For Texans who are having financial challenges, bankruptcy might seem like an opportunity to get their situation straightened out and get back on stronger ground. In many cases, it is. However, it is imperative to bear in mind that there are also negative aspects to any bankruptcy filing, and understanding them before taking a certain course of action is wise.
The bankruptcy filing will stay on the person’s credit record for as long as ten years. Because of that, it could have an influence on finances in the future. Although having bankruptcy on one’s credit record can be an issue, those whose financial issues have grown to the degree that they are considering filing for bankruptcy will already have issues on their credit record. Therefore, this may not be a major obstacle. Some might find that the bankruptcy even improves their credit standing. With Chapter 7 bankruptcy, there can be a discharge of debts only once in eight years. Because of that, creditors will be aware that an applicant for credit will not be able to use Chapter 7 as a tool to get out of debt on a regular basis making that person a more stable risk.
Getting credit after a bankruptcy depends on the situation. One study indicated that one out of every three people who filed for bankruptcy were able to get credit within three years. Half were able to do so within five years. It must be remembered that credit scores and a bankruptcy will have an influence on interest rates and this can also negatively impact other purchases such as a home or an automobile.
Anyone can get into financial trouble for a multitude of reasons. It is not simply a matter of a person overspending. Those who are seeking debt relief should fully grasp all the aspects of filing for bankruptcy before jumping in. Of course, a person who is in a troublesome financial situation can benefit greatly from speaking to a lawyer who can detail all the positives and negatives of bankruptcy and provide other possible options to help with the debt.
Source: americanbar.org, “Bankruptcy Pros and Cons -- What are the disadvantages?,” accessed on May 17, 2016