Filing for bankruptcy is a legal process for getting relief from debts that you cannot repay. When you file for bankruptcy, your creditors will be informed and must stop pursuing any debt you owe. Filing for bankruptcy grants whats called an automatic stay, which is essentially a block on your debt to keep creditors from trying to collect. They cant deduct money from your bank account, garnish your wages or go after any of your other assets. Once your petition for bankruptcy is filed, you benefit from an automatic stay. It will immediately notify your creditors of your status and bar them from contacting you via email, USPS mail, or telephone.
However, bankruptcy can have negative consequences that can affect your possessions and make it difficult to get approved for credit for years. Bankruptcy will remain on your credit report for up to seven or ten years, depending on the type of bankruptcy. This can make it difficult to obtain further credit, such as a bank loan or a conventional credit card. Bankruptcy can also lead to higher interest rates when you are eventually able to obtain financing.
If you file for personal bankruptcy, you generally have two options: Chapter 7 or Chapter 13. In a Chapter 7 bankruptcy, many of your assets will be sold off to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period.
Its important to understand that declaring bankruptcy has a serious, long-term effect on your credit. Bankruptcy may help you get relief from your debt, but its important to consider it as a last resort. As an alternative, you may be able to negotiate with your creditors and work out a payment plan or other solution.
