Coming to the realization that you need to file for bankruptcy is a serious matter. There are two types of consumer bankruptcy filings. One of these is a liquidation bankruptcy, Chapter 7, in which all your non-exempt assets are liquidated to pay off creditors. You don’t have to make regular payments in this one.
When you file a Chapter 13 bankruptcy, you get to keep more of your assets. You will have to make regular payments on your debts to the trustee over the case. These continue for three to five years, but any balance remaining after you pay all the required payments will be forgiven.
One of the downsides of a Chapter 13 filing is that you’ll have to live on an enforced budget for a while and cannot immediately start to rebuild your credit. You can’t obtain new lines of credit during the bankruptcy unless you have the court’s permission. Once your bankruptcy is discharged, you can begin to rebuild your credit by obtaining new cards, but these will likely be at higher interest rates.
The bankruptcy will remain on your credit report for up to 10 years. This will make it a bit more difficult to do things like getting a mortgage. As time progresses, the bankruptcy might have less of negative impact on your ability to obtain new lines of credit.
Your bankruptcy attorney can help you to understand various pros and cons of this type of bankruptcy based on your circumstances. Be sure that you understand those, as well as the responsibilities you have so you know that you’re making the best decision for your financial future.