Sometimes, outstanding debts become too much to pay off due to a financial emergency, and your only recourse is to file for bankruptcy Everett WA. Most people are told that bankruptcy is the end of the road. However, more often than not, bankruptcy gives individuals a second chance when debts build up and income disappears.

Automatic Stay

As soon as you file for bankruptcy, an injunction called an “automatic stay” is placed on your creditors. This freezes claims on your property and assets, both to give you time to work through the filing process and to prevent one creditor from seizing assets before others get a chance to step in. The duration of an automatic stay varies based on the type of filing and the duration of the case.

The Creditors Meeting

Also called the 341 hearing, after the relevant section in the U.S. Bankruptcy Code, this meeting establishes the terms of your bankruptcy. You, the trustee responsible for your case and your creditors will meet to verify your identity, discuss your petition under oath and assess any relevant documentation to determine your financial situation. This typically is your only visit to court.

Repayment

How your debts are resolved depends on whether you file Chapter 7 or 13 bankruptcy. In a Chapter 7 case, you may have to surrender assets to pay creditors, though rarely do debtors lose a substantial amount of property. For Chapter 13 cases, you instead receive a plan for repaying debts over the next few years, based on how much you owe and earn, with specific instructions and deadlines for repayment.

What Happens Next

A bankruptcy case will persist on your record for seven to 10 years, causing your credit score to drop because of your admission to struggling with debts. This can cause some further financial troubles, but the impact varies and typically is lighter than what would’ve happened if creditors came to collect. On the other hand, most of your debts will be discharged or lessened, alleviating the payments you have to make. This is the second chance that filing for bankruptcy can give you.