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Disadvantages Of Bankruptcy

Todays Date: August 16, 2017

Without fully understanding the disadvantages of bankruptcy, a lot of people will file for the “protections” it offers. In most cases, filers believe that bankruptcy clears the slate. Without a complete knowledge of bankruptcy provisions, a lot of borrowers actually find themselves in a deeper financial rut than before they filed. After all, as a last resort, bankruptcy was created to penalize everyone involved, including you. With that in mind, you should have a thorough understanding of the disadvantages of bankruptcy before you file.

As a leading disadvantage of bankruptcy, the fact that a discharge will not always clear all debt is one that is often overlooked by borrowers. That’s right; in some cases, even after a trustee has liquidated your assets and repaid creditors, you could still owe others whose debt was exempt from the bankruptcy discharge.

Another disadvantage of bankruptcy is that you not only lose your existing property, including (in some cases) real estate, automobiles, investments and other personal belongs, but your rights to future property. In most cases, “future property” can include winfalls such as an inheritance.

It is almost impossible to withdraw a chapter 7 filing. Once you file for bankruptcy, it is done and you are subjected to all the disadvantages. Your credit score takes a major hit. Bankruptcy will stay in your credit rating for the next seven years. Lenders usually do not entertain previously bankrupt borrowers. Thus, after bankruptcy, it can be difficult for you to get loans.

Chapter 7 bankruptcy can be filed for almost any amount of debt. The one restriction is that debtors cannot file another petition within six years of their last bankruptcy discharge.

Many filers often overlook the fact that the process of filing for bankruptcy will take a psychological and physical toll. For most people, filing for bankruptcy takes a tremendous toll as the bankruptcy seems to constantly follow them.

In many cases, the stress from bankruptcy will result in relationship problems, including martial breakdown and divorce. Ultimately, this worsens the financial impact of bankruptcy, leaving bankrupt individuals feeling even more beaten down and defeated. Such relationship stress can also lead to problems within shared social circles and, not surprisingly, bankruptcy also increases the probability of substance abuse. In fact, the feelings of “loss” are greatly enhanced among bankrupt individuals.

Such feelings of loss, defeat and trauma often make managing regular relationships with other family and friends difficult. The difference in opinion among friends and family, combined with the feelings of guild and shame, often alienate bankrupt individuals from those who have been closest to them.

There are some advantages for persons in serious debts. However, for most people, they can get along without filing bankruptcy. There is a mandatory credit counseling three months prior to filing bankruptcy. This will help the persons find ways of managing their finances. File for chapter 7, only if you know as last resort. It is the option that makes better financial decision. If the advantages outweigh the disadvantages of bankruptcy, only then should you go for it.

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