Bankruptcy is a legal process that allows you to clear your debts and make a fresh financial start. However, it has significant consequences that you should know about before making a decision to file.
Filing for bankruptcy is a serious choice, so it’s important to get expert advice. Your lawyer can help you understand the options and decide which one is best for your circumstances.
Creditors are not allowed to contact you
After you file for personal bankruptcy, most creditors are barred from contacting you to collect on any debts you have discharged. This is known as an automatic stay of legal proceedings against you and it prevents them from trying to contact you for payment or filing lawsuits against you.
Unfortunately, some creditors ignore this automatic stay and continue to harass you. These unscrupulous tactics are a serious violation of the law, and it is important to get help if you are receiving constant calls from creditors after filing bankruptcy.
If you are unable to stop creditor harassment, contact a Cleveland bankruptcy attorney immediately. They can follow up to ensure the system gets updated and take legal action against creditors who are breaking the law by ignoring your automatic stay. They can also warn the creditor of possible sanctions that the bankruptcy court has the power to impose, such as fines or attorneys fees.
You can keep your property
In general, no one loses everything they own when they file for bankruptcy. This is because of exemption laws–state laws that protect property you may need to get by in personal bankruptcy.
Exemptions vary from state to state, but they generally include your car, your home, and other essentials. They also include money in tax-exempt retirement accounts.
However, exemptions don’t cover luxury items like fur coats and hobby equipment (known as “nonexempt” property). In a Chapter 7 bankruptcy, the trustee can sell such assets to pay your creditors.
In a Chapter 13 bankruptcy, you can keep your nonexempt property in exchange for paying back a portion of the debt through a repayment plan that you and your attorney negotiate with the court. In either case, you will need to file a schedule of assets and a statement of financial affairs simultaneously with your bankruptcy petition.
You can keep your car
If you have a car loan, filing for bankruptcy doesn’t eliminate the lien that gives the bank the right to repossess your vehicle. However, it may be possible to keep your car if you make up the missed payments or cure your default.
Regardless of your situation, it is important to know that bankruptcy will remain on your credit report for 10 years and negatively affect your credit score until you can rebuild it. That makes it very difficult to get another car loan in a timely manner after bankruptcy.
In addition, the value of your car can impact how much you can keep it in Chapter 7 and how much you can pay on your car loan in a Chapter 13 case. To find out how much you can keep your car, consult a qualified lawyer.
You can keep your home
Your home may be one of your most valuable assets. It’s a place where you have created memories and a safe haven for your family. It can be a stressful experience when you have to face the possibility of losing your house due to excessive debt.
If you file for bankruptcy, there are ways to protect your home. First, it is important to determine whether you are up-to-date on your mortgage payments.
Keeping up with your mortgage payments is essential for any property to remain protected in a bankruptcy.
Chapter 7 and Chapter 13 are both available to protect your home. In Chapter 13, you, the bank and your creditors work together to design a three-to-five year repayment plan that does not sell off your assets.
If you are struggling to make your mortgage payments, a home equity loan might be an option. However, it is also possible to lose your home in a foreclosure.
