How Does Declaring Bankruptcy Affect Me & My Family?
Personal or individual bankruptcy is a taboo subject. Regulated by the court, individual bankruptcy is a process formulated to help people with massive debt start again, clearing her of her accountability.
Although the process of filing individual bankruptcy is meant to help, the act of filing it is already a disgraceful deed in the eyes of society. Companies won’t hire you, landlords won’t let you rent, and you can’t use credit cards, get a mortgage, or acquire loans. People just find it hard to trust individuals who are branded by the law as “financially incapable to pay borrowed money.” It can slow down your life but the bankruptcy stigma is normally temporary.
Effects on your finances
Normally, filing bankruptcy nullifies your accountability to your debt without having to pay your creditors ever. These debts are mostly credit card and medical bills and unpaid taxes. Once all your eligible debt is wiped out. Your cash flow will drastically shoot up but the law may require you to pay unpaid interest when you show financial capability again.
Regarding your assets, you can only keep a limited amount of asset value. Any excess will be transferred to your trustee, who will sell them in favor of your creditors. After filing bankruptcy, most creditors will not entertain you anymore as a client, because of your prior fiasco. You become a confirmed risky person once you declare bankruptcy.
Effects on your home/mortgage
The first housing matter that filing individual bankruptcy will affect negatively is your ability to acquire a mortgage for a house. You won’t be able to rent an apartment, or any rentable residential space. You will only be able to do these things when your credit rating finally recovers.
A good way to avoid these inconveniences is to lock in a lease before filing bankruptcy. This way, you will be able to have a place to live in, assuming that your credit score did not take a massive beating. You’ll be lucky to find landlords that don’t look at credit scores and bankruptcy status, as long as you pay future payments. A rent-to-own setup may place your home under your name after being bankrupt but only if you show the ability to earn and pay within a few years.
Effects of bankruptcy on your family
Bankruptcy can ruin families. The financial implication of bankruptcy can stress out your family so much that it can also ruin emotional ties. Your spouse will stop trusting you and your children will lose a huge amount of respect. They will also question your inability to fully disclose your financial struggle while it is still solvable.
Couples can get divorced because of bankruptcy. Parents can lose the battle of custody because of bankruptcy. What’s worse is the law may not even allow you to come near your family at all. Even cousins, grandparents, and other relatives may start dissociating themselves from you just because they don’t want to be involved with someone who has been dubbed by the law as a financial delinquent.
The negative effects of bankruptcy on your family and loved once can last for years, or even decades. Even when you recover from bankruptcy and become a better person, financially, they will still remember the time when you gave up on the fight to pay debt.
Truth be told, there are families who stick together through thick and thin, no matter how bad bankruptcy may be. We still cannot deny the fact that financially, it will affect your family because they live with you or they may be financially depending on you.
Effect on your job/future job search
Employers are not allowed by the law to fire you just because you’re legally bankrupt. They are also not allowed to discriminate you, demote you, pay you less, give you zero work as an employee just because of your bankruptcy.
If you’re jobless, it’s a different case. You will definitely have a hard time finding a job despite the law disallowing employers to ask if applicants are legally bankrupt or if they have a good credit score or not. They are not allowed to check your credit history unless you sign a paper that will allow him to.
Take note that even though you can’t be fired for being bankrupt, the employer can use any other unrelated reason to fire you.
Effect on loans
Just like in mortgage and credit, your ability to take loans will also be jeopardized by your bankruptcy. No bank will offer you alone if you cannot show any ability to sustain financial responsibilities. It will take years to recover from a credit score crash and you will have to double your financial capability and credentials to earn back financial institution’s trust.
Before considering filing for bankruptcy, make sure you looked at all the options possible. Strip down all the effects of bankruptcy in all angles of your life and finances and see which works best for you.Recommend0 recommendationsPublished in