Filing for bankruptcy is a big decision. There are benefits, and there are drawbacks. When you’re deciding whether or not to file for bankruptcy, it’s important to appreciate both the short-term effects and the long-term effects of filing.
It’s also helpful to work with an experienced Las Vegas bankruptcy attorney to understand what filing means for your personal situation. Here are six short-term effects and five long-term effects of filing for bankruptcy to consider.
Six Short-Term Effects of Filing for Bankruptcy
1. Creditors Stop Calling
Perhaps the most welcome, immediate effect of filing for bankruptcy is that creditors have to stop calling you to try and collect the debt. Creditor phone calls should stop immediately when you file for bankruptcy.
Creditors may still try to collect some of the debt through the bankruptcy, but they can only go through formal, official bankruptcy channels. You don’t have to worry about lawsuits, process servers, and the never-ending phone calls from the credit card companies and other unsecured creditors when you formally file for bankruptcy.
2. You Can Stop Paying Low-Priority, Unsecured Debts
When you decide to file for bankruptcy, it no longer makes financial sense to continue to pay on low-priority, unsecured debt. Debts like credit cards are likely to go away entirely in a Chapter 7 bankruptcy filing. If you file under Chapter 13, you’re probably going to pay only a fraction of the total amount that you owe. Filing for bankruptcy can give you immediate relief when you’re drowning in payments.
3. You Buy Time to Stay in Your Home or Get Caught up on Your Mortgage
When you file for bankruptcy, it can stall the foreclosure process. When you file for Chapter 7 bankruptcy and you’re in foreclosure proceedings, you may be able to stay in your home for several months longer than you may be able to stay if you don’t file for bankruptcy.
In a Chapter 13 bankruptcy filing, you can get caught up on your mortgage payments and avoid foreclosure altogether. If you’re behind in your home mortgage payments, it’s important to speak with an attorney about what bankruptcy may be able to do to help you with your living situation.
4. You Have Options to Address Your Car Loan
If you have a car loan, filing for bankruptcy gives you a number of options to address the loan. You can make payments to become current on your car loan and keep your vehicle in a Chapter 13 filing. You may be able to surrender your vehicle or negotiate better loan terms if your car is worth less than your current loan. If you’re behind in your car loan, filing for bankruptcy gives you options to address the debt. You may or may not end up keeping the vehicle.
5. Assets and Debts Become Public
Bankruptcy is a public legal proceeding. Unfortunately, your assets and your debts are about to become public information. There’s not much you can do to avoid the public scrutiny that comes with filing for bankruptcy. Your personal financial life is about to become public.
6. You May Lose Some Property
Nevada has some of the most generous bankruptcy exemptions in the United States. You don’t have to worry about losing the assets that are most important to you as long as they fall within the allowed exemptions. However, if you have property above the allowed exemptions, you might lose some items when you file for bankruptcy. Your attorney for bankruptcy in Las Vegas can help you understand what’s likely to happen with your property when you file for bankruptcy.
Five Long-Term Effects of Filing for Bankruptcy
1. A Lower FICO Score and a Record on Your Credit Report
Your bankruptcy goes on your credit report for ten years. You can also expect an extremely low FICO score. When you file for bankruptcy, there’s no way to stop the bankruptcy from ending up in your financial records. You can expect creditors who run your report to find the information for the next decade.
2. Higher Car Insurance Rates
Bankruptcy can raise your car insurance rates. It might seem unfair that you have to pay higher car insurance rates when you’ve fallen on hard times, but insurance companies can legally charge higher prices to people who have filed for bankruptcy. Insurance companies often base their rates on credit scores. You can expect to shell out more for car insurance after a bankruptcy filing.
3. Difficulty Getting a Loan or Renting an Apartment
Bankruptcy can make it complicated to get a loan or even rent an apartment in the years following your bankruptcy. Many lenders and landlords see bankruptcy as a red flag when they’re deciding on an application. In addition to difficulty getting a loan or renting an apartment, you also can’t get a guaranteed mortgage loan for two years after your bankruptcy is final.
Essentially, you’re going to be living in a cash economy for several years. You can rebuild your credit over time. Certainly, the 10th year after bankruptcy isn’t going to be as hard as the first year. However, you can still expect to pay cash for most of your purchases for at least a few years after you file for bankruptcy.
4. Employment Scrutiny
Some types of jobs consider your bankruptcy when they’re making hiring decisions. Jobs like law enforcement or financial management may be skeptical of anyone with a previous bankruptcy filing. Employers must ask permission before seeking your financial information for a job application, but in any case, a bankruptcy filing may be a red flag.
5. You Can’t File for Bankruptcy Again for Years
When you file for bankruptcy, you can’t file again for a number of years. The time limit depends on what chapter you use to file the first time and what chapter you want to file next. The waiting period is several years for any combination of filings.
Is It Worth It to File for Bankruptcy?
Are you wondering if bankruptcy is right for you? Our Las Vegas bankruptcy attorneys can help. We can help you understand the short-term effects and long-term effects of filing for bankruptcy, in your unique case. When you understand the bankruptcy process, you can make the best decisions for you. Contact us today for an immediate consultation about your case.