Filing for Bankruptcy: What Are the Consequences?

When a person falls on hard times financially, they are faced with difficult choices.  How can they increase their cash inflow and decrease their outflow?  What debts can they continue to pay, and what debts do they let fall to the wayside?  Filing for bankruptcy can be a good option, but filing is not a decision that should be taken lightly.  It can have many long-lasting consequences.  For a person to even consider filing bankruptcy, they should have a significant amount of debt.  Read through the qualifications and consequences to determine if this is the right path for you.

Bankruptcy won't rid all debts. 

It is important to know that several kinds of debt will not be forgiven in bankruptcy.  Certain court ordered debt, such as alimony and child support, will not go away.  Student loans will not be forgiven, nor will recent income tax bills.  If you have a cosigner for anything, your bankruptcy could also hurt them, as they may have to take on responsibility for your debts that they cosigned on. 

There are some severe consequences of bankruptcy.

• It lingers on your credit report. Bankruptcy hangs out on your credit report for about seven years.  If you opt for Chapter 7 bankruptcy, which is the most common type, it will be there for ten years.  Chapter 13 takes about seven years to drop off your credit report.  You will have a very difficult time purchasing a home after bankruptcy.  Any loan or credit card you are able to get will have very high interest rates. 
• You have to pay to file, and it could be pricey. People make the decision to file bankruptcy because they have no money.  However, you actually have to pay money in order to file bankruptcy!  You will need to hire a bankruptcy attorney, like Wiesner & Frackowiak, LC, to assist you throughout the ordeal.
• Bankruptcy is on public record. Anyone can see that you have filed bankruptcy, including potential future employers.  This could actually prevent you from getting a job in some industries.
• You could lose everything. Chapter 7 bankruptcy forgives most debts (with the exceptions that were mentioned above), but you may have to turn over certain valuables you owe money on.  If you file Chapter 13 bankruptcy, you have to repay some debts in order for the rest of your debts to be terminated.  If you miss a payment in a Chapter 13 bankruptcy, it then becomes a Chapter 7 bankruptcy, and you will lose many of the assets you were attempting to hold on to. 

Even though these consequences can be severe, they won't be as burdensome as drowning in debt.  Once you successfully file, you won't be hounded by creditors, and you can move on with your life.  If you think that bankruptcy is your best option, contact a bankruptcy attorney as soon as you can.  Many attorneys offer a free consultation, and they will give you the information you need to make an educated decision.  

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