Having to declare bankruptcy is a scary time for anyone. The fear of the unknown and the stigma associated with declaring bankruptcy is enough to have anyone hiding under the covers. If you think you may need to file bankruptcy, it is critical to consult with an attorney. Attorneys, like these bankruptcy lawyers in Scranton, specializes in bankruptcy law and are essential to you during this process. Don’t try to go at it alone. Bankruptcy law is exceptionally complex and challenging to navigate, and an attorney will help reduce your stress during this emotional time.

Credit Score

Many people are under the impression that filing for bankruptcy will destroy their credit. While your credit does take a while to recover from the process, there is a bright spot. Most people who are preparing to file bankruptcy already have an inconsistent payment history. Also, you most likely have a higher debt ratio than the recommended 30% or underutilization rate. Payment history is such a big part of the credit scoring model.  So, chances are your credit score is much lower than you may have thought.

Property

In some cases, filing bankruptcy can mean the loss of your personal property. During the bankruptcy filing, a credit counselor and trustee will be appointed to manage your affairs. The trustee’s job is to sell off your assets to make payments to your creditors. This can be especially traumatic if your car and home are sold. Even your possessions in the house are subject to seizure. But every case is different. This is why you need your attorney to help you throughout the process. They will advise you on what to expect, and that way, you can make plans for how to begin rebuilding.

Credit Counseling

When you begin the filing process for bankruptcy, you will be assigned a credit counselor. This counselor is assigned to help go over your finances and to see the areas of opportunity for improvement. You must complete financial management classes so that you don’t find yourself in this situation again. By learning healthy money habits, you are helping to secure your stress and debt-free future.

Higher Interest Rates

After coming through on the other end of the bankruptcy, you might find you need to secure a car loan or a new mortgage. It is challenging right after your bankruptcy to secure any loan or line of credit. Once a little bit of time has passed and you are working on rebuilding, you may be eligible for a credit card, loan, or mortgage. Be prepared that it is a more difficult process as many of the banks and lenders will decline your application. But some will approve. Because you are a higher risk applicant, you will have to pay higher interest rates to help mitigate the lender risk. As more time passes and you show healthy credit habits, your interest rates will begin to lower, and you will be approved more often.