Bankruptcy is a legal declaration of your inability to pay your debts. It provides you with protection under a federal bankruptcy code that can save some of your assets, keep your creditors at bay, and provide you with the help of a professional (such as an attorney or a court-appointed trustee) to sort out the situation. It is an option, but is it the best option?
Facts about bankruptcy
To some people, bankruptcy seems less damaging these days. They see big corporations using bankruptcy and decide that it must be okay. But the consequences of personal bankruptcy are serious and long lasting.
Bankruptcy should be viewed as a last resort, not as a natural outcome of a credit crisis. Usually there are far less drastic solutions available. Here are some facts to keep in mind if you are considering bankruptcy:
- Bankruptcy will remain on your credit report for up to 10 years.
- It may affect your ability to rent or buy a home.
- It may impact your ability to obtain future credit, including credit cards.
- You will not be excused from certain debts, including Federal Student Loans, IRS debt and child support.
- Your pension or profit-sharing plan may be affected.
- It may affect your living standard by denying you the privilege of using credit to purchase necessary items such as large appliances, plane and car reservations, etc.
- It may impact your career if a future employer questions your attitude toward responsibility.
Declaring bankruptcy may provide a fresh start, but the negatives often far outweigh this positive. You should, therefore, exhaust every alternative to meet your obligations before considering bankruptcy.