How does bankruptcy work? I am thinking of filing but I am worried about it will ruin my life.

Bankruptcy may easily be one of the most misunderstood areas of the law by non-attorneys. Many people believe if a person files bankruptcy their credit is ruined for life.  Others believe if you file bankruptcy, you would not be able to obtain credit for 10 years.  After 29 years of practice, I can tell you that none of this is true. 

People worry about filing bankruptcy simply because they do not understand how it works.  Bankruptcy is a federal court process which protects debtors from their creditors.  Bankruptcy is a great tool to protect your home, car, money and to prevent your creditors from harassing you for past due payments.

Bankruptcy does not ruin lives.  In fact, bankruptcy often gives a person back their life. Bankruptcy can put you back in control of your finances instead of allowing the debt collectors to control your destiny.  Bankruptcy is designed to provide people with a fresh start. And, it does just that.  For people who complete their bankruptcy cases, life gets better.  There is no shame in filing bankruptcy.

Bankruptcy can eliminate your debt upon the discharge of your case. A discharge simply acts as a "forgiveness" of your debt.  If you are filing a Chapter 7 bankruptcy, your debts will be discharged in approximately 3 to 8 months.  Generally, the only debts that cannot be discharged are student loans, child support/alimony payments, some tax debts and debts related to criminal matters.

In a Chapter 13 case, your debts are reorganized by forming a payment plan that will last from three to five years.  A Chapter 13 case is a great way to catch up past due mortgage payments.  Most payment plans under a Chapter 13 case will include your vehicle payment.  Therefore, you will have just one easy monthly payment.  You will not lose your home or car.  While student loans, child support/alimony payments, tax debts and debts related to criminal matters would not be discharged, these could be paid through a Chapter 13 case. Unsecured debt such as credit card debt, finance companies, and payday loan company debts will be completely eliminated.  You will also receive the title to your vehicle when your case is discharged.

There is life while you are in a bankruptcy case and after you are discharged from bankruptcy.  After a Chapter 7 case - which usually lasts only 3 - 8 months, you can incur credit right away. Of course, the sooner you incur credit after a bankruptcy, the higher the interest rate will be.  If your income qualifies, most people can purchase a home about 2 years after their Chapter 7 case. You will also begin to be offered loans at competitive interest rates about 2 years after your case if over. Debtors filing for Chapter 13 protection can incur credit while they are in the bankruptcy plan provided they obtain court approval. For qualified Chapter 13 debtors, the purchase of a home is possible after they have made 12 months of timely bankruptcy payments.

You will find instant relief by filing a Chapter 7 or Chapter 13 as creditors are not allowed to attempt to collect on their debt as soon as the case is filed.  As a result, you will not have to worry about receiving harassing calls from your creditors as they are not allowed to contact you in any way.


The Law Office of Seymour & Associates, P.C.

The legal info provided on this website should not be construed to be any type of formal legal advice, nor the formation of an attorney-client relationship. Any case results set forth here were dependent on the specific facts of that case and the results will differ from case to case.

Angie Seymour
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Bankruptcy Attorney Serving Augusta, GA