What Happens After Chapter 7 Personal Bankruptcy?
Clients typically have a hard time deciding when, where and how to bite the bullet to file bankruptcy. Whatever the chosen approach, a frequently asked question is how will filing bankruptcy affect my life? This question remains one of the biggest deterrents and concerns of a debtor. Quite often, people don’t know the implications of filing bankruptcy and assume the worst. Generally speaking, declaring bankruptcy is not a major life shift, for most, life only gets better. Here are some of things you’ll want to know regarding life during and after bankruptcy. For more bankruptcy basics, check out https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics.
Fresh Start
Creditors don’t go away, in fact, most of the time, non-payment leads to civil lawsuits and ultimately wage garnishment. There is no reason to drag out harassing phone calls, court hearings and have your employer notified of a judgment entered against your name. As a New York bankruptcy lawyer, my recommendation is to proceed with filing sooner rather than later. In light of the challenges and hardships that arise from not paying creditors, filing a bankruptcy can be an easy solution.
The fundamental purpose of bankruptcy, particularly Chapter 7, is to provide a fresh start. Assuming you qualify, a Chapter 7 bankruptcy is the best type of proceeding for an individual. Credits cards, personal loans, car loan deficiencies, judgments, and under specific circumstances, taxes (if old enough) are wiped out, gone forever. There is no reason to think about these debts ever again. Certain debts such as student loans, most taxes and other limited exceptions are not discharged in bankruptcy. For most clients with substantial debt, there is no breathing room. On top of daily worries, there’s calls every hour, piles of collection notices in the mail, and service of court papers. The beauty of filing bankruptcy is that it stops all harassing collection activity. At filing, the “fresh relief” is instant – no calls, no notices, no lawsuits, no judgments, no wage garnishments. Although the typical life span of an individual Chapter 7 bankruptcy is about four months, there is nothing to do on the debtor’s end except wait for the official discharge papers in the mail.
In sum, life after bankruptcy entails a walk away with zero debt (most often). Of course, you can’t escape rent, utilities, and other necessary living expenses, but you can eliminate high interest credit cards and loans that can be impossible to pay off.
Rebuilding Credit After Bankruptcy
Often, people who have filed bankruptcy have no problem rebuilding their credit. Its not uncommon for a debtor’s mailbox to be flooded with credit card offers shortly after their discharge. Most expect to never qualify for a credit card or a loan again. Instead, some find themselves in hot water again few years later, since qualifying for credit is so easy. Companies are happy to approve you since you should virtually have zero or a small amount of debt after bankruptcy. Moreover, they know that a discharged debtor is unable to file again for at least another 8 years, which gives them plenty of time to collect interest.
But what about qualifying for car loan or a mortgage? A Chapter 7 filing will show up on your credit report for a period of 10 years. This means that if a bank runs your credit report, they will see that you filed a bankruptcy. Nevertheless, you can still qualify for a mortgage given this reporting. Whether someone is able to finance or lease a vehicle or obtain a mortgage will be case specific. Banks consider debt to income ratio, overall credit score and account history. Some banks may be harder to obtain a mortgage than others. For example, Chase Bank may deny an applicant based on their past bankruptcy filing, while a smaller bank may welcome that customer in an attempt to attract new business.
In sum, you will qualify for credit cards after bankruptcy. Although acquiring a car loan or a mortgage after bankruptcy may be a bit challenging, some banks will allow for a co-signer or try your luck with a smaller or newer lending institution.
Will My Employer or Landlord Be Notified?
An employer is notified when a creditor is trying to collect on a judgment entered against you. A creditor typically sends a notice to your employer with a copy of the judgment asking them to disclose your pay history for the purpose of garnishing your wages. Your employer never has to gain wind of your financial troubles if you file for bankruptcy early on. Although you will have to disclose the name of your company in your schedules and provide paystubs to your bankruptcy lawyer, only creditors are notified of the filing, no one else.
In a similar vein, unless your landlord is a creditor, has a judgment against you, or you are facing eviction, they do not have to know of your filing and do not receive notice of your bankruptcy filing.
Can I Keep My SSI Benefits If I File Bankruptcy?
SSI benefits, whether the source be retirement or disability, are untouchable in bankruptcy. You can keep your Social Security Income and other government benefits in bankruptcy. Moreover, other income and assets that are also safe in bankruptcy include veteran benefits, Holocaust survivor aid, 401k and similar pension accounts, and life insurance policies, to name a few.
How do I File Bankruptcy?
Your bankruptcy attorney will file the case for you. All you need to do is provide them with the requested paperwork, which, for a Chapter 7, is typically: tax returns for the past two years; pay stubs for a period of 60 days; and completion of a credit counseling course at https://debtorcc.org. We never recommend that a debtor attempt to file on their own, but in the event that hiring professional legal help is impossible, read this checklist for the required documents: https://www.nyeb.uscourts.gov/chapter-7-checklist-individual
Contact Us
At Mishiyeva Law PLLC, we represent Chapter 7, Chapter 13 and Chapter 11 bankruptcy clients daily. As bankruptcy lawyers, we pride ourselves on offering honest and practical advice concerning debt reorganization, debt settlement and full discharge. Contact us for a quick and free consultation to see if you qualify: 646-736-6328.