On behalf of Law Offices of Mark M. Kratter, LLC on May 23, 2012
Filing for bankruptcy in Connecticut is never an easy decision. While it does provide debt relief, there are potentially lasting impacts on a person's life, including a negative impact on your credit score. However, filing for bankruptcy is not the end all be all, and the truth is that people can both survive and come out of it financially stronger. There are other ways to manage debt in order to prevent a bankruptcy filing, but for many people, it is the only way to move forward and begin a clean financial slate.
Two major types of bankruptcy exist for individuals: Chapter 7 and Chapter 13. Chapter 7 is the type used by people who have no conceivable way to pay back the current debts they have amassed. Their non-exempt assets are typically sold under the supervision of the court to repay debts. All of the eligible debts are wiped out and the process is over relatively quickly.
Chapter 13, on the other hand, allows for people to keep the majority of their assets by submitting a plan -- which must be approved by the court -- to reorganize debt under a designated time frame, typically two to five years. People normally use Chapter 13 when they have assets they want to keep, such as a vehicle or home. A Chapter 13 bankruptcy can typically last over several years until the debts are satisfied according to the approved reorganization plan. One advantage to this type of bankruptcy is that it has less of an impact on one's credit score than Chapter 7.
However, no matter which type of bankruptcy you choose, there are ways to rebuild your credit. Because you will probably have difficulty obtaining any kind of loan right after bankruptcy, getting a secured credit card is a good way to regain some creditability. Your card activity will get reported to credit bureaus, so if you use it responsibly, you can start creating a new credit history.
While filing for bankruptcy is not without challenges, by taking the right steps, they can be overcome. And for many people, the need to get back on their feet and rebuild often outweighs the potential complications bankruptcy -- complications that can be conquered with appropriate planning.
Source: San Francisco Chronicle, "How to Survive Bankruptcy," Angie Mohr, May 9,
