Although bankruptcy may be that miracle cure you sought for your financial woes, you may encounter some unpleasant side effects. The disadvantages of filing bankruptcy are:
You can lose assets. Depending on how much your home is worth and where you live, it is possible, but unlikely, that you’ll lose it by filing bankruptcy. In most bankruptcies, debtors don’t have to give up any of their belongings, but…
Bankruptcy is a matter of public record. As more and more records are stored on computers and accessible on the Internet, searching that data becomes easier and easier for anyone who’s interested. In other words, if your nosey neighbor wants to know whether you filed bankruptcy, how much you owe, and who you owe it to, the information may be just a few mouse clicks away,
Bankruptcy affects your credit rating. Bankruptcy may have a negative effect on your credit rating, but that fact may well fall into the “So what?” category for you. Even with a bankruptcy on your record, your odds of obtaining credit are very good. With a little work and perseverance, you can reestablish credit almost immediately. Some credit-card companies actually target folks right after bankruptcy because they know that these people are free of all their existing debts and probably won’t be eligible to file another bankruptcy any time soon.
For a few years after bankruptcy, you may have to pay higher interest rates on new credit, but this result will ease over time, even if your credit report still shows a bankruptcy. So, don’t pay too much attention to the horror stories bill collectors tell you about the disastrous effect bankruptcy has your credit.
Friends and relatives can be forced to give back money or property. If you repaid loans to friends or relatives or gave them anything within the past year, they can be forced to repay a trustee the money they received, if you don’t know what to watch out for. You can usually avoid these kinds of problems by carefully timing your bankruptcy filing.
Bankruptcy can strain relations with loved ones, especially parents who were raised in a different era.
A stigma may still be attached to filing bankruptcy. This drawback is especially true in small communities, but is much less likely to be a problem in cities, where newspapers rarely bother printing the names of non-business bankruptcies.
Bankruptcy may cause more problems than it solves when you’ve transferred assets to keep them away from creditors.
You can suffer some discrimination. Although governmental agencies and employers aren’t supposed to discriminate against you for filing bankruptcy, they may still do so in a roundabout way. Prospective employers may also refuse to hire you.
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