Being buried in debt can be overwhelming and it may seem like you’ll never be debt-free. Late or missed payments can destroy your credit and make it difficult for you to get financing for a house or car. When things get bad, some people turn to bankruptcy for a fresh start.
Depending on your financial circumstances, bankruptcy allows you to either restructure or eliminate your debt. When you are facing overwhelming financial obligations, filing for bankruptcy can provide immediate relief and give you a fresh start to rebuild your credit.
What happens when you file for bankruptcy?
When you start the bankruptcy process, the court will issue an automatic stay that prohibits most collection actions. That means that collection letters and calls will stop, along with all creditor harassment. This can give you much-needed emotional breathing room so that you can mentally regroup and start to develop a realistic plan to move forward.
What about your credit after the bankruptcy is over?
Bankruptcy will remain on your credit report for ten years if you file Chapter 7. If you file Chapter 13 bankruptcy, it remains on your credit report for seven years. However, you can work on rebuilding your credit during this time and come out ahead in the end – especially if your credit is currently damaged due to late or missing payments.
One of the quickest ways to rebuild your credit is to obtain a secure credit card. To do this, you submit a refundable security deposit to the bank and use the card to make purchases.
Although they frequently have higher interest rates, these cards can be a viable alternative for demonstrating that you can responsibly manage your credit until you are eligible for a standard credit card with more favorable terms. This is particularly true if the card issuer reports to the three main credit bureaus that you are making timely payments.
For more information about filing for bankruptcy, seek assistance from someone who can help you with all of the decisions you’ll have to make.
