Filing for bankruptcy is a decision that must not be taken lightly, as bankruptcy has serious consequences on your financial well-being and your life in general. Not only will filing for bankruptcy ruin you financially, it can also have an impact on your ability to rent or purchase a home, purchase insurance coverage, attend college, and make many other life-altering decisions. Knowing the consequences of bankruptcy can help you to avoid these pitfalls and reorganize your financial situation so that you don't have to take such a drastic measure.
Filing for bankruptcy can influence your ability to rent or purchase a home because a bankruptcy stays on your credit report for ten years. When potential landlords and mortgage brokers see a bankruptcy on your credit report, they may not want to rent a home to you or allow you to take out a mortgage on your property. Having a bankruptcy on your record shows that you have a past history of not being able to meet your financial obligations, which most landlords and mortgage brokers will consider a deal breaker.
Insurance companies may also check your credit report and find that a bankruptcy has been filed. Since you pay monthly premiums for insurance coverage, these insurance companies want to know that you will be able to make your monthly payments. Having a bankruptcy on your record shows these companies that you were not able to make regular payments on past bills, and these companies may turn you down for insurance due to your history of bankruptcy.
Attending college is one of the many steps you can take in life to provide yourself with more opportunities for education and career advancement. Having a bankruptcy on your credit record can disqualify you from applying for credit-based loans. Missing out on these funds can make it difficult for you to afford to pay for tuition, room and board, books, and other college expenses. This is one situation in which having a bankruptcy on your record can haunt you for life. Without being able to pay for these necessary college expenses, you may miss out on higher-paying jobs with more opportunities for career advancement.
Another consequence of filing for bankruptcy is not as well-known as the effects outlined above. Once you have filed for bankruptcy, particularly Chapter 7, you will begin receiving credit card and cash advance offers once your debts have been discharged. While you may want to take advantage of the opportunity to have a card for emergencies, be very cautious when accepting these offers. Credit card and cash advance companies make these offers available to consumers who have just filed bankruptcy because a Chapter 7 bankruptcy can only be filed every 6 years. By making these offers immediately following a bankruptcy, these companies know their debts can not be put into a bankruptcy case and discharged. This means that you will be liable for these debts and will not be able to file bankruptcy to get rid of them.
Knowing the consequences of bankruptcy can help you make the decision of whether or not to file. It is important to weight each consequence against the benefits of filing for bankruptcy so that you do not lose out on future opportunities for career advancement, education, insurance, or home ownership.
