Many people look to bankruptcy as the opportunity to start fresh and escape the impact of bad mistakes or bad luck. Your financial situation may be the result of regretful decisions you’ve made or of incidents out of your control like a job loss or catastrophic medical bills. Whatever its roots, debt can be devastating to your quality of life, so it is natural for those considering filing to think of bankruptcy as a sort of magic wand that will erase their economic hardships. Though bankruptcy accomplishes a great deal, immediacy is not a part of the process, with one significant exception.
Let’s start with what will happen immediately, as it does represent a major relief. Once you file for bankruptcy the court will issue an automatic stay that puts a stop to the collection actions that have been making your life miserable. The stay goes into effect the moment your bankruptcy petition is filed. All of the calls and letters from your creditors or their agencies have to stop once the stay is put into place: Those who continue to pursue you risk legal action.
Beyond the automatic stay, the improvement you will see in your life tends to take a bit longer. The process of filing for bankruptcy usually takes a few months and recovering from your economic hardship will take significantly longer. Your credit scores will have dropped as a result of the bills that accrued and the bankruptcy will lower them further. It will stay on your credit file for years, but at the same time your debts will have been wiped out and you will have the opportunity to rebuild.
Another determining factor is whether you file for and qualify for Chapter 7 bankruptcy or whether you’re required to use Chapter 13 bankruptcy. While Chapter 7 eliminates all of your dischargeable debts, Chapter 13 reorganizes them and creates new terms. This may mean you have more time to pay off individual bills, or that your interest rates are lowered, or that the debt amount itself is renegotiated.
The exact impact of filing for bankruptcy is specific to the person filing. For a better understanding of how bankruptcy will affect you, contact our office today to set up a time for a consultation.
