Are you undergoing financial hardship? You might consider bankruptcy to be a last resort. However, if you file for bankruptcy, you may have the chance to secure a clean financial slate or pay down a portion of your debts at a lower interest rate, depending on the type of bankruptcy that you choose. The attorneys at the Law Offices of Craig L. Cook can help you understand what happens when you go bankrupt so that you can determine whether it is the right choice for you.
What Happens When You Go Bankrupt?
Bankruptcy is designed to help people experiencing financial difficulties by giving them the opportunity to repay a portion of their debts through a repayment plan or to have some of their debts entirely discharged.
What happens when you go bankrupt? Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, the first thing that happens is that the court will issue an automatic stay. This is an injunction that prevents creditors from trying to collect on the debts that you owe. After the automatic stay is issued, your creditors must stop calling you and sending letters. Any garnishments of your wages for debts must end, and your creditors will be prevented from going after your other assets as well. The automatic stay gives you time to work with the bankruptcy court and your creditors to figure out how to handle your debts.
What Happens to Your Property?
The fate of your property depends on the type of bankruptcy you file and the exemptions available to you. Chapter 7 bankruptcy is the most common type of personal bankruptcy. Most people who file for Chapter 7 bankruptcy get to keep all of their property by claiming the proper bankruptcy exemptions. If you are one of the few people that cannot exempt all of your property, before you file for bankruptcy, your attorney can determine what property you could have to turn over so that you can choose the best chapter of bankruptcy to meet your goals.
In Oklahoma, people can only choose the state’s bankruptcy exemptions, which are found in Title 31 of the Oklahoma Statutes. In Arkansas, people can choose between the federal exemptions or the state exemptions. Your lawyer can help you to determine which exemptions might offer more benefits to you.
If you file a Chapter 13 bankruptcy case, you will not have to liquidate any of your assets. Why? Chapter 13 bankruptcy is a reorganization of your debts, which allows you to repay what you owe partially or fully over a period of three to five years. After you complete your repayment plan, your remaining unsecured debt balances will be discharged. If you do not adhere to the plan, however, your creditors might be able to renew collection activities.
Credit and Bankruptcy
While a bankruptcy will remain on your credit report for up to 10 years, many creditors will extend credit to you soon after you receive your discharge. This is because creditors know that you will no longer have a significant debt burden and will not be able to declare bankruptcy again for years, making you less of a credit risk. The two types of bankruptcy are also treated differently. Chapter 13 does not have as great of an impact on credit since people who go through this type of bankruptcy are repaying a portion of their debts. Consequently, a Chapter 13 bankruptcy stays on your credit report for seven years instead of ten.
Employment and Bankruptcy
According to a survey by CareerBuilder, 29 percent of employers check the credit of applicants. This means that if you apply for certain types of jobs, prospective employers might see your bankruptcy case. This is especially true with certain government jobs and positions in the financial services industry. However, employers are not allowed to discriminate against applicants simply because they have previously filed for bankruptcy. Employers that run regular criminal background checks will not see that you filed for bankruptcy.