February 3, 2021

What Is the Downside of Filing For Bankruptcy?

Filing for bankruptcy can help you discharge your debts and will produce an automatic stay against creditors. Some of your debts will also be written off after your bankruptcy is discharged.

But there are problems that come with filing for bankruptcy. Here are a few of the more prominent concerns to note before filing:

  1. You could lose various assets in court. A bankruptcy court can seize assets like a car or a house. The court could sell these items to pay off your creditors, especially if they are valuable enough.
  2. It may be difficult for you to obtain a loan, a mortgage, or a credit card after declaring bankruptcy. Your credit score will experience a substantial hit.
  3. You might also struggle to find a job or a new home. Employers and landlords might notice a bankruptcy in your name and will ask about the situation at hand. These people may find you irresponsible, reducing your risk of being accepted as a tenant or landing a new work position.
  4. You cannot discharge all your debts through bankruptcy. You cannot discharge student loans, alimony, child support, or any criminal restitution charges.
  5. Your bankruptcy will stay on your credit report for years. It can remain for at least six years in most cases. The timeframe will vary by state or country, but it can be extensive.
  6. The only financial services or products you will qualify for will be more expensive ones. You can find unsecured credit cards and other items that can help you rebuild your credit. But these often come with exorbitant fees and lofty interest rates.
  7. Your bankruptcy will be disclosed to the public as part of your record. You may request a court order to avoid releasing your address data if you are concerned about being a victim of violence. You’d have to provide proof of your concern in this situation.

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