Bankruptcies are filed every day in California. If you have amassed significant debt, you may consider filing for bankruptcy to free yourself of this burden. You should realize, however, that life after bankruptcy can be very different. The consequences can shape your future.
Life after Chapter 13 bankruptcy
When considering what life after bankruptcy may be like, you have to consider the fact you may not be able to move through a Chapter 7 bankruptcy liquidation process. Instead, if you fail an income means test, you may be forced to file for Chapter 13 bankruptcy. This will involve:
- Your debt being reorganized in a manner that will make paying it off feasible
- Paying off the reorganized debt over a three or five-year period
- Making monthly payments to a trustee out of your income
- Retaining certain assets such as a primary residence and vehicle
- Unsecured debt being discharged after the plan ends
- The bankruptcy remaining on your credit report for seven years after filing
- Future credit being much more expensive to obtain
Life after Chapter 7 bankruptcy
If your income is low enough, you may be allowed to move through a Chapter 7 bankruptcy. Your life after Chapter 7 bankruptcy will be different than after a Chapter 13 bankruptcy:
- No repayment plan will be created
- A trustee will review your assets
- Your assets will then be liquidated to pay off creditors
- Priority unsecured debt is paid off first followed by secured debt and non-priority unsecured debt
- Your debt will then be discharged
- The bankruptcy will remain on your credit report for 10 years after filing
- You will not be able to receive Chapter 7 bankruptcy discharge for eight years
Overall, bankruptcy will change your life. However, how it will change will depend on whether you can file for Chapter 7 or Chapter 13 bankruptcy. Consider other options, such as settling your debts, before you file.