If you have no other option but to file for bankruptcy, you will certainly need to make some lifestyle changes. For some people, consolidation loans provide a good solution, and you need to use bankruptcy only as the last resort. If you are unable to pay anything back to any of your creditors, you will be able to write off the whole of the debt, but this relief will come with a price. Apart from social problems, potentially losing your assets, bank account and job, filing for bankruptcy will affect your credit rating for a long time. Find out more about these effects below.
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Payments
You are not allowed to make any payments after filing for bankruptcy, and you are obliged to pay the legal fees. A bankruptcy lawyer will be able to take you through all the steps and give you a breakdown of the fees to be paid. It is important that your bankruptcy case will be examined carefully, therefore, you need to provide the court with supporting evidence that you are unable to pay. Bankruptcy will give you the opportunity to rebuild your credit, but it will not happen overnight. Your creditors will be advised of the case and they will stop sending you letters about your debt. Remember that bankruptcy is not starting your finances again, as it will affect your credit rating for a long time.
Restrictions After Bankruptcy
There are different types of bankruptcy you can file; chapter 7 or 10 will make the record appear on your credit file for 10 years, while filing under chapter 13 will remain in the books for 7 years. For two years you will not be able to apply for a mortgage. Renting properties will also be harder, not to mention obtaining a job in finance or the corporate world. You cannot obtain credit based products for a few years, and it is up to the lender's criteria whether they would consider you fit for finance. All your assets and loans will be written off, therefore, the house you have finance on will also be lost to cover the costs of the procedure and outstanding debt. Some people might have difficulties obtaining a checking account after bankruptcy, therefore, it can cause you many problems, including not being able to pay your bills, having to carry cash all the time and seeking alternative methods to receive your salary.
How Long Are You Affected by Bankruptcy?
Bankruptcy will stay on your credit report for up to 10 years. Letting agents and finance companies will be able to access the information related to your finances, so will potential employers. You will need to focus on improving your financial situation and payment schedule, to be able to gain trust again. Bad credit accounts and secured finance products would be a good starting point; however, they will not guarantee that you can obtain finance in the near future. Even if banks offered you credit, it would be with a higher interest rate, longer term or they would seek securities.
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