What are the Disadvantages of Filing for Bankruptcy?
Bankruptcy is the word that sends a shiver down the spine of many people. In most cases, this fear is not without justification. Bankruptcy law often makes it difficult for bankrupt individuals to get back on their feet and start living normally again. Moreover, people who file for bankruptcy are often given negative credit ratings by lenders, landlords, and employers, which can lead to missed opportunities in these areas.
This blog post will explore some of the disadvantages that you may experience if you have filed for bankruptcy.
Lower your credit score
The biggest consequence of bankruptcy is the negative impact it has on your credit score. If you want to rent an apartment, rent a car, or even try to make a large purchase, you will be looked down upon by potential creditors. Some landlords may even think twice before renting you an apartment if they find out that you have filed for bankruptcy in the past.
Will not remove student loan debt
Student loan debt is not considered a true liability when you are filing for bankruptcy. It has been argued that student loans should be considered non-dischargeable debts just like other loans granted on the basis of the property. Student loan debt can basically only be erased by making payments towards it over a period of time that can last up to 25 years in some cases.
You will lose your current credit cards
When you have filed for bankruptcy, the credit card companies will automatically cancel your cards. This means that you will not be able to use these cards again and can only request new ones after the court case is over.
You can lose some luxury possessions
As mentioned above, the biggest issue with bankruptcy is the negative impact it has on your credit score. This can also result in you losing some possessions that you have purchased with your credit cards, such as a house or car.
You may have to wait or take extra steps to get a mortgage
If you want to buy a house after filing for bankruptcy, you will have to wait at least two years before you can apply for a mortgage again. Moreover, some banks are more flexible than others and might require additional interviews before giving out loans and mortgages.
Bankruptcy can feel defeating
Bankruptcy is often associated with failure. This can lead to low self-esteem and depression if you make the mistake of getting down about it.