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Can You Bounce Back from Bankruptcy?

Do you lose everything you own in a bankruptcy…even your future? Or is it all just a difficult period we can all eventually pick up and dust off from?  The reality of the situation seems pretty unpredictable because of the varying of the damage done. No two bankruptcies are ever the same.


What is bankruptcy?

Bankruptcy is a federal court process which is utilized to abolish or repay debts of the consumers. This process is carried out under the protection of the bankruptcy court. The main intention of this process is to give the consumers a fresh start for a new financial life. Under a bankruptcy, all creditors are treated fairly and the same. This means all debts must be included in your bankruptcy and you do not have the liberty to pick and choose which debts you will disclose.


Are there any benefits of bankruptcy?

Bankruptcy comes with some benefits to the consumer.

  • The automatic stay

Once the bankruptcy case is filed you are free from all the collection instances such as foreclosures, repossessions, garnishments, license suspensions, and creditor harassment. However, depending on the situation the automatic stay may not be permanent

  • Protects assets through exemptions

The trick is that there are federal exemptions of assets and state exemptions of assets—but you can only choose one or the other. Exempt assets are protected when filing a bankruptcy. Examples of exemptions include equity in homes, equity in vehicles, furniture, retirement funds, household goods and more.

  • Relief from debt

Under this circumstance, you will not have to repay any loans you obtained. However, when you discharge the vehicle loans and property loans, you will lose those assets.


What are the drawbacks?

  • Your credit reports show your bankruptcy for 10 years, which is the biggest burden for you to obtain a new home
  • It will be hard to find a new rented house

This is because most landlords rely on credit reports before renting their houses. However, a recommendation letter might assist the application process in such cases

  • Effect on new employment

If your credit report is reviewed upon applying for a new job, you are most likely to lose the opportunity

  • Higher insurance premiums

With a new damaging credit score, you are likely to end up with a higher premium. The situation will be slightly better if you have a good history with your insurance provider.

  • It can ruin your social standing

Most of the Bankruptcy cases are published in the newspapers and usually these cases are considered a public record. It may affect badly on your social status and other affairs.


Trying to repair the damage a bankruptcy does to your credit could mean working at this process for 7-10 years. recently published this account of one of their readers recounting their experience just two years after a bankruptcy:


“Our credit score dropped by approximately 100 points when we filed for bankruptcy. Prior to that, we actually paid our bills on time, but it got to a point where we knew it was no longer going to be that way so we had to file. The decision to file bankruptcy was the hardest decision of my life and I’m still not sure it was for the best. Two years later we now have two car loans and a line of credit but our credit scores have not moved. I’m frustrated and I’m not buying into this credit score thing and “making it better.” We don’t have credit cards, yet every website says to get a card. I don’t want a credit card! I like having to rely on the cash I have and I’m not interested in credit cards at all. So while I pay all of my bills on time, including several student loans, my credit score never moves… and there seems to be no great explanation as to why. What gives? “ “2 Years After Bankruptcy, My Credit Is Still Bad — Why?








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