The Effects of Filing Bankruptcy
When you file for bankruptcy, it will appear on your credit reports for as many as 10 years. And, since it is a matter of public record, it will show up elsewhere for 20 years, or more. But that's just the beginning. Furthermore, you may find it difficult to apply for credit in the future because filing for bankruptcy will negatively effect either your getting loans or the interest rates you will be charged. Even when you apply for a new job, many employers require good credit as criteria during the hiring process.
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Significance
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Filing for bankruptcy should be your last resort to getting your financial house back in order. Not only will doing so have a financial impact on what you do in the future, it can also be a serious shock to your marriage or other relationships. It will cause immense stress that could lead to estrangement and even divorce.
Dealing With the Trauma
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It helps to learn from this bad experience by doing what is necessary to secure your financial future. To cope with difficult financial times in the future, learn new skills like bookkeeping or investing. Realize that filing bankruptcy is not the end of the world, but the beginning of a new financial life.
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Effects
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If you file for bankruptcy, you will be required to make available to both the court and to your creditors minute details of all your financial affairs. Because of that alone, many people who do file bankruptcy are left feeling embarrassed or thoroughly defeated. What's more, if you have assets, most of them can be confiscated by the bankruptcy court, including your business if you own one. And if you file for bankruptcy under chapter 13, chances are that payments will be taken by the court from your paychecks for as many as five years to repay your creditors.
Considerations
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New laws involving bankruptcy were enacted by Congress in 2005 that have a serious affect on anyone who files. For one, if your income exceeds the median income of people in your state, generally you cannot file for bankruptcy under chapter 7. There is also now a so-called "means test" to determine if you have a sufficient amount to pay creditors. In addition, when you file bankruptcy, you will be obligated to receive credit counseling within 180 days of filing. Finally, since the law imposes more requires on attorneys, the bankruptcy process has become far more expensive.
Prevention/Solution
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Learn ways to avoid having to file bankruptcy, starting with living within your means. Also, review all of your options before you file. For example, many people avoid filing bankruptcy by employing a credit counseling companies to help. And if you feel that you can be successful in dealing with your credits, do so. But by all means stay in touch with your creditors because they could be helpful to you by offering alternatives.
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