No, it will not. Filing bankruptcy will impact your credit upon filing however, after a year of filing bankruptcy most debtors find their credit scores have increased approximately 125 points from the date of filing. In today’s economy, bankruptcy has become a much more frequent occurrence and the consequences of filing have drastically decreased in their severity. Normally, the only place that a bankruptcy can be viewed by a creditor is a credit report. When a bankruptcy is filed, almost all of the debt on a credit report goes to zero while income stays the same. Thus, this improves the credit score, giving most bankruptcy filers a better credit score shortly after filing.
Today, those who file bankruptcy are able to obtain credit right after the bankruptcy process is complete (4 months in most circumstances). This includes obtaining new credit cards and car loans. However, the Annual Percentage Rate (APR) on these items may be high if they are obtained too soon. Therefore, an individual who files bankruptcy should spend about six months to a year raising their credit score to a point where the APR rises to a rate that is reasonable and similar to the rate obtained by the individual before the bankruptcy was filed.
An individual who files bankruptcy can increase their credit score almost immediately after the bankruptcy process is finished. This can be done by obtaining a secured credit card and using it like a regular credit card. In addition, any payments that are made to any reaffirmed debts (debts that are secured by a car or a house where a new contract is signed for these items during the
bankruptcy) also count towards increasing the credit score of an individual bankruptcy filer. In most circumstances, bankruptcy is a new start for any individual who has come upon hard times.
It depends on the kind of bankruptcy. With liquidation bankruptcy, like Chapter 7, you can ask that your debts be discharged—in other words, that they be wiped out. This may require surrendering some property to sell to satisfy creditors. Chapter 13 requires repayment of some debts, in part or in full, but is spread out with a payment plan. Some debts are never discharged with bankruptcy, such as child or spousal support and tax debts. Student loans are only discharged if you provide evidence that paying them constitutes an undue financial burden; discharge of student loans is rare.
Bankruptcy filings are public as a part of court records. That being said, unless someone is deliberately looking into those court records, the only people who will know about your bankruptcy filing are you, your attorney, the court, the creditors, credit bureaus, and trustees. Of course, any scenarios in which your credit score is checked, such as in making purchases or signing up for a new credit card, will reveal your bankruptcy record. Additionally, if your wages are being garnished, your employer will be aware, as will former spouses if they are receiving spousal or child support.
Chapter 7 bankruptcy is a liquidation form of bankruptcy. That means that many debts are discharged, and the remaining liabilities are paid off with proceeds from the sale of non-exempt assets. As you can guess, Chapter 7 results in loss of property, though many assets can be saved through state exemption laws. Eligibility for Chapter 7 is based on means, so if you’re above a certain income level, you will have to file for Chapter 13.
Chapter 13 bankruptcy establishes a repayment plan, typically taking place over 3 to 5 years, during which you pay back creditors for what you can afford. Some debts are discharged, others are paid back only partially, and others are required to be paid in full. The specifics of your payment plan depend on your income and assets.
Filing for bankruptcy results in an automatic stay, meaning creditors can no longer hound you for payment, including credit card companies. However, that doesn’t mean your maxed-out credit card is suddenly useable again or that your account will remain intact. Some card companies terminate accounts belonging to those who’ve filed for bankruptcy, even if there’s no balance on the card. If there is a balance on the card, that card will be canceled when you file.
After bankruptcy proceedings are completed and your debt is discharged, you can apply for new credit cards, but you will face higher interest rates due to your reduced credit score. Bankruptcy will also appear on your credit report for a number of years, depending on the chapter. Chapter 7 can remain on your report for up to 10 years, while Chapter 13 can remain for up to 7.
In short: all of your assets. This is required by bankruptcy law, and failure to disclose assets can result in fraud charges. Assets include property, both real and personal, as well as any interest in property. Before you get worried about accidentally leaving something off and getting charged with bankruptcy fraud, remember that our lawyers will be right there with you! As long as you are honest with us, we can guide you through the process of disclosing your assets. Just don’t try to cut corners and hide assets, thinking that will protect you. In the long run, it will only cause you harm. Trust us and we’ll get you through this.
- A list of every bill that you owe.
- A copy of any lawsuit that you are involved in.
- Two pay stubs representing an average pay period which include year to date income.
- Make sure you are aware of all interests in real estate in which you have any (even a partial) interest (including real estate you are purchasing, that you already own, or that your parents or another relative may have put your name on the deed).
- A list of any cars, trucks, trailers, boats, motorcycles, mobile or motor homes you own.
- Have some idea of what your home, jewelry, and other property is worth.
- Make sure you are aware of the cash value of any whole life insurance policies you have.
- If you are self-employed, make sure you know all business debt for which you are personally liable.
- If you have used your credit cards for purchases, cash advances or balance transfers in the past 4 months, go through your statements and calculate how much money you have charged to each card.
It is possible to file a joint petition for bankruptcy as a married couple, but not required. You can file jointly or separately, depending on your situation and how much debt you both share. However, keep in mind that because Arizona is a community property state, both spouses can be held responsible for debts incurred by one member if the debt occurred during the marriage. The best course of action greatly depends on your specific situation, so contact one of Bellah Perez’s bankruptcy attorneys today to find out if joint or separate petitions are right for you.
Bankruptcy is the last resort. If you are able to pay your debts or can find relief through debt negotiation or settlement, do so. It’s best to try other options before turning to bankruptcy. However, if your income and property are not enough to keep up with the payments you owe, bankruptcy can be the best option for starting over with a clean slate. If creditors are harassing you, you’re burdened with debt following a divorce, you’re facing foreclosure, or your wages are being garnished to pay your debts, consult a bankruptcy attorney today to determine the best path to relief.
Certain property and assets are exempt. For instance, homesteader’s protection can allow you to keep your property as long as your equity in it does not exceed a certain dollar amount. Vehicles can also be eligible for exemption, along with some personal property such as household furniture, appliances, clothing, musical instruments, pets, books, computers, and some jewelry. In many of those cases, there is a dollar limit to those exemptions. Life insurance policies, retirement, and lawsuit settlements can also be protected. Chapter 7 carries more potential for losing assets than Chapter 13, which generally leaves most of your belongings untouched by creditors. To know the specifics, contact one of our attorneys today. They can assess your property and tell you exactly what possessions are off-limits to creditors.
There are multiple ways to keep a financed personal vehicle while filing Chapter 7 bankruptcy. One possible option is redemption, which not only allows retention of the vehicle but also reduces the amount to be paid for the vehicle. A bankruptcy attorney at Bellah Perez, PLLC can help you determine the best way to keep your financed vehicle while at the same time getting the bankruptcy relief you need.