The decision to file bankruptcy should never be taken lightly despite its ability to allow you to either eliminate or repay debts. When someone decides to file bankruptcy, there are several consequences that should be taken under consideration. Take the following disadvantages into consideration before you file for bankruptcy:
One of the most well-known disadvantages to filing for bankruptcy is the adverse effect it will have on your credit rating and credit report. Even though you are essentially creating a clean slate and creating a new financial start, the bankruptcy stays on your credit report for a long period of time. For example, for those who file a Chapter 7 bankruptcy, it will stay on their credit report for as many as ten years. And, for those who file a Chapter 13 bankruptcy, it will stay on their credit report for as many as seven years.
Rest assured, though, that a credit report is not damaged on a permanent basis should you decide to file bankruptcy. Something to consider is that the financial circumstances leading to your decision to file could be just as damaging as the bankruptcy itself. Under normal circumstances, those struggling with the decision to file bankruptcy tend not to have a high credit score anyway. With that reality in consideration, it’s actually possible for some who are struggling with serious debt to see a bit of a rise in their credit score once they have filed for bankruptcy. By far, though, the best decision you can make in order to fix your credit is to work with your debtors, your credit union, or your bank toward making timely payments on all of your debts.
It isn’t uncommon for filing bankruptcy to cause an excessive amount of stress and worry throughout the entire process. Additional emotional issues and lifestyle changes include feelings of embarrassment, confusion, and being overwhelmed. Other lifestyle changes include a court appointed financial guideline by which you must abide by throughout the duration of repayment if you have filed Chapter 13. If you have children in private schools, the guidelines might require you to transfer them to public school in order to ensure debt repayment is more secure. This lifestyle change not only impacts your financial lifestyle, but it also impacts the lifestyle of the rest of the family. This is a strong consideration to make before filing for bankruptcy.
Loss of Possessions:
In order to satisfy the repayment terms of some of your debts, it may require the liquidation of some of your possessions. This is especially true if you file for Chapter 13 bankruptcy because some debt could take between three and five years to repay. When filing Chapter 7 bankruptcy, it isn’t uncommon to be required to sell off assets in order to repay debt. The process is confusing no matter if you are filing for Chapter 7 or Chapter 13, so it’s a good idea to hire an attorney to help sort it all out and determine if there are any exemptions. An attorney will also help you determine how to file for bankruptcy with the least amount of consequences involved. Therefore, you may be able to keep the bulk or all of your possessions.