What Happens After Bankruptcy?

When an individual files for bankruptcy, it does not have to mean the end of his financial future. A bankruptcy filing does not translate into an end of all financial problems, either. After bankruptcy, filers can expect to be protected from most creditors, but should also prepare for a onerous road ahead paved with legal fees and credit counseling courses. Although bankruptcy laws vary by country, it can be months before the bankruptcy process is complete.

Life post-bankruptcy varies depending on the type of filing a debtor makes. In the US, there are two primary types of bankruptcy that individuals can file: Chapter 7 and Chapter 13. Under Chapter 7, the debtor is seeking a liquidation of all his assets and requests to be discharged from any financial obligations. Under Chapter 13, the debtor seeks a reorganization in which debt will be restructured under more favorable financial terms to increase his chances of repaying creditors.

After bankruptcy, a filer can expect to be protected from the collection of debts accumulated prior to the filing. Under a Chapter 7 or Chapter 13 filing in the US, an automatic stay is granted on behalf of the filer. This motion will stop or delay foreclosures, repossessions, wage garnishments, power shut-offs, and other debt collection actions such as harassing phone calls, as long as the case is still before the bankruptcy court. Under Chapter 7 bankruptcy rules, once a judge rules to discharge a filer's debt, creditors may no longer make claims on the individual.

Property owners can expect the court to intervene with real estate after bankruptcy. Individuals who file for Chapter 13 may be able to keep properties after the reorganization is complete. Under Chapter 7 laws, filers can expect to surrender property to a trustee. The assets will be liquidated or sold and the proceeds are used to repay creditors.

Multiple sets of circumstances can lead to a bankruptcy filing, including unemployment, a divorce, or a prolonged sickness. No matter the reasons surrounding a bankruptcy filing, an individual can expect to receive a fresh start after bankruptcy. He should use the opportunity to rebuild credit by obtaining a secured credit card and making consistent monthly payments. A bankruptcy filing can remain on a filer's credit report for ten years, but a person doesn't have to wait that long before attempting to obtain a loan. After only a few years, a former filer can begin taking steps towards obtaining a mortgage.