What are the negative effects of bankruptcy?
Many people cringe when they hear the word bankruptcy. You might think of it as one of the worst things that can happen to a family, and it can certainly have negative consequences.
Whatever the case may be, it’s true that bankruptcy is a legal and legitimate way to deal with excessive debt that is beyond your ability to pay.
Still, it’s important to remember that bankruptcy is a serious step that will have long-term consequences for your financial affairs. Before making a decision to take the lead, you should discuss the situation with a bankruptcy lawyer. What exactly are the drawbacks of declaring bankruptcy?
Well, it has been said that declaring chapter 7 bankruptcy (which seeks to eliminate most or all of your debts) is the ultimate admission of financial defeat. As such, it will stay on your record for about 10 years and thus seriously damage your credit rating. This will make it more difficult to obtain a loan for a car or house (or for anything else for that matter).
That’s not to say that no one will extend the credit, and you may even be able to get a loan shortly after bankruptcy. This is because creditors realize that you have had a fresh start financially and don’t have too many items on your plate. Even so, you’ll probably have to pay higher interest rates, and you need to be careful about accumulating debt. Learning to have discipline in your spending is critical to avoiding these problems in the future. You don’t want to end up with a second bankruptcy several years down the road.
If you instill some discipline in your spending and control your shopping impulses, you certainly can rebuild your financial future in time.
Another possibility that you may not have considered is that innocent creditors will be hurt as a result of your filing bankruptcy. This is particularly sad when you’re dealing with small businesses who extend you credit and may be hit hard if their loans are not repaid. This should be taken into consideration, but ultimately you have to do what is best for you and your family.
You should always consider all of your options carefully before deciding to declare bankruptcy. Sometimes bringing in some extra income through any number of ways can be enough to help you see the light at the end of the tunnel.
Comments
Leave a Reply
