What are the consequences of filing for bankruptcy?
Individuals and companies sometimes reach a level of financial difficulty that a decision is made to investigate the possibility of filing for bankruptcy. In fact, there are situations where the choice of filing for bankruptcy at https://bankruptcy-basics.org/filing-bankruptcy/filing-bankruptcy/ is the most logical course.
At the same time, petition for bankruptcy should never have been seen as an easy way to come from under a mountain of financial obligations. There are consequences for filing for bankruptcy, which should be carefully balanced against the benefits. Here are a few examples.
First, a bankruptcy can make it very difficult to obtain credit in the future
Many people are under the impression that it is easy to obtain credit just after filing a chapter 7 bankruptcy. Up to one point, there is some truth in this since high risk credit card providers will often extend credit lines to people who have filed for bankruptcy recently.
But it is common in many cases to limit credit to private individuals and companies for major purchases for a period of up to two years after the bankruptcy is considered completely discharged.
For example, meeting the conditions for a home loan will not be possible until two years after Chapter 7 has been discharged. If the individual filed a Chapter 13, all debts associated with a bankruptcy must be paid in full, two years must have passed since the bankruptcy was issued, and the credit file meanwhile must be free of any new negative items.
Filing for bankruptcy can also affect future career opportunities
Often a person who has been through bankruptcy filing lately is not entitled to remuneration as a director of a company. It may also be impossible to keep certain offices in local organizations that would be helpful in promoting the career.
The simple act of filing for bankruptcy can reduce the level of confidence that current customers have in the individual or business, and can also postpone potential customers who prefer to go with a unit that is more financially stable.
Depending on the circumstances, filing for bankruptcy will also mean losing personal assets. This may include the property, home, car or other value that can be seized, sold and used to partially meet the outstanding debt. Although this is not always the case, it is possible for creditors to request the court to take this kind of action.
At least, filing for bankruptcy means creating a more bad credit history
This action will affect a credit score for at least six years and nine months, and possibly up to ten years, no matter how financially responsible the individual is after filing. At best, this means settling for credit that carries an outrageous interest rate. At worst, it means an inability to obtain any kind of Bill Sikes from a home or car.
Filing for bankruptcy should always be the last resort
If any other agreements can be made to pay outstanding debts, they should be considered before embarking on any form of bankruptcy filing. While other methods can also damage the credit rating, they can also help begin the process of reversing a negative rating and restoring a healthy credit score over time.