Understanding Bankruptcy and Its Effects

Taking out a loan or financing is a widely accepted norm. In fact, credit card debt, auto, student loan and mortgage debt rose significantly in 2014 compared to the previous years. This fact also shows the potential number of people who might have problems paying back their debts. For many who have exhausted ways to do so, they can resort to filing for bankruptcy.

Bankruptcy is the process of eliminating or repaying a portion or a whole debt under the protection of the federal bankruptcy court. It can be accomplished either by liquidating a debtor’s property or by reorganizing the repayment agreement. These options are elaborated in Chapter 7 and Chapter 13 Bankruptcy. The court shall decide which should resolve a debtor’s financial obligation.

Filing for bankruptcy looks like a good option, but it can also have adverse effects on your life. Besides possibly losing properties to help pay your debts, such as your car, expect your credit rating to plummet. When this happens, you may lose the chance of taking out good financing deals. Your bankruptcy file will also be published in the public register, so your privacy will be affected.

On the other hand, experts say that this is the quickest solution to the stress of having an excessive amount of financial obligation. To prevent the process from further stressing you out, make sure you are well-represented. It is crucial to hire a bankruptcy lawyer to represent you in court once you file for bankruptcy.