Bankruptcy After a Job Loss
Bankruptcy is one of the most difficult decisions to make for most people. The situation of being an unemployed mortgage borrower is even more serious. It’s essential to consider the short-term and long-term impacts of this decision.
If you are thinking about filing bankruptcy, take a moment to learn about it and exactly what the implications will be for you right now as well as in the past. If you have limited options, this could be one of the best financial moves for you, especially if you have significant debt, and you are struggling to find a job.
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Bankruptcy Can Happen to Anyone
For those who need it, bankruptcy is an important component to improving financial life. Many people view this as an acceptable option when they have too much debt, such as from a severe health crisis that leaves them unable to pay their bills. Yet, many more use it when there is a need to get immediate help to stop legal actions such as foreclosure.
Did you know that between October 1, 2005, to September 30, 2017, about 12.8 million people filed for bankruptcy in the U.S. court system, according to the United States Courts. Of those who filed, about 68 percent, or 81 million people filed for Chapter 7 bankruptcy, which is the type that allows for debt elimination through the liquidation of assets. You are not alone in the need to file bankruptcy. However, before you take this step, there are a few key things you need to know about it.
Bankruptcy Can Help
One of the most important ways that bankruptcy can work for you is by getting rid of the debt you cannot pay. In Chapter 7 bankruptcy, the court seizes any extra assets you own, sells them, and repays the creditors with them. The rest of the debt is forgiven – you never need to repay it.
The benefit here is that you get a fresh financial start. It does not matter if the debt is related to credit cards or has built up over time as a result of medical bills. As a component of the rights that Americans have, you have the ability to ask for financial forgiveness.
You do not have to pay back any debt that you cannot afford to repay. This includes credit cards, medical bills, and personal loans.
You are removed from all legal liabilities for those debts. Those creditors cannot come after you ever again for those costs.
You also get an emergency freeze of all legal action against you. For those facing foreclosure, this can buy you time until you find a solution for getting your mortgage loan caught up.
If you do not want to remain in your home, you can file for bankruptcy to have the debt (and the home) stripped of your financial responsibility.
Bankruptcy can also work to eliminate other debts, allowing you to get caught up on your home’s mortgage payments if you want to remain in your home.
What About the Negative?
After a job loss, your mounting mortgage payments may push you to file bankruptcy. In some cases, it can be a good thing, but it does come with some consequences. For example, it will remain on your credit report for up to the next ten years. During that time, it will be significantly harder for you to obtain new credit – and hard to buy a new home as well. You may find that you need more money in the bank for a down payment to purchase or even rent your next place to live. This may mean you find yourself without debt, but also without the ability to regain control over your home.
Also, note that some employers will check an applicant’s credit score. If your credit history is bad, this may encourage them not to trust you especially for any type of financial position.
There is also the need to purchase a bankruptcy attorney. Though legally you do not have to have an attorney, having one ensures the process goes well and that all your debt is included.
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