It is natural to fear for the well-being of your family when filing for bankruptcy. Bankruptcy can and usually does affect families. Below are some questions that families frequently ask about bankruptcy.
Does bankruptcy mean the loss of family possessions?
This depends on the amount of your debt and the type of bankruptcy you file. Since both home and car loans are considered secured debt-debt which includes collateral in case the loan defaults, Chapter 7 bankruptcy may result in the loss of your home or car if you still owe money on them. Chapter 7 may also result in the loss of your home or car if the trustee must sell either to settle outstanding debt. Chapter 13 bankruptcy generally protects you from losing a home or car as long as your payments are current.
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How does this affect my family's finances in the future?
It is important to analyze your family's expenditures that rely on credit and rearrange or eliminate them as necessary. It is not impossible to obtain credit following a bankruptcy-and it may even be a good idea to do so if your aim is to rebuild credit-but it is always best to avoid using that credit for purchases that you cannot pay off in a month's time.Try to build credit using vital purchases, such as groceries and supplies. Use cash or debit to pay for any optional purchases.
Do we have to relocate?
This also depends on many factors. Even when you are not at risk of losing your home, relocation can be beneficial. The cost of living in certain locations such as Orlando is high compared to the median income of the general population in Florida, and filing for bankruptcy often involves making significant lifestyle changes or even moving to accommodate a successful fresh start. An article entitled America's Most Expensive Cities in Travel and Leisure Magazine cited Orlando as number 16). When a spouse or children are living in the home, it is sometimes possible to delay its sale up to a year after filing for bankruptcy.
What effect does this have on my credit?
Bankruptcies remain on credit reports for seven to ten years. It is not possible to remove a bankruptcy from your credit record before that time. While there are companies that offer loans to those with a low credit score, large loans-such as those needed to buy a house or car-may be very difficult to obtain while the bankruptcy remains on your credit report.
What emotional or social impact does this have on my family?
The emotional impact filing for bankruptcy has on an individual or couple varies depending on the personalities of those involved, but it is possible to minimize the impact on children and social lives. Bankruptcy filings are public records, but it is uncommon for most people to check them.
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