Financial complications are a part of life, and no one should shy away from the situation. People should learn to address such problems and work hard to make a comeback. People may also encounter extreme conditions, like bankruptcy. While declaring bankruptcy, people should choose the most suitable type of bankruptcy, so it serves their interests and safeguards their assets. Most importantly, it should help you in getting back on your feet.
People can file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Both of these are different in characteristics. Chapter 7 bankruptcy talks about more extreme circumstances, as applicants seek to wipe out their debt. It is helpful for those who have a minimal source of income. It can also involve the selling of your assets. But it would be best if you got an experienced lawyer to land a good deal.
On the other hand, Chapter 13 bankruptcy is more about rearranging loans and debts rather than waiving them. In some cases, unsecured debts may be discharged, but mostly the loans are rearranged according to the individual’s income. The terms and conditions of the debt are modified. It might include the settling of the period, the monthly repayment of arrears, or the lowering of the interest rate.
Opting for the most suitable bankruptcy
An individual is expected to consider several factors while declaring bankruptcy. The eligibility criteria are different for almost every type of bankruptcy. For example, Chapter 7 and Chapter 13 bankruptcy only covers individuals and not businesses or partnerships. But Chapter 11 bankruptcy covers individuals as well as businesses. In addition to this, the debt level is a major determinant in your bankruptcy filing procedure. The amount of secured and unsecured debt you have will fit you in different categories.
On the other hand, you might have to give a means test to determine your low income. This is mainly done while acquiring Chapter 7 bankruptcy. After filing for bankruptcy, there are different time durations for getting a discharge. The duration is less for Chapter 7 bankruptcy as compared to the others.
Applicants consider their real estate property and other assets while filing for bankruptcy. Mostly. In Chapter 13, people get to keep their assets, but it can be different from Chapter 7 bankruptcy. Moreover, Chapter 13 also allows lien stripping, while Chapter 7 does not. Applicants can acquire a loan cramdown in Chapter 13 bankruptcy, but they cannot do the same in Chapter 7 bankruptcy.
Getting an auto loan right after bankruptcy
Declaring bankruptcy can have a poor impact on your credit score. Your report will have the reference to Chapter 7 bankruptcy for ten years. For Chapter 13 bankruptcy, the duration is seven years. However, it is not a compulsion that the credit score is meant to go downhill. Several applicants even improve their credit score after filing for bankruptcy, as they get rid of large debt amounts.
However, if you need to apply for a loan after being discharged from bankruptcy, you might have to wait for a set time period. But this is only a condition for some loans. There is no waiting time for car loans or other personal loans. “Regardless of legal requirements, lenders will still ask for your financial information and credit reports. They will learn about your credit history and bankruptcy, your current debts and assets, and whether you are employed. Therefore, to maximize your chances of a successful car loan application, you may want to spend some time repairing your credit”, said attorney Dave Roemerman.
An applicant can also apply for a loan through a private lender. For that purpose, they do not have to wait after a bankruptcy, and their credit score is also not so important. If you live in the area, you can easily find a vehicle loan in Ontario even if your credit score is far from ideal. Some lenders prioritize people coming from bankruptcy in their loan application process. They believe that these applicants are more financially secure and responsible as they have gone through bankruptcy. Also, the risk margin is less, as these applicants cannot apply for the waiving off a loan for several years.
Read Also: 4 Things You Should Know Before Filing for Bankruptcy
All of these factors can help you in moving forward from bankruptcy. It shows that the state and authorities are assisting individuals in bouncing back from an adverse financial situation. However, you have to stay vigilant and optimistic throughout the process, and the assistance of a legal team can help you make more informed decisions.
