If you are deep in debt, you may think that your only option is to enter into bankruptcy. While this is certainly a possible solution to your debt, it’s important to know how it could affect you and how it will change your future.
To start with, understand that there are different types of personal bankruptcies. You may opt for a Chapter 13 or Chapter 7 bankruptcy, depending on your situation. With Chapter 7, you will lose some of your assets to liquidation. With Chapter 13, you’ll pay a monthly fee to the bankruptcy trustee for three to five years, and then any remaining debts included in the bankruptcy will be dismissed.
The difference between these two types of bankruptcy is primarily that one results in the liquidation of some of your assets while the other does not require liquidation. If you earn too much money to qualify for Chapter 7 bankruptcy, then it’s likely you’ll be able to use Chapter 13 instead.
After a bankruptcy, you will have limited access to credit, mortgages and loans. The bankruptcy usually stays on your credit report for seven to 10 years, but as time passes, it stops affecting you as much. For example, in the weeks after a bankruptcy, it would be unlikely that you could get a home loan. However, if you wait four or five years, then you may be able to get one without a problem.
Bankruptcy can be the right choice in a variety of situations, but you should first sit down with your attorney to discuss your options.