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How will bankruptcy impact my finances?

Filing for bankruptcy isn't a decision that most people come to overnight. Instead, it is often made after taking a serious look at their financial state. When you do decide that you are going to file, you have to think about how this decision will impact you now and into the future.

There are two forms of personal bankruptcy that are the most common. Chapter 7 and Chapter 13 are the ones that most individuals will file. When you do this, you are trying to stave off financial disaster. There are a few differences between these two that you have to consider.

Do I have to make payments after bankruptcy?

You will make payments to the bankruptcy trustee when you file a Chapter 13 bankruptcy. This is also known as a wage-earner's bankruptcy. You won't make any payments to the trustee for a Chapter 7. This is known as a liquidation bankruptcy because your nonexempt assets are liquidated to pay your creditors as much as possible.

How can I rebuild my finances after bankruptcy?

Rebuilding your finances is often challenging, but it is possible. No matter which chapter you file, you will have to work to improve your credit score. Since bankruptcy stays on your credit report for up to 10 years, you will have to start slowly to show lenders that you have turned over a new leaf. It is imperative that you pay your bills on time if you are going to do this. You will have the benefit of education courses required to get the bankruptcy discharged. This enables you to learn how to budget and use credit wisely.

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