If you feel like you’re buried in credit card debt and have nowhere to turn, you may be considering bankruptcy as your final option. This can certainly bring relief, but there are some consequences that you need to be aware of.
The most obvious consequence is that your credit will be negatively affected when you declare personal bankruptcy. Of course, this might not be very important to you.
If your financial situation is severe enough for you to consider chapter seven or some other form of bankruptcy, then your credit score is probably not very high on your list of priorities. Still, you should be aware that you may have trouble getting loans. You may have to pay higher interest rates, and your credit report will show a record of your bankruptcy for 10 years.
Another important consideration is that bankruptcy will not eliminate all kinds of debts. In most cases, your student loans, taxes, child support obligations, and criminal fines will not be discharged in bankruptcy. If these fees represent the majority of your debt, then you simply may not benefit from filing bankruptcy.
There’s also a possibility that you may lose some of your personal possessions. Of course, if you’ve reached this stage in your financial life then you probably don’t own a lot of high value items.
You’ll need to discuss these details carefully with your lawyer, especially if you own a home and are worried about protecting it.
You should also consider the fact that you took on financial obligations, but the companies that lent you the money will not be getting it back. You may not shed a tear for some big corporation, but small businesses who extended credit to you may also be left without repayment.
Small businesses who extended you credit may be left empty handed if your debts are wiped out. Yes, you have to do what you have to do for your own security and that of your family. But it’s still something to think about.
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