Filing for bankruptcy isn’t quick or easy, but it may be your wisest option if you have consumer debt that’s ballooning out of control. Bankruptcy laws were created in order to give people a fresh start, and you’ll have help and guidance from an attorney throughout the process. Below are some of the basic outcomes you can expect.
1. You’ll Receive Financial Counseling Before and After Filing
Before you can file for bankruptcy, you’ll be required to go over your finances with a counselor and make sure you qualify. After the bankruptcy is complete, you’ll receive education in money management so that you can put together a secure future. Your lawyer will connect you with these services.
2. An Automatic Stay Stops Collection Actions
Immediately after you file for bankruptcy, an automatic stay will go into effect. This means that your creditors are required to stop pursuing you for unpaid bills. While the stay is in effect, your utility company can’t shut off your service, and your wages can’t be garnished.
3. You Won’t Qualify for Large Loans for a Few Years
You won’t be able to get an auto loan or a mortgage in the first several years after filing for bankruptcy. That’s actually a good thing, however, because it gives you time to establish new sustainable spending habits. During this period of time, you can put extra money into savings accounts and other investments. That way, when you do qualify for a loan, you’ll have a down payment saved up to lighten your debt load.
4. Interest Rates Will Be High for a While
When you do begin to use credit again — carefully — you’ll find yourself paying higher interest rates. Just remember that this is a temporary situation and that if you establish your new financially responsible track record, your interest rates will gradually decrease over time.
5. You’ll Be Flooded With Credit Card Offers
Credit card issuers seek out people who have gone through bankruptcy because they know you can’t discharge your new debts with another bankruptcy for seven to 10 years. Don’t fall into the trap of feeling grateful that someone somewhere is willing to give you credit; many of these offers involve predatory interest rates that may put you right back into an endless debt hole. Review any credit offers very carefully, and follow the money management plan that you developed with your financial counselor after the bankruptcy was completed.
Filing for bankruptcy isn’t fun, but it can remove a huge burden of stress from your life and give you the opportunity for a fresh financial beginning.