruptcy? They can't deduct money from your bank account, garnish your wages or go after any of your other assets. You'll then have time to work with the court and your creditors to determine the next steps. Will I Lose My Property? What happens to your property depends on whether you file chapter 7 or chapter 13 bankruptcy.

If you're not sure which option is right for your situation, see "Bankruptcy: Chapter 7 vs. Chapter Chapter 7 bankruptcy is often called liquidation bankruptcy because you will likely need to sell off some of your assets to satisfy at least a portion of what you owe. That said, state laws determine that some assets, such as your retirement accounts, house and car, are exempt from liquidation.

Check with a bankruptcy attorney in your state to find out what property you would be allowed to keep. With a chapter 13 bankruptcy, you don't need to worry about needing to sell off any of your property to satisfy your debts.

Instead, your debts will be reorganized so that you can pay them off partially or in full over the next three to five years. Keep in mind, though, that if you don't comply with the payment plan, your creditors may be able to go after your assets to satisfy your debts.

When you declare bankruptcy, it's a sign that you are no longer paying your debts as originally agreed, and it can seriously damage your credit history. That said, the two types of bankruptcy aren't treated the same way. Because chapter 7 bankruptcy completely eliminates the debts you include when you file, it can stay on your credit report for up to 10 years.

While chapter 13 bankruptcy is also not ideal from a credit standpoint, its setup is viewed more favorably because you are still paying off at least some of your debt, and it will remain on your credit report for up to seven years.

Shortly after your bankruptcy is discharged by the court—meaning you no longer owe the debts you've included in your filing—it may be difficult to get approved for credit, especially with favorable terms.

There are some lenders, however, who specifically work with people who have gone through bankruptcy or other difficult credit events, so your options aren't completely gone. Also, the credit scoring models favor new information over old information.

So with positive credit habits post-bankruptcy, your credit score can recover over time, even while the bankruptcy is still on your credit report. Are Bankruptcy Filings Publicly Available? Bankruptcies are considered a public record, but that doesn't mean everyone's going to know about it. For the most part, it's more common for attorneys and creditors to use this system to look up information about your bankruptcy. But anyone can register and check if they want to.

The service charges 10 cents per page to access case information. Another way people might find out about your bankruptcy is if your local newspaper publishes public notices. Finally, employers, landlords and creditors may be able to see on your credit report that you've filed bankruptcy when you apply for a job, an apartment lease, or a loan or credit card. Twenty-nine percent of employers run a credit check on new job applicants, according to a survey by CareerBuilder.

As a result, declaring bankruptcy could affect your ability to get a new job, especially if that job is in the financial services industry or with a government entity.