You may have heard the popular phrase “Bankruptcy gives you a fresh start” and wonder what it means. Can it really set me on a new path? Does this mean I won’t owe anything anymore? Is the slate ever truly clean? Let’s answer some of the questions surrounding the concept of ‘fresh start’.
Clearing The Air
As far as bankruptcy setting you on a new path, it absolutely can give you a new path by eliminating those old debts that were dragging you down. Being absolved of old debts can mean that you now have the opportunity to rewrite your financial profile. You can rebuild your credit score and obtain new credit. Without those old debts and delinquent accounts standing around, you won’t be seen as a borrowing risk in the eyes of creditors. The new path you get after a debt discharge is simply one of removing the old and handing you the opportunity to make the new.
If you are wondering about the liability of old debts after a Kentucky bankruptcy it boils down to this: the automatic stay. All of your debts that were eligible to be included in your bankruptcy case are typically allowed to carry a permanent automatic stay order, meaning they are forever deemed “uncollectible” to your creditors. The exception to this rule is jointly held or co-signed debts, in which the automatic stay only protects the filer from future liability of the debt. The other party or person listed on the debt could still be held liable by the creditor and be sought for collection attempts. Similarly, any debts that were not eligible for the debt discharge (typically priority debts such as domestic support payments, student loans etc) are not granted protection through the automatic stay to begin with, and are still able for collection after bankruptcy.
The clean slate you receive through a bankruptcy discharge refers to your debts and account standings. Chances are your high debt balances and missed payments left you with the red mark of a delinquency on your credit report. Once your debts are discharged those balances and delinquency marks are removed, leaving your credit report clean of negative information. While your credit report will show a bankruptcy filing, this mark is not as detrimental as carrying around a credit history tarnished with high balances and delinquency marks.