Consequences of Filing for Bankruptcy

By August 30, 2013Bankruptcy, Credit Repair

As you read in our last post, you have a lot to consider before you file for bankruptcy. You also need to consider the consequences once you do file. Bankruptcy will help you restructure and eliminate debt, but it will affect you for many years to come.

Credit Rating

Your bankruptcy filing will appear on your credit reports for ten years after you file. Although you may still be able to obtain loans during that time, when you do get one, you may have to deal with higher interest rates. Late payments and unpaid debts, on the other hand, only remain on your credit report for seven years.

If you can avoid filing for bankruptcy and instead repair your credit by having errors removed from your report, for example, you could have an easier time securing affordable loans, or at least have less of a wait. Seven years isn’t exactly a short amount of time.

Discrimination Because of Bankruptcy

Government agencies may not discriminate against you for filing for bankruptcy. However, private entities have more leeway. For instance, your employer may not fire you or punish you if you filed for bankruptcy, but a new employer can refuse to hire you. Other forms of legal discrimination range from having your renter’s application denied to having your college transcript withheld (if it is from a private university).

How Long Until Everything is Normal?

Every situation is different, but one thing is for sure: As we mentioned above, your bankruptcy filing will be on your record for ten years. That doesn’t mean that it will take you ten years to obtain a good credit score, but it will make it more difficult than if you can manage to avoid bankruptcy and instead handle your situation through careful budgeting and credit repair.

Effect on Mortgage and Car Loans

The type of bankruptcy filing you make will determine if you can stay in your home and keep your car, assuming you have loans on each. If you declare Chapter 13 bankruptcy, you can keep your home if you are up-to-date on your mortgage payments, or if you can restructure your payment plan. If you file for Chapter 7 bankruptcy, though, you may likely have to surrender your home to your lender. The situation is similar with your car loan when you file for Chapter 7 bankruptcy. If you are behind or unable to make payments on that loan, your car may be seized as well.

The risk of foreclosure and losing your car, and the cost and difficulty of securing future credit all may be difficult on you and your family, so closely consider your bankruptcy and credit repair options before making a decision. If you think that bankruptcy isn’t your best option, consider Ovation for your credit repair needs. We can provide the tools you need to re-establish your credit and feel more confident with your financial situation.


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