What are the negative effects of bankruptcy?
By: Jeena Cho
If you’ve been considering bankruptcy, you may be asking “what are the negative effects of bankruptcy?” First, not all effects of bankruptcy are negative. Certainly getting rid of your debt and starting fresh is a positive effect of filing.
Who will find out about your bankruptcy?
Your name won’t be published in the newspaper (unless you’re famous). However, anyone who has access to your credit report will find out about the bankruptcy. This can make it more difficult to find an apartment, get a credit card, and get any credit in general.
What about my credit?
Most people will say “I can’t live without credit.” Of course, this isn’t true. It may feel like it because you’re so used to living with credit (and consequently debt). But the goal is to get rid of all the debt so you can work on building a healthy reserve to deal with life’s unexpected “gifts” and to plan for the future.
Second, if you are in an industry where employers regularly checks your credit report, your job may be impacted. This typically applies for people that work in the financial industry or have security clearance.
How long will bankruptcy stay on my credit report?
Third, bankruptcy will be reported on your credit report for up to 10 years for Chapter 7 and 7 years for Chapter 13. This does not mean you can’t get new credit until the bankruptcy is removed. Most clients report being able to qualify for a credit card within a year or two of filing.
Lastly, filing for bankruptcy can have an impact on your self esteem. I frequently have clients tell me “I wasn’t raised this way.” “I can’t believe I’m in this situation.” No one wants to file for bankruptcy. You do so because it’s in you (and your family’s) best interest. What do you want your life to look like in 10 years? Do you still want to be struggling with debt or do you want to have a healthy savings/retirement and working towards a successful future? I encourage people to think long term when contemplating bankruptcy.