Hundreds of thousands of Americans file for bankruptcy every year. If you are thinking about filing for bankruptcy, it is vital that you understand the long-term consequences – both positive and negative – associated with this process. As an experienced bankruptcy lawyer, including those who practice at The Law Offices of Ronald I. Chorches, can confirm – bankruptcy does result in some negative consequences in the short-term. However, the long-term consequences of this process are potentially life-changing in the best ways. You just need to know how to take advantage of the opportunities that this process provides.
Your Credit Score Will Drop Initially
Filing for bankruptcy will hurt your credit initially. Your score could immediately drop by as much as 100 points or more. Understand that your credit is important, so you need to take care to repair it by paying your bills on time moving forward. Recovering will take serious time and effort, but it can be done.
Some Debt Will Still Exist
Many falsely believe that declaring bankruptcy absolves debtors of everything they owe. While it does wipe away eligible unsecured debt debt, secured and other non-dischargeable debts will still need to be repaid. For example, back taxes, child support, federal student loans, and government debts will likely remain intact after your case is closed. As a result, it will be important to attend to these overdue balances in a proactive way so that you don’t slip back into financial trouble.
You Will Need to Wait a While Before Obtaining New Credit
Individuals who file for Chapter 7 must wait a full year after declaring bankruptcy to apply for a mortgage. They also need to prove that the reasons for filing were beyond their control and that they have only made good financial decisions since then. If not, they’ll have to wait two years to apply. Chapter 13 filers are required to demonstrate that filing for bankruptcy a second time remains highly unlikely. Non-mortgage creditors don’t usually lend to bankruptcy filers until some time has passed. However, as bankruptcy helps many borrowers obtain a fresh start, creditors usually “come around” after a little while, in the hopes that filers are again ready to begin rebuilding their credit and managing their finances anew.
You’ll Have a Fresh Start
Yes, there are some initial drawbacks to filing for bankruptcy. However, the fresh start that bankruptcy provides may allow you to regain a strong financial foundation upon which to build a financially stable and prosperous future. Be proactive – take this rare opportunity to be freed from your eligible debts and turn that opportunity into a catalyst for a prosperous tomorrow.