Filing for bankruptcy is a serious matter because it has serious long term consequences. You might think that bankruptcy will give you a fresh start; however, it is an option that you should go for only as the very last resort. Bankruptcy, especially Chapter 7, has numerous financial, psychological and social consequences.
On Your Credit Report
One of the main drawbacks of bankruptcy is that it goes on your credit report. It will stay on your report for 10 years; furthermore, it will stay in the court records for 20 years. So there is no doubt that it will severely damage your credit history for a long time.
No Loans
A bad credit report has severe consequences. It will severely limit your ability to receive loans from financial institutions. Furthermore, if you are planning to buy a house, you will have to put that on hold for quite some time. No bank would be willing to give you a mortgage on your home. And if by any chance you do manage to secure a mortgage, you would have to pay very high interest rates on it.
No loans mean that you will face a hard time buying a new car or a home. You will even find it hard to rent a home. Before renting you a home or apartment, the home owner will definitely take a look at your credit report. A bad credit report will show that you are in a bad financial situation. And this means that you might have trouble in making your rent payments. Under such circumstances, the homeowner will definitely think twice before renting out his home to you.
You will also have trouble in getting health or car insurance. Again, insurance companies also look at your credit report before giving you the insurance coverage. A bankruptcy on your credit report means that you will have to pay high rates on your insurance coverage. This will strain your financial resources further.
Affect Your Job Chances
Bankruptcy can also affect your chances of getting a job. Certain employers do check whether the prospective employee has bankruptcy on the record or not. So if you are looking for a new job, bankruptcy can make life a little harder for you.
Chapter 7 means that all your bank accounts, credit cards, etc. will be closed. If you have recently bought a new car through financing, you would have to return it to the owner. Under Chapter 7 bankruptcy, many of your assets will be possessed and liquidated to pay off your creditors. Some even end up losing their homes.
Bad For Family Life
Being in a financially bad situation can affect your family life as well. There is no doubt that you will be under lot of psychological strain. Many people end up divorcing after filing for bankruptcy.
Personal bankruptcy can also spoil your social status. It is quite an embarrassing situation when people find out that you have filed for bankruptcy. This can be an emotionally disturbing scene for many.
As you can see, bankruptcy does have many serious consequences. It is an option that you should consider only after you have considered all other options, such as debt consolidation and debt counselling.
Under debt consolidation, your debts will be added up and you would be given a loan to pay off all your dues. Of course, the debt consolidation company will negotiate with your creditors to bring down your total debt. After all the debts have been paid off, you will be required to pay a single monthly payment towards your debt consolidation loan. This will definitely ease a lot of financial pressure on you.
However, after trying out all the other options, if you do not see any significant improvements in your financial condition, you should opt for bankruptcy. If you are thinking about filing for bankruptcy, it is better to opt for Chapter 13 than to opt for Chapter 7. Chapter 13 Bankruptcy will let you keep all your assets and over a period of time that acts as a breather, you would be able to pay off some of your debts. In the end, you will surely feel good about taking care of all your debts.