What Actually Happens When You File for Bankruptcy

If you have questions about what actually happens when you file for bankruptcy, then read on to learn more. Bankruptcy is a legal process in which you file for relief from your mounting debts. In most cases, it is possible to save your business from bankruptcy by filing under chapter 11.

However, if you're worried that bankruptcy will strip you of your possessions, rest assured that you're not going to lose your television, jewelry, or clothing. In fact, an Auburn bankruptcy attorney will take care of valuable items that you've hidden in a safe place. But even the average person has a few personal items that are protected by exemptions. Here are some things to keep in mind before filing for bankruptcy.

If you're considering bankruptcy, the first big step is to make a decision. Depending on your unique circumstances and your emotional state, the process could take months or even two years. But it's not recommended that you wait too long to make a decision. The sooner you can make a decision, the better, and the less stressful the experience. So, prepare mentally and emotionally. It will help the bankruptcy process go more smoothly.

A bankruptcy court will determine whether you have a nondischargeable debt. For example, if you have a car loan, you sign a document that gives the lender security interest in your car. If you fail to pay, the finance company can take the car back and you will end up with an unsecured debt. Similarly, when you use a credit card, you sign an agreement promising to pay. If you don't pay, the company can sue you, and you will end up paying twice as much as you were originally.

Bankruptcy can be a necessary solution in some situations, but there are consequences to consider. It will stay on your credit report for seven to 10 years. This can make it difficult to get credit in the future. As a result, you'll be paying higher interest rates and receiving lower credit limits. However, you can start the process of rebuilding your credit after filing for bankruptcy by using your credit wisely and paying your bills on time.

After filing for bankruptcy, you'll be required to attend a second credit counseling session to learn financial management skills. You can complete this session with the same company you attended your first session. After you've completed the credit counseling sessions, your creditors will be no longer able to contact you to collect on your debts. Once your bankruptcy is over, you can begin rebuilding your credit and finances.

Once you've completed the debt counseling required by your attorney, you'll be released from bankruptcy. If your creditors don't agree to accept your plan, they'll send the court a notice of your bankruptcy. This is the time when you can confirm your plan. If the plan is confirmed, you'll be discharged. If you're a corporation, you'll have to go through the court process to file for bankruptcy.