How does the bankruptcy process work?

On Behalf of | Aug 22, 2022 | Bankruptcy

Bankruptcy gets a bad rap in Texas. But, it can actually be one of the best decisions that you can make when finding it hard to keep up with your debts. If you know what to expect during the process, the idea of filing for bankruptcy can be less daunting.

Immediately after filing for bankruptcy

The moment you legally file for bankruptcy in Texas, your creditors will stop all collection attempts. This includes wage garnishments, lawsuits, and any other type of harassing contact. This is because the bankruptcy court will place an “automatic stay” on your debts, giving you temporary protection from creditors while your bankruptcy case is pending.

The bankruptcy court will then assign a trustee to your case. The trustee’s job is to administer your estate and ensure that your creditors are paid as much as possible. You will also have to attend a 341 meeting, where your creditors can ask you questions about your bankruptcy petition and asset list.

After that meeting, the court will require you to partake in a credit counseling course to learn more about money management and the steps you can take after bankruptcy to avoid getting into debt again. It takes around 60 days, and you’ll get a certificate of completion that you must file with the court.

After your bankruptcy case is closed

Once your case is closed, the court will wipe some of your dischargeable debts, including credit card debt, medical bills, personal loans, and most types of unsecured debt. But, there are debts that you must pay regardless of your circumstances. They include student loans, child support, alimony, and most taxes.

Your credit score

The main reason bankruptcy gets a bad rap in Texas is because of the negative impact that it has on credit scores. It also stays on your record for up to 10 years. This could make it challenging to get approved for a loan, credit card, or apartment. However, you can rebuild it again by making on-time payments, keeping balances low, and using credit responsibly. Over time, you may be able to qualify for new lines of credit and improve your financial standing.

Filing for bankruptcy can give you a fresh start and help you get back on your feet financially. But, you may need to weigh its pros and cons before filing.