What Happens When You Declare Bankruptcy?

If you’re struggling with debt, bankruptcy might seem like a viable option. It can help you reorganize your debts to make them more manageable or eliminate them entirely after paying off what you can. Understanding the bankruptcy process can help you decide if it’s the right choice for you and how it will affect your future.

Chapter 7 Bankruptcy

Also known as liquidation bankruptcy, Chapter 7 involves selling off certain assets to pay off your eligible debts. The remaining debt is then canceled. Before filing, you must complete a credit counseling course and pay a $338 filing fee. A meeting with your creditors will follow within 21 to 40 days to discuss your petition. Your non-exempt assets will be liquidated, and the proceeds will be distributed to your creditors. Typically, your remaining debt will be discharged within four to six months.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy helps you reorganize your debts to pay off some or all of what you owe over three to five years. Like Chapter 7, you must complete a credit counseling course before filing and pay a $313 filing fee. You must start making plan payments within 30 days, even if your petition hasn’t been approved. A meeting with your creditors will occur within 21 to 50 days, followed by a confirmation hearing within 45 days to approve or deny your repayment plan. Your plan will last three to five years, after which any remaining debt will be discharged.

What Debts Can Be Discharged in Bankruptcy?

Most consumer debts can be included in a bankruptcy filing, such as:

• Unsecured and secured loans and credit cards
• Medical bills
• Collection accounts
• Business debts
• Private loans owed to a family member or friend
• Past-due utility payments
• Back rent

However, some debts cannot be discharged, including alimony, child support, certain tax debts, government fines, and student loans (which are challenging to discharge).

Will I Lose My Property if I File for Bankruptcy?

In Chapter 13 bankruptcy, you typically won’t need to sell your personal assets. However, in Chapter 7 bankruptcy, you may need to sell some assets to satisfy your debts. State laws determine which assets are exempt from liquidation, such as retirement accounts, your house, and your car. Consult a bankruptcy attorney in your state to understand what property you can keep.

What Happens to My Credit if I Declare Bankruptcy?

Declaring bankruptcy indicates that you are no longer paying your debts as agreed, which can severely damage your credit history for years. Chapter 7 bankruptcy remains on your credit report for 10 years, while Chapter 13 stays for seven years. However, the impact can diminish over time, especially if you take steps to rebuild your credit.

Are Bankruptcy Filings Publicly Available?

Bankruptcy filings are public records, accessible through the Public Access to Court Electronic Records (PACER) system. While anyone can register for PACER, the service charges a small fee per page. Local newspapers may also publish public notices of bankruptcy filings. Employers, landlords, and creditors can see your bankruptcy on your credit report when you apply for a job, lease, loan, or credit card.

Will Bankruptcy Affect My Job or Future Employment?

Employers can find out about a recent bankruptcy through a federal bankruptcy search or credit check. While it may not impact your job candidacy in most cases, it can be a deal-breaker for positions involving financial information or government security clearance. Current employers are less likely to conduct background checks, and they need your permission to do so.

Monitor Your Credit Throughout the Process

Since bankruptcy can affect your credit history and future opportunities, it’s crucial to monitor your credit scores during and after the process. This can help you understand how certain actions impact your credit and provide insights into improving your credit after bankruptcy.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand that financial challenges can be overwhelming. If you’re considering bankruptcy or need assistance with your mortgage, we’re here to help. Our team of experts can guide you through the process and help you make informed decisions about your financial future. Call us today at 213-732-3074 for any mortgage service needs. Let us help you navigate your financial journey with confidence.