By Robert J. Semrad | Published July 19 2021 |
How Does Bankruptcy Affect You?
If you're considering bankruptcy, you may be wondering what it will mean for your finances. How will it impact my spouse? Will it affect my credit score? And will I lose everything if I file?
The good news is that, despite what many people think, filing won't ruin your life. In fact, many people don't have to give up any of their assets. As long as you can meet the qualifications and follow the necessary steps, filing can be an opportunity to start fresh and get back on track with your financial future.
Does Bankruptcy Affect Your Spouse?
Many people mistakenly believe that spouses are automatically on the hook for each other’s debts. In reality, both spouses are usually only responsible for debt that was acquired jointly. If one spouse files and the other does not, only the filing spouse’s debts will be discharged. The non-filing spouse’s debts will not be included and only the filing spouse’s obligation to pay joint debts will be discharged. This means that creditors for joint debt can still pursue payment from the non-filing spouse even if the other spouse files.
Additionally, if you file for bankruptcy, it will not damage your spouse’s credit.
What About Personal Assets?
For guaranteed protection of your personal assets, you can file for Chapter 13. This type of bankruptcy restructures your debt into an affordable 3-to-5-year repayment plan, and as long as you follow the schedule, you won’t have to give up anything you own.
Essential Info About Taxes
Many of our clients are surprised to discover that you can include qualifying federal back taxes in a bankruptcy. However, it’s important to note that you cannot eliminate, pre-existing tax liens in the process. This means that, while it will protect you from having your property seized or your wages garnished, you won’t be able to sell the property without first paying off the lien. For this reason, it’s vital that you file BEFORE the IRS files a lien on your property.
Your Credit Score
People often tell us they don’t want to file because they are worried about destroying their credit. The truth is, while the record can stay on your credit report for up to ten years, many of our clients actually improve their credit scores by filing. By the time people file for bankruptcy, their accounts are often severely delinquent and their credit scores are already shot. By discharging your debts, you can start over with a clean slate, and even in the short term, the positive effects of filing often outweigh any damage done to your score.
Possible Loss of Property
With the exception of child support and student loans, Chapter 7 bankruptcy allows you to wipe out most of your unsecured debts. In exchange for your debts being discharged, you must allow a court-appointed trustee to liquidate your assets to repay creditors. However, in our experience, DebtStoppers clients rarely lose a thing during this process.
While bankruptcy can have a substantial impact on your life, it is overall a positive one. Still hesitant? The experienced attorneys at DebtStoppers can answer your questions and explain how bankruptcy can get your finances back on the right track. Call or text an office in your state or contact us online to schedule a free personal debt analysis with a member of our team.