Filing for bankruptcy is a major step that many people consider when faced with overwhelming debt and unable to meet their financial obligations. In the United States, this procedure is a legal option for individuals and businesses in financial difficulty. However, filing for bankruptcy comes with a number of significant consequences that must be carefully considered before making this decision. Here we tell you the 6 consequences of filing for bankruptcy in the United States.
- Impact on credit history
One of the most immediate effects of filing for bankruptcy is the impact on your credit score. A bankruptcy will show up on the credit report and negatively affect a person’s credit score. This can make it difficult to get credit in the future, and it can take years to rebuild a solid credit score after a bankruptcy.
- Loss of property and assets
In a bankruptcy proceeding, a trustee may be appointed to sell certain assets and property to pay creditors. That means you may have to sell valuable property, like your house or car, to pay off some of the debt. The amount of assets that will be liquidated depends on the type of bankruptcy filing you are filing.
- future restrictions
After filing for bankruptcy, your future financial options may be limited. A consequence of filing for bankruptcy in the United States is that some employers may have policies that prohibit or discourage the hiring of individuals with a history of bankruptcy. Also, you may be offered higher interest rates on loans and credit cards if you can get them.
- Consistency in credit history
A bankruptcy filing can linger on your credit report for several years, meaning that even after you’ve met your legal obligations, its effects can still be affecting your personal finances. Chapter 7 bankruptcy can stay on your credit report for 10 years, while Chapter 13 can last up to 7 years.
- Social and emotional stigma
In addition to the financial impact, bankruptcy can have a significant emotional impact. Many people feel embarrassed or stigmatized by filing for bankruptcy, which can negatively impact their emotional well-being and self-esteem.
- Restrictions on future bankruptcy filings
If you have filed for bankruptcy in the past, it is important to note that there are limits to how often you can re-file. This means that you cannot use the bankruptcy tool as a repeated solution to financial problems.
Filing for bankruptcy in the United States can bring temporary relief to those in overwhelming financial distress, but it comes with a number of significant consequences. Before making this decision, it is important to seek professional legal and financial advice to fully understand the implications and to explore other options available. Insolvency is not a universal solution and must be carefully considered based on the individual financial situation.