When your bills begin to outpace your wages, you may consider bankruptcy as a way to start fresh, but what happens once the process is in motion and you start thinking about rebuilding your credit? According to the credit reporting agency Experian, any type of bankruptcy stays in your file for 7-10 years, which can severely impact your chances of obtaining future loans and other types of credit.
Understanding some possible consequences of bankruptcy may help you decide which type is best for your situation and how to prepare for the process so you come out the other side and feel more confident about the future.
A loss of property
If you qualify for Chapter 7 bankruptcy, the court liquidates any non-exempt property to pay off your creditors. Depending on the circumstances, you may have to liquidate several different types of property, including:
- Your home/other real estates
- Antiques and other items of value
Most properties are not exempt from liquidation, especially vacation homes and, in some cases, your business property.
Future credit restrictions
Because either a Chapter 7 or Chapter 13 bankruptcy can remain on your credit report for up to a decade, you may find obtaining future credit challenging. Most creditors might refuse you; however, there are some credit card companies and other lenders who may help you rebuild your credit by offering you cards and loans with certain restrictions and strict terms. This can present you with certain financial roadblocks, but with patience, you can restructure your financial future.
If you are uncertain whether bankruptcy is for you, there are other options. Speaking with your creditors about your debt and consolidation may also assist you.