While bankruptcy is a legal solution that can dismiss large portions of debt, it comes with serious consequences and requirements. Therefore it’s important to understand the impact bankruptcy will have on your finances and how to recover.
Even the most responsible people can run into financial hardships. Sometimes these issues get so bad that they can’t get out from under them. For those with unmanageable debt, one solution is to file for bankruptcy.
Having to file for bankruptcy can take an emotional and financial toll. Therefore to survive and recover from this financial shakeup understand that the process is complex and may require hiring lawyers who specialise in this topic.
Every bankruptcy is unique. The court will evaluate each individual’s financial situation, their debt and their ability to pay back that debt to determine whether they can declare bankruptcy. If the court decides that you can declare bankruptcy, it will also decide what debt is dismissed and may still require you to pay back some of your debt.
Bankruptcy will not only relieve you of certain debt, but the court will usually assign you a budget, so you can repay your remaining debt. It will stop foreclosures of homes, repossessions of cars and other property, cease wage garnishments and prevent your utilities from being turned off. Also, creditors and collection agencies must stop contacting you for repayment once you file for bankruptcy. If they continue calling after you notify them, they can be fined.
Now due to bankruptcy tarnishing your credit declaring bankruptcy will negatively impact your credit history. This will make getting loans and new credit cards difficult or require you to accept a higher rate. You can work on improving your credit over time after bankruptcy.
Try to avoid adding any new negative items to your credit report by sticking to a budget. Pay all your bills on time and avoid building new debt. Research any new loan or credit application to see whether bankruptcy will cause automatic denial because applying for new credit too soon or having multiple denials can hurt your credit even more.
