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What Happens When Someone Files For Bankruptcy

Posted on September 9th, 2014

When someone living in Arizona files for bankruptcy, they are often doing so because of costly medical bills, having been laid off from a job or simply having a large amount of unsecured debt. There are enormous benefits to filing for personal bankruptcy, but it is not without its costs. After filing, people may need to spend some time rebuilding their credit score.

 

Filing for bankruptcy either eliminates most or all of an individual’s unsecured debt or enables them to take more time paying off their debts. It also protects them from having their wages garnished and stops foreclosure proceedings. Furthermore, creditors must stop attempting to collect on unpaid accounts once someone has filed for bankruptcy. Individuals who file often feel a huge sense of relief at not having to constantly worry about their finances.

 

Still, there are a few things that those who file for bankruptcy need to be aware of. A chapter 7 bankruptcy, or asset liquidation, filing stays on someone’s credit report for up to 10 years. This can make it difficult for someone to get credit, and if they are able to borrow money, it is often at a high interest rate. The good news is that this is only temporary. Those who are responsible are often able to rebuild their credit, and some are even able to get a mortgage approved with a bankruptcy on their credit report.

 

A bankruptcy attorney could be helpful to someone who is struggling financially. An attorney may be able to help people understand what is involved in the filing process, what debts can be discharged and whether Chapter 7 or Chapter 13 bankruptcy is best for their situation.

 

Source: Santa Barbara Independent, “How Bankruptcy Affects You as an Individual“, Harley Hahn, May 19, 2013

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