Not knowing the disadvantages of bankruptcy, several people go for it. Many think bankruptcy is like a clean slate. However, without a good knowledge of bankruptcy provisions, you can fall into a bigger financial rut. Bankruptcy should only be used as the last option. It is designed to not be beneficial for anyone, including you. In other words, you really need to assess your financial condition before filing Chapter 7.
As a leading disadvantage of bankruptcy, the fact that a discharge will not always clear all debt is one that is often overlooked by borrowers. That's right; in some cases, even after a trustee has liquidated your assets and repaid creditors, you could still owe others whose debt was exempt from the bankruptcy discharge.
Your property will be sold by the trustee. In some cases, your debts that couldn't be repaid after the distribution of assets will be discharged. Any inheritance that you get after filing for bankruptcy can also be considered property and can be used to repay creditors.
Where Chapter 7 is considered, you will need to be committed to your decision for at least seven years. This is because a bankruptcy discharge is irreversible, meaning you cannot repay any unpaid debt after the bankruptcy has been discharged. As a result, your credit score will suffer and most lenders will not entertain granting you additional credit, even if you have the means of repaying that credit several times over.
Debtors are able to file for Chapter 7 for nearly any amount of debt, however a minimum of six years must elapse before a debtor can file once again.
Many filers often overlook the fact that the process of filing for bankruptcy will take a psychological and physical toll. For most people, filing for bankruptcy takes a tremendous toll as the bankruptcy seems to constantly follow them.
Bankruptcy can lead to divorce, which can put further strains on your finances. You will also feel like beaten down or defeated. This can lead to strained social life and unhealthy habits like alcoholism. The feelings of losing everything are also prevalent among bankrupts.
Such feelings of loss, defeat and trauma often make managing regular relationships with other family and friends difficult. The difference in opinion among friends and family, combined with the feelings of guild and shame, often alienate bankrupt individuals from those who have been closest to them.
With the disadvantages of bankruptcy in mind, there are actually some advantages for borrowers with tremendous debt. This includes the mandatory credit counseling course that must be undertaken at least three months prior to the filing. This small requirement can actually help some debtors better manage their finances and find ways to avoid bankruptcy. In cases where bankruptcy is truly used as a last resort and where asset values fall short of debt owed, Chapter 7 might be the better option. However, bankruptcy should only be used as that: a last resort.
As a leading disadvantage of bankruptcy, the fact that a discharge will not always clear all debt is one that is often overlooked by borrowers. That's right; in some cases, even after a trustee has liquidated your assets and repaid creditors, you could still owe others whose debt was exempt from the bankruptcy discharge.
Your property will be sold by the trustee. In some cases, your debts that couldn't be repaid after the distribution of assets will be discharged. Any inheritance that you get after filing for bankruptcy can also be considered property and can be used to repay creditors.
Where Chapter 7 is considered, you will need to be committed to your decision for at least seven years. This is because a bankruptcy discharge is irreversible, meaning you cannot repay any unpaid debt after the bankruptcy has been discharged. As a result, your credit score will suffer and most lenders will not entertain granting you additional credit, even if you have the means of repaying that credit several times over.
Debtors are able to file for Chapter 7 for nearly any amount of debt, however a minimum of six years must elapse before a debtor can file once again.
Many filers often overlook the fact that the process of filing for bankruptcy will take a psychological and physical toll. For most people, filing for bankruptcy takes a tremendous toll as the bankruptcy seems to constantly follow them.
Bankruptcy can lead to divorce, which can put further strains on your finances. You will also feel like beaten down or defeated. This can lead to strained social life and unhealthy habits like alcoholism. The feelings of losing everything are also prevalent among bankrupts.
Such feelings of loss, defeat and trauma often make managing regular relationships with other family and friends difficult. The difference in opinion among friends and family, combined with the feelings of guild and shame, often alienate bankrupt individuals from those who have been closest to them.
With the disadvantages of bankruptcy in mind, there are actually some advantages for borrowers with tremendous debt. This includes the mandatory credit counseling course that must be undertaken at least three months prior to the filing. This small requirement can actually help some debtors better manage their finances and find ways to avoid bankruptcy. In cases where bankruptcy is truly used as a last resort and where asset values fall short of debt owed, Chapter 7 might be the better option. However, bankruptcy should only be used as that: a last resort.
About the Author:
Chris Blanchet is the author of Help Fix My Finances, an e-book about legitimately taking back control of your personal finances. He also maintains a debt-free blog, How To Repay Debt.com.
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