If you’re overwhelmed by your debt, you may be thinking about filing for bankruptcy. Although bankruptcy isn’t as taboo as it was many years ago, the idea of filing can still be a little scary. The truth is that there are both positives and negatives about bankruptcy. It’s important to educate yourself about them before filing.
Here are several important things to know when filing for bankruptcy:
Your Credit Will Take a Hit
One of the biggest drawbacks of bankruptcy is a lower credit score. After you file, your credit score can drop significantly and the bankruptcy can stay on your credit report for up to 10 years. That’s why bankruptcy is often seen as a last resort for many people. You may have difficulty getting approved for mortgages and other types of loan after filing. However, that doesn’t mean you can’t work to improve your credit score over time. Begin by applying for a secured credit card and making all your payments on time.
Paperwork Filings are Public
Before you file for bankruptcy, understand that the filing will be made available to the public. If someone wants to find out about your financial information, they can. Additionally, your name will be published in local newspapers and online.
Certain Debts Can’t Be Discharged
It’s important to understand that not all debts are eligible for discharge in bankruptcy. You’ll still be on the hook for secured debts like student loans, back taxes and child support. If you have a lot of secured debts that can’t be wiped out, you might want to consider loan refinancing or credit card consolidation.
Creditors May Challenge Your Request
When you initially meet with a bankruptcy lawyer, you will have to make a list of all your debts. Be honest about your debts and don’t leave details out. Your bankruptcy lawyer is there to help you, not judge you. Afterward, you’ll be sworn into a meeting with your creditors. They can ask any questions they want during this time. Creditors will then have up to two months to file a lawsuit to challenge the discharge of your debts.
There Will Be Upfront Costs to Pay
Before filing bankruptcy, your bankruptcy lawyer will require you to pay legal fees upfront. Some lawyers charge a flat fee while others charge based on how much debt you owe. You won’t be able to discharge these legal fees in your bankruptcy.
If you have decided to file for bankruptcy, talk to a reputable bankruptcy lawyer as soon as possible. He or she will assess your case and determine if bankruptcy is the right option for you or not.