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What Happens When You File for Bankruptcy?

On Behalf of | Jan 17, 2022 | Bankruptcy

If you are facing financial hardship and can no longer pay your debts, bankruptcy can help you start over and get your finances under control again. However, filing for bankruptcy is a major decision. It’s important to understand the process, as well as the legal and practical implications. Contacting an experienced bankruptcy attorney can help you decide what legal and financial choices are in your best interest.

What Is Bankruptcy?

Bankruptcy is a court proceeding in which you are granted relief from your debts, either through their discharge or permission to pay them down over time. Filing bankruptcy prevents creditors from trying to collect money from you or going after your assets.

There are four types of bankruptcy, called Chapters, which determine the specifics of how your debt will be relieved. There are also specific requirements related to your income and debts that you must meet to be eligible for each type of bankruptcy. A skilled Iowa bankruptcy attorney can help you understand your options so that you can select the type of bankruptcy that best applies to your financial situation.

Will I Be Debt-Free after I Declare Bankruptcy?

Declaring bankruptcy does not necessarily discharge all of your debts. The bankruptcy chapter that applies to your case will determine which of your debts may be eliminated. There are also certain types of debt to which bankruptcy does not always apply, including:

  • Student loans
  • Most taxes
  • Child support
  • Alimony
  • Criminal fines

Will I Lose All My Assets When I File Bankruptcy?

Filing for bankruptcy does not mean you will lose all of your assets. However, depending on the type of bankruptcy you file, you may need to sell off assets to repay a portion of your debts. Under Iowa state law, property that is essential to your health and wellbeing is protected in bankruptcy, and this includes:

  • Your home (1/2 acre in town, up to 40 acres elsewhere)
  • Your car (up to $7,000)
  • Your personal belongings (within limits)
  • Your retirement accounts and pensions (within limits)

There are limitations on the value of property that is protected. A Council Bluffs bankruptcy lawyer can advise you on exactly which of your assets are protected and about any limitations that apply to your specific situation.

How Does Bankruptcy Impact My Credit Score?

Filing bankruptcy indicates that you are unable to pay your debts. Therefore, this will have a negative impact on your credit score. After you file bankruptcy, it will become more difficult for you to obtain leases, loans, and credit cards. If you’re able to obtain loans or credit cards, they will be offered to you with higher interest rates and stricter terms.

Bankruptcy will stay on your credit record for up to ten years. However, you can begin rebuilding your credit soon after filing through basic steps, such as making timely payments on bills and credit cards. Bankruptcy and the negative impact it has on your credit record is usually a better option than holding onto debts that you can’t afford to repay. Bankruptcy can offer the opportunity for a fresh start on your finances but requires careful consideration of the consequences, as well.

Who Will Find Out That I Have Filed Bankruptcy?

While bankruptcies are public records, most people do not take the time to look up bankruptcy proceedings unless they have reason to do so. A bankruptcy will show up in a credit check but not in a criminal background check. Potential employers, landlords, and creditors are the only ones who are likely to run a credit check on you and find out about your bankruptcy.

How Can a Bankruptcy Attorney Help?

Bankruptcy allows you to start over with your finances, but it involves a complicated legal process and comes with many long-term consequences. Filing for bankruptcy involves many critical steps and decisions, and making mistakes in the process can negatively affect the outcome of your case.

If you are considering bankruptcy, the accomplished bankruptcy attorneys at Telpner Peterson Law Firm, LLP can assess your specific financial situation and advise you on your options. Call us at 712-309-3738 today and let us help you take the guesswork out of this major decision.