Bankruptcy allows people who can’t meet their debt obligations to wipe the slate clean and be relieved of some of their burden. People in California who file for bankruptcy should be aware that filing for Chapter 7 or Chapter 13 won’t make it impossible for them to borrow money ever again. With that said, they may face some challenges that other borrowers wouldn’t.
How you file matters
There are two types of bankruptcy that are commonly used by individuals. In Chapter 7 bankruptcy, the court may liquidate some of your assets to satisfy some of your creditors. This form of bankruptcy will remain on your credit report for 10 years. Often, it only takes about two to four months to complete the actual process.
Chapter 13 bankruptcy is different. In this structure, people who work make a plan to pay down their debt over time. The process typically takes between three and five years with the debtor making regular payments to a trustee. Chapter 13 will be visible on a credit report for seven years.
Lending options
Life after bankruptcy can be satisfying as you rebuild your finances. Even while bankruptcy is on your credit report, it may be possible to borrow money to buy a car. It’s important to understand that these loans will likely have higher interest rates. Buying used will likely save you money compared to buying new.
If you are dealing with bankruptcy, it’s important to develop a working relationship with an attorney. That’s true whether you’re entering into it or emerging from it. A lawyer may be able to review lending contracts for you before entering into them. This may help prevent you from having recurring financial problems.