From time to time you may see ads on television or on Internet websites that promise to help you eliminate all of your debts by declaring personal bankruptcy. The ad pitch often makes it sound as if going through the bankruptcy process is easy, and that you’ll wind up coming out of bankruptcy in great financial shape.
It’s true that for some individuals it might become necessary to declare bankruptcy, but it should generally be considered as an option of last resort. There are a number of financial consequences to bankruptcy, and some of them can impact your financial situation for many years into the future. Make sure you consider all of these impacts and weigh them against the short term debt relief you might be able to obtain through bankruptcy.
Here is some borrowing advice on the consequences of filing for bankruptcy.
Damage to Your Credit Report. The fact of your bankruptcy won’t be confidential or private. In fact, a bankruptcy filing will show up on your credit report for anywhere from 7 to 10 years afterwards. Even if you are able to rebuild your financial picture relatively quickly after bankruptcy, the simple fact that you’ve used the bankruptcy process may lead many lenders to deny you credit even if you’re in a much stronger financial position after that process.
Not Every Debt is Discharged. Going through the bankruptcy process may result in many of your debts being discharged, but that’s not always the case. First of all, any balances remaining on your student loans will still need to be repaid, regardless of the bankruptcy process you use. Regardless of your financial situation, your student loans are virtually impossible to extinguish. In addition, some lenders may be able to petition the bankruptcy court to have certain debts reaffirmed, which means you’ll still be responsible for paying them even after your bankruptcy.
Job Opportunities May be Limited. Depending on your profession, declaring bankruptcy can limit your ability to get certain types of jobs or hold certain types of positions. This is particularly the case if you work in the financial field (such as an accountant or comptroller), and it may also prove to be a significant “black mark” on your record if you ever have to seek out a government security clearance.
Meet with an Advisor. Sometimes it can be invaluable to actually speak with someone about your various options, and the pros and cons of declaring personal bankruptcy. Seek out experts and advisors who work for nonprofit public interest groups, rather than employees of a for-profit credit counseling service, in order to make sure you’re getting the best advice for you.
It might seem too difficult to focus on your future when you’re having significant financial problems in the present, but it’s important to not let your immediate financial needs completely dictate what happens to you in the next decade or more. Filing for bankruptcy might become necessary, but make sure you understand the full impact of doing so.
Tags: bankruptcy, borrowing advice, Credit Score