Understanding personal bankruptcy, its positives and aftermath

On Behalf of | Dec 31, 2020 | personal bankruptcy |

With the ongoing health crisis and the accompanying financial challenges people are facing through job loss, medical expenses and depleted savings, bankruptcy may be a way to navigate the situation and get on stronger financial ground. Illinois residents and people across the nation who are thinking about bankruptcy should be hopeful about the future as bankruptcy can either formulate a reasonable monthly payment of what they owe via Chapter 13 or clear their unsecured debt through Chapter 7. Still, there are factors to consider, including the aftermath of the filing.

What to expect after a successful bankruptcy

There are many benefits to bankruptcy including eliminating the harassing phone calls, retaining a home and automobile, and no longer worrying about how to make the minimum payments to kick the can down the road until the next paycheck. However, people who have filed for bankruptcy will have a noticeably different financial situation and concerns to address.

There will be a changed landscape when securing housing whether the person is renting an apartment or trying to purchase a home. There is generally a credit check when renting and explaining the bankruptcy might be necessary. For some, renting before the bankruptcy might be a wise option. For mortgages, it is even more difficult. Income and credit are vital components to getting a mortgage. The interest rates will likely be higher for those who have filed for bankruptcy. On the positive side, people who have filed for bankruptcy will be in a better financial position to pay their debts on time and their credit score can improve rapidly.

Regarding credit, people can get credit cards relatively quickly after the bankruptcy. There may be an annual fee and the interest rates will be higher, but a credit card can be of use to purchase necessities. If the bills are paid on time and for more than the minimum payment, this can increase a credit score in short order. Employers will frequently check a person’s financial history before offering a job. A bankruptcy is not a disqualifying factor in a job search, but job seekers should be prepared to explain how they got into difficult financial straits.

Having legal assistance can help with the entire process

Given the ongoing global situation, there may be greater understanding as to how people suddenly started struggling with their finances. Regardless, when thinking about bankruptcy, it is imperative to understand the entire process from the start. That includes what happens after the filing. A firm with experience in representing people in their bankruptcy cases can provide guidance and advice on how to proceed and achieve a successful outcome.