No one wants to file for bankruptcy. If you’re contemplating it, you might feel like it signifies financial failure. In reality, bankruptcy can be a fresh start for your finances. For some people, it is not a failure, but an effective path to financial freedom.
At Integrity Law Group in Seattle, we have extensive experience in bankruptcy cases. We help you through the intricacies of bankruptcy court to use unfortunate circumstances to your advantage. For bankruptcy to be a beneficial turn-around and not just another form of financial collapse, you need to know how to navigate the filing process and the aftermath. Let’s explore what happens when you file for bankruptcy.
Deciding to File for Bankruptcy
If you’re wondering what happens after filing for bankruptcy, you’re probably deciding whether or not to file. Knowing what comes next and how it will affect your future are essential components of making that decision.
Many people can qualify for bankruptcy, but that doesn’t make it advantageous. Bankruptcy should be considered a last resort to escape debt, not a loophole to avoid paying bills. Whether or not bankruptcy will help depends on factors like your income, your assets, and the type of debt. The best way to determine if you should file for bankruptcy is to consult an experienced attorney who can walk you through the pros and cons of your unique situation.
Filing for Bankruptcy: What Happens Next?
If you decide to file for bankruptcy, you will first need to complete a credit counseling course. Then you can file your petition. A trustee will be assigned to your case and will meet with you and your creditors. You will also need to pass a means test to qualify for Chapter 7 bankruptcy.
From there, what happens next depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.
After Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy, the court immediately issues an automatic stay, which protects you from creditors and debt collectors. This prevents wage garnishment, repossession, and other collection actions.
After meeting with you and your creditors and assessing the case, the trustee will sell your non-exempt assets to help pay off some of your debts. Typically, non-exempt assets include property aside from your home, extra vehicles, valuables like jewelry and collectibles, and investment accounts.
Once these assets have been used to pay off creditors as much as possible, your remaining debts may be discharged, meaning you don’t have to pay them. Some debts, like child support or student loans, cannot usually be discharged.
After Chapter 13 Bankruptcy
Chapter 13 bankruptcy is typically for those who do not want to give up their assets or who have too high of income to qualify for Chapter 7. Instead of having property liquidated to pay off debts, you will work with the court to reorganize your debts and create a long-term repayment plan.
With Chapter 13 bankruptcy, your life continues as normal and you still must pay off debts, but you are given longer to do so and may escape some fees and increased interest rates.
What Happens to Your Credit Score After You File for Bankruptcy?
One of the biggest consequences of filing for bankruptcy is the effect on your credit score. Bankruptcy will stay on your credit report for 7-10 years, depending on whether it’s Chapter 7 or 13. This makes it difficult to get credit cards or loans.
However, there are steps you can take to start rebuilding your credit. We recommend getting a secured credit card to start repairing your score. Make sure you pay your bills on time and try not to use more than 30% of your limit each month.
File for Bankruptcy with Confidence
Filing for bankruptcy doesn’t have to be a financial catastrophe that costs you your home or car. Working with a bankruptcy attorney means you have someone on your side who knows how to protect your interests and secure the best possible outcome.
Our experienced team has been making difficult situations better for people like you in Seattle since 2008. Schedule a consultation to learn about your options and start your path to financial security.