The process of using bankruptcy can be quite confusing, especially if you've never gone through it before. While bankruptcy is useful for giving you a fresh financial start, you likely have questions about what will happen before you get started. Here are three common questions that people often have when thinking about filing for bankruptcy.
What Is The Filing Process Like?
Using bankruptcy is not as simple as making the decisions and filling out the proper forms. There is a legal process that must be followed for bankruptcy to happen. It starts by having a court hearing with a judge who will look at your financial situation. The judge will decide if your financial situation justifies the use of bankruptcy and the discharge of your debts. The process can take some time to happen, but, when it's over, creditors will not be allowed to contact you regarding debts that you owe to them.
How Will Your Credit Be Impacted?
While you will get a huge financial relief from using bankruptcy, you will see a huge impact on your credit. There are different forms of bankruptcy that can have lasting effects on your credit, but they will all disappear from your credit report at some point. Until that happens, the bankruptcy will negatively affect your credit and cause several problems.
A bankruptcy can hurt your chances of being able to get loans, open credit cards, and essentially do anything that involves borrowing money. Since the bankruptcy appears on your credit report, lenders will see it before deciding to approve or deny any sort of loan. This can make it difficult to get a mortgage for a home, forcing you to rent until the bankruptcy falls off your credit report and is no longer viewable to lenders.
What Happens If Bankruptcy Is Denied?
All hope is not lost if your bankruptcy filing is denied. You can have a lawyer help you negotiate your debt and restructure it. If a creditor knows that you are not going to be able to pay back a loan and default on it, they may be more willing to work with you so that they can receive some form of payment rather than nothing. It's possible that they may forgive the interest that you owe to make paying back the principal payments. Another option is to liquidate assets to pay down those debts since you do not have the cash on hand to do so.
For help with navigating the complex process of filing for bankruptcy, contact a bankruptcy lawyer.