Bankruptcy attorneys are in the business of representing bankruptcy clients. Consequently, asking a bankruptcy attorney whether you should file bankruptcy is a lot like asking the salesman at the Ford dealership whether you should buy a new Chevy Camaro. You will likely get a very biased and self-serving answer. So today, instead of extolling the virtues of bankruptcy, let’s take a hard look at the down-side of filing bankruptcy.
Bankruptcy negatively affects your credit
Filing bankruptcy is listed as a public record that stays on your credit report for up to ten years from the date you file the case. Bankruptcy changes the status of every open account to “included in bankruptcy.” After the bankruptcy, discharged accounts are listed as “discharged in bankruptcy,” a negative report. Discharged accounts stay on your credit report for up to seven years from the date you filed bankruptcy.
In fairness filing bankruptcy also immediately stops all past due accounts and prohibits further negative reporting. Since your credit score is heavily weighted to recent activity, stopping delinquent debts helps you rebuild your credit over time.
Bankruptcy can affect your ability to get a job
The federal law prohibits employers from firing an employee for filing bankruptcy. However, if you are looking for a job in the private sector, your bankruptcy filing can be used as a reason to deny employment. Government agencies may not deny employment because of bankruptcy, but may look to the reasons you filed. This is especially true for government jobs that require security clearance. However, delinquent accounts and financial problems are also reasons to deny or strip security clearance.
Bankruptcy makes it more difficult to buy a house
Most lenders require bankruptcy debtors to wait a year or more after bankruptcy before qualifying for a home loan. On the other hand, a high debt-to-income ratio, outstanding collection accounts, or judgments will also make it difficult or impossible to qualify for a mortgage loan.
Bankruptcy can carry a stigma in the community
Many people view bankruptcy as a personal failure or even an immoral decision.
While bankruptcy cases are public record, they are difficult to access. Bankruptcy cases are not printed in the local paper, so most people have no idea when a neighbor files bankruptcy. What’s more, in the past five years more than 6.5 million bankruptcy cases have been filed in the United States, many of those joint husband and wife filings. Chances are that you and your neighbors personally know individuals who have filed for federal bankruptcy relief. These are not bad people, only people in bad financial situations.
For more information or a free consultation contact the experienced attorneys at Fears | NachawatiLaw Firm by calling 1.866.705.7584 or send an email to fears@fnlawfirm.com.