Bankruptcy is one debt relief option that helps you to become debt free easily as it discharges most of your debts and pouts a stay order on any kind of activity after the bankruptcy has been filed. Many people support bankruptcy and are of the opinion that bankruptcy helps you to get a fresh start. However, some others believe that it is better to avoid bankruptcy as it hurts your credit.

What happens with bankruptcy?

In case of bankruptcy, immediately you file for it and if it is passed by the court, a stay order comes into effect. As a result, no creditor can sue you for being delinquent on their account and no lender can foreclose your property or take away your automobile for being delinquent.

However, still many people will ask you to avoid bankruptcy as it almost wrecks havoc on your credit. Once you file bankruptcy, it gets listed on your credit report. Depending on the chapter, it stays on your credit report for 7 to 10 years. If you file chapter 7 bankruptcy it will be there on your credit report for 10 years and if you file chapter 13 bankruptcy, it is going to stay on your credit report for 7 years. Whenever you apply for new credit after the discharge of the bankruptcy, the creditors and the lenders will check with your credit report. When they will see that you had filed bankruptcy, they might even reject your application for new credit.

Moreover, in case you file for chapter 7 bankruptcy, your assets are sold off by the bankruptcy trustee. This is done to pay your creditors. So, you can see that filing bankruoptcy can even result in loss of your assets.

Bankruptcy hurts your credit score and lowers it by 200-350 points. Thus, it really becomes difficult for you to get approved for any new credit card or any kind of loan. Though there are ways in which you may be able to improve your credit, you should know that it takes time till you can again become eligible for new credit. So, many financial experts may ask you to avoid bankruptcy and try out other debt relief options.

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