While filing for bankruptcy allows you to eliminate or repay some or all of your debts, it should not be taken lightly. There are consequences involved in filing for bankruptcy. Before filing for bankruptcy, you should be familiar with the disadvantages of bankruptcy.
Impact on Credit
The most obvious disadvantage of filing for bankruptcy is that it may damage your credit report. Bankruptcy will allow you to start over again with a clean financial slate, but it remains on your credit report for ten years if you file Chapter 7, or seven years if you file Chapter 13. This is a considerable amount of time to carry such a negative mark on your credit. However, your credit will not be permanently ruined by filing bankruptcy. Bankruptcy may be no more harmful to your credit than the financial circumstances that lead to the bankruptcy filing. Most people seriously struggling with debt aren’t exactly maintaining a top-notch score to begin with. In light of this, many people see a boost in their credit scores after filing bankruptcy. You can rebuild you credit after bankruptcy. The best way to improve your credit score is to work with your local bank or credit union and then make timely payments.
Losing Personal Possessions
Another disadvantage of filing for bankruptcy is that you may lose some of your property in order to satisfy your debts. If you file Chapter 13 bankruptcy, you establish and adhere to a debt repayment plan in order to satisfy your debts. In Chapter 13, you keep the bulk of your personal possessions, but must make monthly payments over three to five years to repay all or some of your debt. If you file Chapter 7 bankruptcy, the bankruptcy trustee may take and sell some of your property to pay back some of your debt. However, there are property exemptions that allow you to keep certain assets. So, if your property is exempt then it cannot be taken or sold to pay your creditors’ claims. Both Chapter 7 and Chapter 13 bankruptcy have many rules and exceptions to those rules regarding what property you can and cannot keep. Thus, a qualified attorney can help you properly apply the exemptions allowed in bankruptcy allowing you to keep most, if not all, of your assets.
Impact on Emotions and Lifestyle
Declaring bankruptcy can be a very painful, emotional process. You may feel overwhelmed, embarrassed, and confused. Additionally, filing for bankruptcy can negatively impact your lifestyle. For example, if you file Chapter 13 bankruptcy you might have to adhere to court-regulated financial guidelines throughout the entire period of repayment. These guidelines can include such requirements as transferring your children from private to public schools.
Filing for bankruptcy can be stressful and emotional, and may have a negative impact on your lifestyle and credit. Still, these disadvantages do not necessarily mean that you should not go ahead with bankruptcy proceedings. A qualified attorney can help you obtain the least impactful consequences. Thus, if you’re considering filing for bankruptcy as a way to relieve your financial debt, you should meet with a qualified attorney who can help eliminate or significantly reduce the adverse effects of bankruptcy.
Meagan Waters interns for The Cohen Firm, a bankruptcy law firm in Irvine, California. For further information regarding bankruptcy, please contact Isaac Cohen, Esq. at 949-900-6700 or at firstname.lastname@example.org. Learn more about The Cohen Firm’s bankruptcy services by visiting their website www.thecohenfirm.com.