Many people in financial crisis are forced to file bankruptcy. Although filing bankruptcy often clears a person from their debts, it has both positive and negative effects on a person’s lifestyle and financial future. If you’re considering bankruptcy, it’s important to talk a bankruptcy attorney in Washington, PA about the impact that bankruptcy may have on your life.
If you’re an individual considering bankruptcy, you have two filing options – Chapter 7 and Chapter 13. Based on the type of filing you choose, the repayment of your debts may vary. By filing Chapter 7 bankruptcy, you may be able to eliminate your debts and keep your personal possessions, but you must qualify for this type of bankruptcy. If you choose Chapter 13 bankruptcy, you will have a repayment period up to five years. You must submit a proposed payment play to the court when you file. If the payment plan is approved, you must start making monthly payments as soon as your filing is approved.
Bankruptcy exemptions that let you keep some of your personal assets vary from state to state. Some states have an unlimited exemption for homes, while others protect your home up to a certain dollar amount. Generally, household furnishings, retirement accounts, and tools of your trade are protected, while vehicles are protected up to certain values. Filing bankruptcy will give you some time to get your life in order and your finances back on track, but it does not allow you to keep your house or your car if you can’t pay for them.
Unfortunately, filing bankruptcy can drop your FICO score by as much as 200 points or more. If your credit score is already damaged due to late payments and prior delinquencies, your score may not decline that much. Your payment history makes up about 35 percent of your total credit score and becomes public record. If you file Chapter 7 bankruptcy, you can expect it to remain on your credit report for 10 years. For Chapter 13 bankruptcy, it’s seven years. As long as the bankruptcy shows on your credit report, getting new credit may be difficult.