If a person’s financial obligations become excessive, they may sincerely wonder how to get out of debt. Attempts to pay off debts could last for years with no resolution. North Carolina residents might look toward the bankruptcy court for a solution, but if they’re unfamiliar with bankruptcy proceedings and their impact, they may not understand the process. Before entering bankruptcy court, debtors should learn how the process impacts them.
Seeking personal bankruptcy protection
Personal bankruptcy could involve filing for Chapter 7 or Chapter 13. Chapter 7 bankruptcy involves liquidating non-exempt assets to pay specific debts. The remaining debts face a discharge, meaning the debtor does not need to pay those creditors anymore.
Not everyone qualifies for Chapter 7, so Chapter 13 becomes the alternative option. With Chapter 13, a debtor finds that some debts are discharged, but a requirement exists to pay remaining debts through a structured plan. Filing for bankruptcy has many potential benefits, but filers should expect there to be some undesirable results from a bankruptcy filing.
Bankruptcy and credit reports
Any time someone files for bankruptcy, their credit score reflects the filing. Chapter 7 may appear for up to 10 years, and Chapter 13 could last seven years. When a third party runs a credit check, they will see the bankruptcy notes on the report.
Bankruptcy could lead to negative responses from credit card applications, and even those institutions that approve the application might require higher interest rates. Personal and mortgage loans might be difficult to acquire since the borrower appears risky. Lenders don’t want to see the borrowers file bankruptcy again.
Individuals applying for a job or seeking an apartment might run into difficulties as well. Leasing or buying a car could come with trouble. However, individuals who are unable to pay their debts and struggle with collectors may find that bankruptcy protections are worth the potential drawbacks.