Bankruptcy Facts

Declaring bankruptcy is a last resort for people who have borrowed money and have absolutely no way of repaying their debt. Filing for bankruptcy can be detrimental to, not only your credit history, but also your relationships and quality of life so before you consider this option, it’s important to have all of the bankruptcy facts.

Types of Bankruptcy:

Chapter 7 - with this type of bankruptcy the person in debt must petition the court to be freed from all debts following the liquidation of virtually all assets. Usually your house will be spared from liquidation.

Chapter 11 - this type of bankruptcy is less severe and allows the person in debt to remain in possession of their assets. Typically a repayment schedule is negotiated with creditors as an alternative to asset liquidation.

What to Expect When You Declare Bankruptcy:

  • When you decide to file for bankruptcy be prepared to explain to a judge or trustee how you got yourself into such a dire financial situation.
  • You will likely lose any credit cards you have unless you have completely paid them off before declaring bankruptcy.
  • After declaring bankruptcy you may have trouble getting mortgages, loans, credit cards, life insurance and even some jobs so it is very difficult to find the means by which to rebuild your credit.
  • A bankruptcy will stay on your credit report for at least 10 years.
  • Student loans and back taxes may still need to be paid after declaring bankruptcy.

Bankruptcy can be painful financially and emotionally so before you consider it, be sure to weigh all of your options. Bankruptcy is easy to get into, but often nearly impossible to get out of.