What You Should Know About the Consequences of Filing for Bankruptcy

 

Bankruptcy is associated with the clearing up of debt obligations, either through a full discharge, or a repayment plan. However, the reality is that not all debts are cleared away magically. An applicant for bankruptcy carries debt obligations which must be fulfilled before he or she can be declared debt-free.

Bankruptcy is governed by rules and regulations and it is not a process that guarantees quick results or resolution. Depending on your financial status, obligations, and debts incurred, you can file under different categories, such as Chapter 7 , Chapter 11 , Chapter 13, etc. Depending upon which category you file under, you may receive a discharge or a repayment plan. Some debts, such as alimony and child support may not receive discharge under bankruptcy while some, like a student loan, can be discharged based on the situation.

Further, take note of which state you are filing in, or eligible to file for bankruptcy from. Depending on this, the consequences of the bankruptcy could be different. Rules differ from state to state, especially regarding the loans that will receive a discharge and those that may not.

• • Receiving Discharge

Discharge from debts is the most common association with the process of bankruptcy. However, bankruptcy does not mean a total wipe-out of debts. Most commonly, applicants will be put through a reorganized payment plan, with some of the debts discharged.

• • Issuance of Stay Order

Once you file for bankruptcy, a stay order is issued by the court that prevents creditors from carrying out debt collection practices, including making frequent calls and taking legal actions against the debtor. These practices add to the trauma faced by someone already burdened by debt and applying for a bankruptcy.

• • Losing Assets and Property

As part of the resolution, one of the consequences of bankruptcy is that any property or assets you possess may be utilized towards payment of the dues.

• • Negative Impact on Borrowing Mortgage Loans

Mortgage loans may not be approved for a bankruptcy filer. If one is granted, it may come along at a higher interest rate and one that may prove difficult for someone who has recently filed for a bankruptcy to sustain.

Seek Help

Filing for bankruptcy , reeling under debt, and facing potential loss of income can be terrifying prospects. However, remember that legal help is available and within your reach and that you are not alone.

Applications for bankruptcy undergo stringent reviews and may face the prospect of rejection, if not made in the right way and as per norms outlined. Given these facts, if you are still considering filing, you must learn about the consequences of bankruptcy.

Apart from the pointers given in this article, it is advisable to reach out to a professional bankruptcy lawyer to guide you on the application. A professional can help you understand the application process better, thus increasing your chances of receiving a positive affirmation on your claim.