Negatives of Bankruptcy

Bankruptcy is a last resort for people who are in financial turmoil. It is considered a last resort for many reasons. The negatives of bankruptcy are long lasting and significant. There are several reasons to avoid bankruptcy detailed below.

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• Most importantly, a bankruptcy can stay on your credit report for up to ten years. If you apply for credit in the form of a car or home loan or even a credit card, your potential creditor will see your bankruptcy status on your credit report and in all likelihood, deny you credit for this reason, particularly when it is freshest on your report. Some credit applications ask if you have ever filed for bankruptcy, and lying on a loan application is considered a crime.
  
  
• Of course, your credit score will also drop as a result of filing. If your credit is good, your credit score will drop considerably after filing for bankruptcy. If your score is lower, a bankruptcy will not affect your score as much. The lower your credit score, the more obstacles you'll face when trying to gain additional credit.
  
  
• Your privacy is compromised. When filing a bankruptcy petition, you are required to divulge all of your financial information. Once your bankruptcy case is closed, your file becomes a public record. Once available, anyone can go to the courthouse and pull up your bankruptcy record. This record will always be publicly available.
  
  
• Your loan interest rates will be higher for new credit obtained requiring you to pay more for certain products and services. It will be challenging to gain new credit soon after filing for bankruptcy, however; there are some companies who will offer you credit at much higher interest rates.
  
  
• You will have a harder time obtaining employment. There are companies who run credit and background checks as part of their job application process. A bankruptcy can hurt your job application. Some businesses will tell you before you apply for a job with their company that a bankruptcy will disqualify your application.
  
  
• There is a stigma attached to people who have filed for bankruptcy. You are not required to tell your acquaintances or friends that you have filed. Many people choose not to tell these individuals that they have filed for bankruptcy because of this stigma.