What Will My Life Be Like After I File Bankruptcy?

Woman discussing paperwork

Most people who have never filed for bankruptcy do not know what to expect from the process. Bankruptcy can offer people relief from their financial struggles, even issues involving student loan and income tax debt, and it enables them to regain control of their financial future. However, there has always been this stigma surrounding bankruptcy, as if filing for bankruptcy means you have failed somehow and you should be ashamed, which could not be further from the truth.

In many cases, people are struggling financially due to circumstances out of their control, such as job loss, divorce or medical debt from a sudden illness. Bankruptcy is a legal tool that offers you a chance to fix your financial troubles so that you and your family no longer have to struggle. Obviously, life will be different following bankruptcy, but that is not necessarily a bad thing.

What Do I Need to Know About Life After I File Bankruptcy?

As any qualified and experienced bankruptcy lawyer can probably tell you, one the questions bankruptcy attorneys face most often is: “What will my life be like after I file bankruptcy?” While everyone’s bankruptcy experience is unique, this is generally what you can expect your life to be like after you file for Chapter 7 or Chapter 13 bankruptcy:

  • Chapter 7 Bankruptcy – This form of bankruptcy may enable you to discharge most of your debt, which will leave your income intact. You will, however, have the bankruptcy on your credit reports for as long as 10 years. This will mean you will have to live mostly off of cash, since your credit score will drop after a bankruptcy. You should begin saving money in an emergency fund following bankruptcy, which will help you weather situations where you relied on credit to help you in the past.
  • Chapter 13 Bankruptcy – Unlike Chapter 7, filing Chapter 13 involves a reorganization of your debt by the bankruptcy court and requires you to pay off some of your debts over a three to five-year period before the remainder is finally discharged. Therefore, your income is under the control of a court-appointed bankruptcy trustee who gives you a set amount for living expenses each month and divides up the rest of your income amongst your creditors. In addition, if you want to take on new debt, such as a car loan or credit card, during the three to five-year period, you will need have the court’s permission.
  • Debt Collector Harassment – For the most part, creditors will stop contacting you, and any creditors who do continue to harass you will probably be breaking the law and you may be able to sue them for damages.
  • Wage Garnishment – If you were dealing with wage garnishments, those will most likely no longer be an issue, meaning your income should be all yours following bankruptcy.
  • Rebuilding Your Credit – While your credit score will take a hit immediately following bankruptcy, it will begin to rise as time goes on if you are financially responsible from that point forward. One way you can begin to reestablish your credit is to get a secured credit card. After a year or so of using a secured credit card responsibly, you may be able to get an unsecured credit card. You may also be able to get an auto loan pretty quickly following a bankruptcy.
  • Discharged Debt – Not only will the debts you have discharged through bankruptcy, such as credit card and payday loan debt, be a relief, because you no longer have to pay those bills, but also that will free up money in your budget to pay other non-dischargeable debts, such as rent, car payments, mortgage payments and utility bills.
  • Collateral Damage – Due to the fact that credit score will fall after a bankruptcy, any bills you pay where your credit score is taken into account could rise. Most notably, you could have to pay more for car insurance, renters insurance or homeowners insurance, because insurers often look at your credit score when determining rates.

For years, Washington DC bankruptcy attorney Kevin D. Judd has been helping people and their families in DC and Maryland who are overwhelmed with debt achieve financial freedom.

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