Although bankruptcy is often portrayed as a miracle solution of erasing all your debt problems, there are numerous negative consequences of bankruptcy. Most people think that a bankruptcy attorney could help them get rid of all their debt issues while they sit back and relax in a courtroom. This is not the case in reality. In fact, filing for bankruptcy is far from easy and can have a negative effect on your financial future. This read offers information on the negative consequences of bankruptcy.
Find out when you should throw in the towel.
Bankruptcy will remain on your credit report for years to come which can have a devastating effect on your ability to obtain any credit in the long run. Although a Chapter 7 bankruptcy can be completed in 4-6 months and excuse you from your immediate debt issues, it can remain on your credit report for up to seven to ten years affecting your ability to obtain future credit. Another disadvantage is that bankruptcy filing cases go to the Public Domain. Since bankruptcy is a legal procedure, as soon as you file for bankruptcy, your personal information appears in court records. This means anyone can access your personal and financial information thereafter. For example, your lenders, employers, clients, and even other businesses can access your information.
Filing for bankruptcy doesn’t come cheap for people who are on a shoestring budget. Although most people contemplate filing for Chapter 7 or 13 bankruptcy because they don’t have enough money to pay their debts, bankruptcy doesn’t come cheap. Rates can vary according to your location and many other factors. For example, Chapter 13 bankruptcy can take between 3-5 years to settle. In fact, attorney fees for such a procedure will cost between $2,500 to $3,500. On the other hand, Chapter 7 bankruptcy is less expensive due to the limited role that a lawyer plays in the procedure. Still, it can cost between $600 to $2,000 depending on your location and the reputation of the attorney.
Contrary to popular belief, filing for bankruptcy doesn’t erase all your debts. If you have unpaid income tax bills that are more than three years old, bankruptcy will help you get rid of such debts. But student loans or recent taxes will not go away just because you file for bankruptcy. It can eliminate numerous unsecured debts such as credit card balances and medical bills. But most of the student loans have to be repaid. A bankruptcy filer would not be able to avail him/herself for a decent home loan in the near future. Most of the time, it can take up to four years for a bankruptcy filer to avail him/herself of an attractive home loan. A recent bankruptcy filer may apply for a mortgage loan under higher interest rates which is not a practical situation. For example, a bankruptcy filer would be offered an interest rate of 10.5% whereas the prevailing rate would be around 3.5% to 4%.
This is why it is important to think twice before you apply for bankruptcy. Here is another discussion on bankruptcy you might find useful: https://www.reddit.com/r/explainlikeimfive/comments/12bxvl/what_happens_when_you_file_for_bankruptcy/. True, there are many people who have been able to successfully emerge from bankruptcy procedures. But it is not something to be taken lightly. You have to weigh the pros and cons according to your current situation before deciding to file for bankruptcy. It is essential that you know the benefits and risks of filing for bankruptcy. This will prevent bankruptcy filing from taking you by surprise.
In conclusion, although bankruptcy is portrayed as a miracle solution to your debt problems, it is not so in reality. This read offers information on some of the negative consequences of bankruptcy.