How to Go Bankrupt (if you Really Have To)
Bad Debt Consolidation by splinder
Filed under Bankruptcy
You go bankrupt when your total liabilities become higher than your total assets and your limited monthly income does not allow you to continue making your monthly payments to your lenders. When you declare bankruptcy, a legal proceeding starts wherein the bankruptcy court steps in to discharge,’ or remove your debts.[br]
What Changes When I Go Bankrupt?
Bankruptcy can be an effective way to regain control on your monetary status and tackle your mounting debt. When you go bankrupt, the following things come into effect:
- Your credit report shows your bankruptcy status for ten years. This is better than having bad credit because on paper, you have taken the first step towards alleviating your debt.
- Your credit score will go down significantly. However, you would not be disqualified from applying for a car loan or a mortgage during the period.
- If you have opted for Chapter 7, your high-value possessions will be acquired by the bank or crediting agencies.
- Once you file for bankruptcy, you cannot un-file.
- Any application for loans may be denied because of your record. Even if you get the nod from a creditor, there is a high probability of paying astronomical interest fees.
Most people who decide to declare bankruptcy do not have good credit score to begin with. Post bankruptcy, several people find that their credit scores start improving within a short span of time either due to removal of most of the debt and adherence to the regular repayment plan. The extent of impact on your credit will be dependent on your credit level and the type of bankruptcy you choose to file.
What About My Co-Signer When I Go Bankrupt?[br]
Co-signers can be protected in certain types of bankruptcies. If you file for Chapter 7 bankruptcy, creditors will proceed to collect the debt amount from your co-signers as you will be protected from them by law.
If you file for Chapter 13 bankruptcy, your co-signer can be protected if they meet the following provisions:
- The debt must have been taken for personal use and not incurred during the course of a business.
- They must not benefit from the proceeds of the debt.
- The debtor is regular in his payments under the Chapter 13 bankruptcy agreement.