Bankruptcy may be your quickest way of getting relief from your unbearable debt, but it is also the most damaging action to your credit ratings. Let us review the consequences of filling for a bankruptcy before your make up you decision to go for it.
1. Hard to Obtain Credit
Bankruptcy restrictions apply from the moment the bankruptcy order is made and it is a criminal offence to break them. These restrictions will make it difficult, if not impossible, to obtain credit. If you wish to buy a house in the future, there will be a two-year waiting period after the Chapter 7 case is discharged before you will be deemed eligible for a home loan. When a Chapter 13 bankruptcy case is involved, the waiting period is twenty-four months after the debts are paid off in full. During that two-year period, you will need to have been employed steadily, have no negative entries in your credit file, and kept debt under control.
2. Negative Impacts If You Are In Business
You will not be able to be a director of a company or hold certain offices. You will also have to inform any people you do business with the name in which you were made bankrupt; this may has negative impact on your company's reputation and may discourage your potential customers to do business with you.
3. Lose Your Assets
You may lose your assets which include your home and anything of value. And some percentage of your income will be paid to creditors for 3 years. A poor credit rating due to bankruptcy will follow you for 7 to 10 years. The bad credit stated in your credit report will cause you hard to obtain a mortgage.
4. Family Relationship Impacts
Financial strain alone is enough to break a relationship. The majority of couples failed in their marriage due to money. Bankruptcy may cause negative impacts to your family relationship if your spouse can't accept the fact of bankruptcy.
5. Health Impacts
You may blame yourself on bankruptcy incident and regret on your action. This may affect both your mental and physical conditions. It may cause you to have financial phobia and fear to manage your finances in the futures.
6. Higher Loan's Interest Rate
Bankruptcy filling has the most damage on your credit record if compare to other debt solutions. Your bad credit record will remain on your credit report for 7-10 years and if you are getting any loan after your bankruptcy discharged, your loan's interest rate will be higher than normal.
Not all are apparent when considering bankruptcy and not all will apply to you. It is certainly worth familiarizing yourself so that you can make an informed decision when choosing whether or not to go for bankruptcy filling. And it is worth to get consultancies and advices from finance experts to see whether the bankruptcy is your only option; who know, you may find alternatives to this option and bankruptcy can be avoided.