Bankruptcy is a legal process that has a significant financial impact on debtors, whether individuals or businesses. For those who have grave financial concerns and mounting debt, filing for bankruptcy can be a powerful solution.
With bankruptcy in effect, most collection action usually stops. These include wage garnishments, lawsuits (although there are exceptions) and those daily telephone calls you’ve come to dread. Bankruptcy can also get rid of most types of debt, such as medical bills, personal loans, credit card balances and others. Even if not all debts are eliminated or forgiven, it gives you the option to repay only a portion of what you owe.
However, if you’re unsure about the way bankruptcy can affect your life, it would be well worth it to get the advice of a legal expert on the matter. Our expert attorney in Corunna and Flint, Michigan shares his expertise in this subject matter.
Things that bankruptcy can do for you
If you’ve been struggling with debt for years and need a fresh start, declaring bankruptcy may be the break that you need. There are two primary types of bankruptcy filed: Chapter 7 and Chapter 13.
Each type of bankruptcy offers different benefits, and usually treats debt and property differently, as well. Depending on your situation (goals, income, property), you’ll be advised by your attorney to choose the chapter that’s right for you.
Either way, these are the things that declaring bankruptcy can do for you:
- End collection activities and harassment
- Stop eviction, repossession or foreclosure (whichever applies)
- Eliminate credit card debt and other low-priority unsecured debts
Things that bankruptcy cannot do for you
Although bankruptcy can help you in eliminating or settling certain debt-related problems, it is certainly not a cure-all as it also comes with limitations. For example, it cannot:
- Protect you from a secured creditor who wants to repossess or foreclose property you can’t afford
- Get rid of alimony and child support financial obligations
- Obtain you forgiveness for your student loans (not unless you can prove undue hardship)
- Eliminate tax debts (sometimes only possible for older unpaid tax debts)
- Eradicate non-dischargeable debt such as debts for personal injury or DUI and debts you forget to mention in your bankruptcy papers
- Remove debts related to fraud
Consequences of bankruptcy
A common consequence of bankruptcy is the loss of property. Whichever type of bankruptcy declaration you go for, you may be required to sell off some of your possessions to repay your creditors. This can mean you losing real estate, jewelry, vehicles, family heirlooms or antique furnishings and even personal art collections.
Your bankruptcy can also affect others who are close to you financially if they are proven to be legally liable. For instance, if your brother or sister co-signed an auto loan for you, they could be held responsible for part of that debt in case you file for bankruptcy.
You also need to remember that declaring bankruptcy has a severe, long-term impact on your finances, especially your credit score. A bankruptcy declaration will remain in your credit report for seven to 10 years, so you may be unable to secure new credit card accounts or apply for loans with favorable terms and interest rates.
Need more detailed information about bankruptcy?
Please contact James L. Gutting — your expert bankruptcy attorney in Corunna and Flint, Michigan.