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Types of bankruptcy and applying for a loan

On Behalf of | Aug 6, 2019 | Chapter 13 Bankruptcy |

People in Virginia who are struggling with debt might wonder whether they should file for bankruptcy and what type of bankruptcy they should file for. They might also wonder whether they would still be able to get a car loan after filing for bankruptcy.

There are two main types of bankruptcies for individuals: Chapter 7 and Chapter 13. To file for Chapter 7, the person must have an income below the median income for the state. If so, the person may be able to go through the Chapter 7 process, which takes around three to six months. This will eliminate most types of debt. A person who makes more than the median income may still be able to file for Chapter 13. This is a longer process, but it can allow the person to keep some assets. With a Chapter 13, a person has to be able to stick to the terms of a payment plan for three or five years.

Both types of debtors may also be able to apply for an auto loan, but the process is different. For Chapter 7 filers, it is usually necessary to wait until the bankruptcy has been discharged. Because Chapter 13 bankruptcies are ongoing for years, people can try to get court approval to apply for a loan.

Many people think that filing for bankruptcy can ruin their credit permanently, but this is not the case. Remaining in debt can hurt a person’s credit as well. When a person files for bankruptcy, all creditor actions against the person must stop. This can include phone calls from creditors, legal action and foreclosure on a home. This helps reduce stress and aids a person in starting a new financial life. Once the bankruptcy is discharged, the person can start rebuilding credit.