Bankruptcy Protection and Your Legal Rights

If you are going through a difficult financial situation, you may be considering using the option of bankruptcy protection. However, before you make a final move in this direction, there are a couple of things that you need to know. There are certain pros and cons of this process that you must be well aware of. For example, it may help you prevent further damage by wiping out most of the debts that you owe to different creditors. But, at the same time, it will cause many personal, professional, and financial problems. You will have a tough time while you try to qualify for credit after bankruptcy. Therefore, make sure you thoroughly analyze the different aspects associated with this option before you go for it.

How It Is Going To Affect Your Credit Report?

When you use the option of bankruptcy protection, it will remain on your credit report for the next ten years. And, the period starts right from the day when you file your petition. During this period, it will be very difficult for you to get credit cards, car loans, mortgage, or even insurance policies. However, if you follow the right approach and show some financial discipline, you can still find many lenders who will be able to help you with your credit problems. It is just that the loans you get will charge you a comparatively much higher rate of interest.

Debts That Bankruptcy Discharge Does Not Include

Though most of the debts that you owe to different creditors will definitely be discharged, you will still be liable to certain sets of debts, such as penalty charges associated with DUI (drunk driving), fines applicable in criminal cases (where you have been convicted), debts incurred by taxes, money that you borrowed through fraudulent activities, student loans, and the amount of alimony that you have been ordered by the court to pay to your spouse.

What about Secured Debts (Auto Loans, Home Loans)?

There are specific provisions on how secured debts should be treated when the debtor claims for bankruptcy protection. As soon as you file your petition, the court imposes an automatic stay for your creditors, as per which no one can give you a call or contact you by any means for the repayment of the loans. Once the court declares you as bankrupt, the secured creditors will further lose their right to sue you for the recovery of the debts. All your assets and properties (excluding the ones that are legally exempted) will be liquidated and the money thus received will be used to pay off the creditors in specific preference (such as first to the secured creditors and to the unsecured ones). If the state laws allow you 100% exemption for your home or residential property, your mortgage lender will not even be able to foreclose the home and keep all the money thus received. You will keep your home in such cases and the creditors will get their money in certain proportion from the money recovered after the liquidation of other assets.

In other cases, you may also have an option to continue with a secured loan, such as auto loan, even after you have been granted bankruptcy protection. The only condition is that you must first become current on your payments. But, this is not as simple as it looks. That is the reason it is recommended that you discuss your situation with an expert lawyer first.

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Posted in Bankruptcy, Filing Bankruptcy | 2 Comments »

2 Responses to “Bankruptcy Protection and Your Legal Rights”

  1. scott says:

    Bankruptcy option is to be very beneficial when you are going through financial crises. Bankruptcy as the ability to free you from your debts but it is not the solution of your problem either now or in future. Bankruptcy prevents you from further damage. If you have chosen the Bankruptcy then you can take the advantages of the new beginnings. I want to know the duration of the Bankruptcy that would be stay on my credit repair.
    A Bankruptcy would be shown on your credit report up to total of ten tears that begin from the very first day of your file for the Bankruptcy. It doesn’t mean that Bankruptcy keep you from getting home, car, loan for ten years. You can also regain your credit before your Bankruptcy is over but the question is that what will be the additional fees and what will be the monthly payment. your credit report also show the debts that you have been paid and notify a zero balance. And if the debts are reported in correctly the credit score would be negative and it is difficult to regain credit.

  2. robert says:

    Very wonderful. Article has got success in its aim of gibing the knowledge about the pros and cons of a very difficult process called Bankruptcy. It is easy to file a petition under Bankruptcy but is equally complicate to proceed further. Any individual trapped in the debts of multiple loans decides to go for Bankruptcy should be very well aware of all the aspects of it. It will change your whole personality financially and mentally also. Your credit report will be show as a Bankrupt for the coming ten years, you will find it extremely difficult to get credit cards, mortgage loans etc. But if there is no other option left for you, go for it with the positive attitude and full proof planning of future. It is true that most of the debts will be discharged after bankruptcy but some of the debts will still remain with you. Secured debts will be treated according to the directions of court. Every step should be taken under the guidance of an expert lawyer. Lawyer can guide you wisely about the dos and don’ts. If you follow some strict financial discipline, your life can be back on the right track of life.

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