You may view the process of filing bankruptcy in a negative light. Filing for bankruptcy is a serious undertaking.
Bankruptcy also provides many benefits to families not available outside of the bankruptcy process.
If you are behind on your mortgage payments, you know how hard it is to catch up with the arrears. Lenders add late fees and penalties to increase the amount you owe. An aggressive mortgage holder can start foreclosure proceedings against you to take possession of your property. If the lender forecloses on your home, you will lose the property.
By filing for bankruptcy, you can stop any foreclosure proceedings. As part of your bankruptcy, you can negotiate a way to pay back any arrearage and stop the running on penalties and interest.
If you receive regular calls from creditors trying to collect bills you cannot pay, a bankruptcy filing will stop creditors from calling. Bankruptcy also stops any litigation proceedings creditors may have against you. The only recourse creditors will have is through the bankruptcy court.
If you qualify to file a Chapter 7 bankruptcy, you can probably eliminate most of your unsecured debt, including credit cards and medical expenses. If you file Chapter 13, you will likely pay a small percentage of the amounts owed to unsecured creditors through one monthly plan payment.
Bankruptcy can provide significant relief for your family if you have overwhelming debts that you cannot pay. After filing, you can start over and change your financial future.
Bankruptcy can be a burden in many ways. Even after you pay off your debt and get on solid footing, you still have to worry about creditors reporting your bankruptcy information.
Negative information in your credit reports can affect your financial options in the future, so you should be mindful of the ramifications. At the same, you should not feel as if your bankruptcy will leave a permanent mark.
For up to a decade, a credit bureau can keep your bankruptcy on your report. Your creditors can also keep negative information such as judgments and lawsuits for up to seven years in most cases. On top of this, if you do not pay some of your tax liens, this information can stay on your record for 15 years. You should keep all of this in mind if a company offers to remove negative information earlier than the standard timeframe.
Errors can easily happen in your credit reports and you have the right to bring them into question. For one, the Consumer Financial Protection Bureau is always there if you have a complaint. Also, if you have trouble getting credit with a company because of a report, the Fair Credit Reporting Act entitles you to a free copy of the report (as long as your request is within 60 days). The company that denies you must also provide you with the phone number, name and address of the credit reporting agency.
While a bankruptcy discharge can help you, you should prepare yourself for what may come after. Understanding how credit reports work can help you repair your finances and move on.