Drawbacks of Bankruptcy
Bankruptcy is a very difficult procedure for individuals and companies to go through and there are many implications involved. Before you undergo the process of bankruptcy, it is a good idea to consult a financial advisor. Doing so will allow you to become aware of the disadvantages of bankruptcy. There may be alternative options available for you.
Let’s take a look at the drawbacks to your own financial future when bankruptcy is involved:
Bankruptcy is certainly not a get-out-of-debt free card. The expenses associated with bankruptcy are many and can be high. There are court costs and attorney fees. Debts that are not discharged in a bankruptcy must be paid. For those already struggling with money problems, the costs associated with bankruptcy can be extreme.
Filing bankruptcy in today’s courts no longer just involves a bunch of paperwork. Credit counseling for the consumer is required as well as time spent preparing the bankruptcy case with an attorney. Creditor meetings are scheduled and need to be attended by the petitioner. This can mean lost time at work and being away from family obligations.
Long-Term Impact on Credit
When you have a negative mark on your credit report, it lasts for 10 years, meaning anyone looking at your credit report will find the negative information during that length of time. When you file for bankruptcy, the length of time it is reported on your credit report is ten years. Once you recover from your debts and begin to get your financial life back on track, your credit will still be marred by the bankruptcy and lenders and other creditors may still deem you as a large credit risk and finding financing even six years after bankruptcy may still be hard. If someone is willing to provide financing for you, expect to pay top dollar in interest rates and fees.
Not Every Debt Is Discharged
While a good portion of unsecured debt is typically discharged in a bankruptcy, there are some debts that will not be and thus the debtor will still be financially responsible. Additionally, there are some debts that are not admitted into a bankruptcy that must still be paid, on time each month in order to prevent further damage to your credit score. Student loans, taxes, child support and alimony payments are not dismissible by a bankruptcy court.
Not Everyone Qualifies
In addition to the numerous other steps involved for a bankruptcy filing, there is also a process that will determine if you qualify for bankruptcy proceedings. Consumers who are seeking bankruptcy for fraudulent reasons or who have filed false information will have their entire case dismissed, making it difficult to secure financial help in the future, including re-filing for bankruptcy.