Some consumers will turn to bankruptcy to solve their financial woes, often as a last resort. If you’ve been seriously contemplating bankruptcy, you’ll want to carefully consider the negative repercussions first. While bankruptcy can potentially be the solution you’re looking for, you’ll want to keep some of the following drawbacks in mind:
You may not qualify
You can’t just want to declare bankruptcy—you need to qualify for bankruptcy as well. Filing can be a convoluted and time-consuming process, and some people already put a lot of effort into starting the process before they find out that they aren’t eligible, and their case is dismissed.
Filing for bankruptcy will tremendously affect your credit score in a negative way, and this is another huge disadvantage to consider. If the filer’s financial situation improves before their bankruptcy is removed from their credit report (10 years), they may still find that it’s very hard to get approved for loans, credit cards, and so on. Even other things that rely on good credit, such as rental housing, can be difficult for someone who filed for bankruptcy.
You can lose assets
A filer’s assets are at risk when they declare bankruptcy, depending on what type of bankruptcy they file and the types of assets they have. Assets that are not exempt can be sold as the result of a bankruptcy in order to satisfy unpaid debts.
Filing for bankruptcy isn’t a simple process, and it can take a long time. Filers not only have to set aside plenty of time to take care of all necessary paperwork and other aspects of their case, but they’re also required to seek credit counseling and attend creditor meetings.
It can be expensive
It’s not free to declare bankruptcy, and this can be another financial burden for someone who is already having money troubles to begin with. Depending on the specifics of the case, including the type of bankruptcy the filer is declaring, bankruptcy can cost a lot of money in court fees and attorney costs.
Your insurance premiums can go up
If you file for bankruptcy, you may have to pay higher insurance premiums, even if you’ve never made any claims. This does, however, vary by individual insurance carrier and also varies by state.
Certain debts can’t be discharged
If you’re seriously considering bankruptcy, ask yourself why and determine the exact debts you’re hoping to discharge. Since certain debts cannot be discharged through bankruptcy (government student loans, for example), declaring bankruptcy might not help your current situation.
Are you receiving long-term payments from an annuity or a structured settlement, but need cash now to help pay down debts? Instead of filing for bankruptcy, let Peachtree Financial Solutions help get you the cash you need. At Peachtree Financial Solutions, we can purchase some or all of your future payments and offer you that money sooner and in a lump sum payment. Use the money you receive from Peachtree to get rid of debt and potentially avoid filing for bankruptcy. Contact Peachtree Financial Solutions today to learn more about the process and to receive your no-obligation, free quote.
Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.