Considering the Realities of Bankruptcy

Filing for bankruptcy is a very effective way to erase mounting debt and stop the harassing phone calls from creditors. However, filing can also have a negative effect on a debtor. Therefore, before filing for bankruptcy, a debtor should speak to an attorney and seriously consider both the negative and positive consequences of filing for bankruptcy.

Debts that Are Non-Dischargeable in Bankruptcy

Filing for bankruptcy does not discharge all of your debts. For public policy reasons, certain debts are non-dischargeable. For instance, family support obligations like spousal support and child support are not dischargeable debts in a bankruptcy. During the bankruptcy proceeding, you must continue to pay your family support obligations or it may affect your bankruptcy eligibility. Taxes are also not dischargeable in a bankruptcy. If taxes were a dischargeable debt, far more people would file for bankruptcy. Student loan debt is not dischargeable in bankruptcy.   

How a Bankruptcy Will Affect You In The Future

A bankruptcy will continue to affect you after your debts are discharged. In general, if you have a good credit score before you file, you will find it decreased significantly. It may take up to two years to get it back above 700. However, if you alredy have a medium or low credit score, then the impact will be less problematic.

A bankruptcy may affect your ability to find employment. Many employers now run a credit check on all potential employees. While federal law protects an employee from being fired from a job because of a bankruptcy, there is no such protection for potential employees.

After fling for bankruptcy, you may lose personal assets. In a Chapter 7 bankruptcy, the bankruptcy trustee has the authority to seize and sell all non-exempt assets. If you own your own business, you may lose that as well. You may feel embarrassed or guilty because you filed for bankruptcy. You may have a hard time talking about it with friends and family. In addition, throughout your bankruptcy case, every aspect of your financial history will be available to your creditors and the bankruptcy court for close inspection.

Getting Legal Help

Before filing for bankruptcy, speak with an experienced attorney in your state. An attorney will explain the bankruptcy process to you and answer any questions you may have about the realities of a bankruptcy filing.