For many Americans who find themselves over their heads in debt and unable to pay their bills, filing for bankruptcy is a viable solution to help get back on their feet. Chapter 7 bankruptcy will, in theory, wipe out many of your debts and allow you to start over financially with a clean slate.
Many people considering filing for bankruptcy may have numerous questions about how bankruptcy will affect their future, financially and otherwise. Though every individual’s situation may be slightly different, below are some common questions and answers regarding life after bankruptcy.
Will the creditors stop calling?
Yes. When you file for bankruptcy, an automatic stay will go into effect, prohibiting creditors and bill collectors from engaging in further collection attempts. Creditors that continue to try to collect may face legal penalties. There are certain exceptions to the automatic stay, however, such as proceedings related to the collection of child or spousal support and certain actions by the IRS.
Will bankruptcy affect my credit?
This answer truly depends on each individual’s situation. Bankruptcy will show up on your credit report and may remain there for up to ten years. However, if you were behind on all of your credit cards, mortgage, etc., having all of those accounts paid and showing as current can actually improve your credit situation even with the reported bankruptcy. Though you may not be able to receive a true credit card immediately after a bankruptcy, you can use a secured credit card or other account tied to your bank account to help rebuild a positive credit history.
Will bankruptcy clear all of my debt?
Not every debt is eligible for discharge in bankruptcy. Some debts that will survive include child support and alimony, most student loans, mortgages, liens, and any debts obtained through providing false information.
Will it affect my utilities?
Public utility companies, including electric, gas, water, etc., are not allowed to deny you service because of a bankruptcy. The companies can, however, put you in a “credit risk” category and require a deposit for future services.
What if employers check my credit?
Federal law prohibits any private employer from terminating or otherwise discriminating against an employee or prospective employee who has filed for bankruptcy or not paid a debt that can be discharged through bankruptcy.
Are You Thinking About Filing for Bankruptcy?
Although these are some basic answers to common questions, every bankruptcy is a little different and an experienced bankruptcy attorney can answer questions based on your individual circumstances. If you would like to learn how filing for Chapter 7 bankruptcy could help your financial situation, call an attorney.