What Is Bankruptcy & How Does It Work?
Bankruptcy is a last resort to seek leniency for debts incurred by declaring through official legal proceedings that you are unable to pay. A person may consider bankruptcy for a lot of different reasons. Some need to file to escape financially fatal medical bills, some suffer setbacks and simply fall behind. Some are even victims of financial crimes or identity theft. In most cases, bankruptcy can wipe the slate clean and give families the second chances they need to start over. The type of bankruptcy you’re eligible to file for, of course, depends on your circumstances.
A Chapter 7 bankruptcy is the type of bankruptcy most seek when they want a truly fresh start. Although it can be painful to watch assets be seized and sold to pay off everything you owe, the freedom to simply walk away after the fact is the reason so many people choose to file for Chapter 7 bankruptcy.
A Chapter 13 bankruptcy is a little different. There are, however, some impressive perks. With Chapter 13 bankruptcy, filers are not required to surrender assets to cover debts, but are instead simply given more conducive repayment plans to pay off what they owe over 3-5 years. Yes it means you still have to pay off a good portion of what is owed, but as a result, debtors get to keep their stuff, with the chance of remaining debts being forgiven after the set payment period is expired.
How Bankruptcy Affects Your Credit
One of the most important factors in determining your credit score is your payment history. When you file for bankruptcy though, you’re legally affirming that you are unable to pay the debts you’ve accrued in full. This, in turn, can dramatically impact your credit. Reported bankruptcy even has the potential to remain on your credit report for up to 10 years depending on the type of bankruptcy you file, which means all future lenders will see even after the debts have been formally discharged. Keep in mind, however, not filing for bankruptcy and continuing to get further and further behind until you’re fighting with creditors to collect debts isn’t exactly good for your credit either. Sometimes the most responsible decision you can make is the one to come forward, admit your mistakes, and accept all the help you can get to rectify the situation and start anew!
Besides, at Suburban Auto Finance, our finance specialists are trained to assist car buyers with bad credit, histories of bankruptcy, and everything in between. Just Apply Now, and you too can meet with car dealers that feel the same!