Bankruptcy is a legal process that can help to clear your debts. However, it’s not for everyone and you should always get advice from a free debt adviser before you make a decision to go bankrupt.
Having a good job and a stable place to live will make it easier to avoid bankruptcy in the future. It shows creditors that you can be trusted and that you are financially responsible.
What is bankruptcy?
Bankruptcy is a court process that allows individuals and businesses to regain control of their finances. This may occur as a result of financial hardships, including job loss, illness or divorce.
In bankruptcy, a court trustee examines a debtor’s assets and liabilities to determine whether to discharge the debts. The debts can be erased through the discharge procedure or not, based on a ranking of unsecured claims called priority.
Depending on the type of bankruptcy, the trustee may liquidate property and distribute the proceeds to creditors. The court can also dismiss the case if it believes the debtor has enough assets to pay them off.
Bankruptcy is an option that should be considered only after you’ve tried and failed to make progress on your debts using other options. This is especially true if you’ve been struggling with medical bills.
Why do people go bankrupt?
The most common reason people go bankrupt is due to poor financial choices. This can include debts from college loans, buying a car or home that is unaffordable and poor management of credit cards.
Another cause of bankruptcy is medical bills. These bills can be a huge expense, especially when the individual does not have health insurance or has a high deductible.
Losing a job can also make it difficult to meet financial obligations. Those who lose their jobs often do not have safety nets such as emergency funds or severance packages.
Other reasons for bankruptcy include divorce and separation, where one partner may have to clean out their assets to pay for the other’s expenses. The financial strain can be especially high when child support and alimony payments are added into the mix.
What happens to my assets?
Bankruptcy is a serious financial move that should only be considered when the
going gets tough and your debts are unmanageable. Once you file for bankruptcy, a trustee is appointed to oversee your assets and pay off your creditors.
Generally, your nonexempt assets are liquidated to pay off your debts in a process called Chapter 7 or Chapter 13 bankruptcy. The right lawyer can help you determine if this is the best course of action for your specific situation.
Thankfully, there are some assets that you can keep in a bankruptcy case. Some of these can be protected by a state or federal exemption. This might be the best way to go if you’re looking to save some money while paying off your debts. The most important part is to be honest with yourself and your lawyer about what you own. In fact, you should also consider your options for transferring your assets to family members or charities after your bankruptcy. Bankruptcy attorneys in Harrisburg, PA can help you with the legalities of filing bankruptcy.
What happens to my credit score?
Bankruptcy is a tough financial move that can reduce your credit score to the lowest possible level. It can also make it difficult to get new credit, such as a loan or a credit card.
Despite that, filing for bankruptcy can be an important financial decision for some people in desperate circumstances. It can wipe away or reduce debt that you cannot afford to pay and give you another chance at a fresh start.
It can also help you establish a credit history and rebuild your credit score. That can take some time, though.
You can start repairing your credit after bankruptcy by making payments on time and using your newfound freed up income to build a solid record of responsible credit use. You should be able to see improvements in your scores after about six months to a year.