What's the difference between letting collections fall off and filing bankruptcy?

[nerdybee]

I'm gearing up to apply for bankruptcy, however something is puzzling me. What is the difference between allowing my debts to fall off after 5-7 years and filing for bankruptcy? Won't the companies I was indebt to potentially flag me if I ever try to establish accounts with them again or meet me with preju

[LadyInTheRed]

Falling of your credit reports is not the issue. Creditors (either the original creditors or company's they sell the debt to) can get judgments against you up to the statute of limitations. Once they get a judgment, they can place liens on your assets and garnish your bank accounts and wages (when allowed by state law). Even after the statute of limitations expires, a creditor might file a lawsuit that you will have to answer and raise a SOL defense. Yes, that could happen with a debt discharged in BK, but sending a copy of your bankruptcy discharge order is a much quicker, more effective way to get a creditor off your back.

If you don't pay your debts, your current creditors will flag you even if you don't file BK. Some will give you credit again, others will not.
As for other potential creditors, your BK will be off your credit report in 10 years after filing a Chap 7 or 7 years after filing a Chap 13.

Your credit report should be your last concern. But, having charged off debt and judgments on your reports is just as bad as a BK. In fact, after an initial drop, many who file BK see their credit scores improve compared to their pre-filing scores. My Chap 13 will be on my reports until April and my credit scores are already better than they were before I filed.

[Geeznowwhat]

The creditor can get a judgement against you. Even though the judgement falls off your credit report....they creditor can still come along years later and grab anything you might have. Suddenly appearing to grab a saving account or lien on an asset. PLUS...the judgement accrues interest every year it is not paid...and they can layer legal fees onto the original debt.

Get everything discharged in BK puts an end to it all. Immediately. You can move forward without looking over your shoulder for years to come.