What really happens when you file for bankruptcy

Although filing for bankruptcy should be seen as a last resort, it can be an effective way to help you get out of debt in a timely manner. In some cases, it may be possible to reorganize your debts without losing property such as a car or Connecticut home. Finally, it may be possible to rebuild your credit within 18 to 24 months of receiving a discharge in your case.

Filing for bankruptcy doesn’t mean that you’re irresponsible

Medical debt is the leading cause of bankruptcy in the United States, and it’s possible to accumulate significant balances even if you have insurance. In most cases, you can seek to have this type of obligation discharged by filing for a liquidation bankruptcy. It also isn’t uncommon for people to file for protection from creditors because they personally guaranteed debts incurred by their companies. Generally speaking, there isn’t a link between how a person manages his or her own finances and how that person manages his or her company’s finances.

You won’t necessarily lose your property

In a Chapter 13 proceeding, you are generally allowed to retain a home, car or other assets assuming that you remain current on your loan payments. In a Chapter 7 proceeding, you are allowed to retain a portion of the equity in most items that are held inside of your bankruptcy estate.

What actually happens to your credit?

A bankruptcy can stay on your credit report for up to 10 years. However, most lenders only care about what you’ve done over the past year or two. Therefore, it should be easier to get a credit card, mortgage or auto loan relatively quickly after your case is discharged. It’s important to note that your score may go up because eliminating existing debts will reduce your debt-to-income ratio (DTI).

If you want to learn more about filing for bankruptcy, it may be a good idea to speak with an attorney. Doing so may make it easier to determine if taking such a step is in your best interest.