Monday, April 7, 2014, PM | 2 Comments
Bankruptcy, the legal designation for a person or business who cannot pay off their debts, has considerable consequences. If you are unable to pay your creditors, bankruptcy can offer a viable solution to your financial burdens. However, you need to know some of the long-term impacts of bankruptcy.
Bankruptcy Documents Will Remain Public
All the documents from bankruptcy court can be accessed by the public. This includes sensitive financial information. Anyone will be able to find out that you’ve been declared bankrupt, and they will be able to view case and docket information.
If you are truly a candidate for bankruptcy, however, this breech of privacy might not be such a huge consideration because filing bankruptcy will erase your debt.
Your Credit Score Could Be Affected
Declaring bankruptcy could cause your credit score to be lowered by up to one hundred points. However, once you’ve been declared bankrupt, you will have an opportunity to slowly build your credit again.
Within two years, your credit score could be back to normal. Aside from accounts showing as “paid in full”, many people don’t see a change in their credit score. A bankruptcy lawyer like those with Lynch & Belch P.C. can advise you regarding which type of bankruptcy will have the least impact on your credit score.
Employers Might Not Hire You
According to CNN Money, the U.S. Bankruptcy Code prevents employers from barring bankrupt employees. However, if an employer sees bankruptcy in your background, you might not get the job. How is this legal? Employers are permitted to turn a job applicant away based on credit. Within two to three years, you’ll be able to strengthen your credit and resolve this issue.
Trouble Getting Into a New Home
After bankruptcy, you could have trouble getting a home loan. Surprisingly, the same goes for renting. Bankruptcy will stay on your credit for seven to ten years; lenders and landlords often view bankruptcy as a red flag.
Take the opportunity to improve your credit after bankruptcy, because this will put the odds of getting into a new home in your favor.
The waiting time for a new home loan is about two years; at this point, you’ll be eligible for the loan and an attractive interest rate. If renting, let the landlord know about your hardship.
Be prepared to pay a larger-than-normal deposit, and you might even need to pay the first few months’ rent in cash. Down the road, bankruptcy should not affect your ability to rent.
Bankruptcy is the best solution to financial hardship in some cases, although it does come with long-term impacts. While these impacts can be significant, they are worth the inconvenience for those who need to cancel their debts.Facebook.com/doable.finance
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