Filing bankruptcy - as with most financial decisions - should never be taken lightly. After all, a Chapter 7 or Chapter 13 bankruptcy has the power to stay on your credit score for years to come. And in those following years, you could miss out on opportunities if you don't know how to use your new financial skills.
However, bankruptcy isn't necessarily the "black mark" it was once considered to be. Bankruptcy law has become more lenient towards the consumer, and several exemptions make it possible for claimants to keep their biggest possessions, including their home and car, while wiping out unsecured debt.
If you are thinking about filing bankruptcy, here's what to expect afterwards:
- Your information will be made public. Fact. One of the biggest reasons that people cite for avoiding bankruptcy is the fear that their financial information will be made public. While it's true that bankruptcies are available for public perusal, this doesn't mean that your community will immediately be made aware of your financial troubles. Usually an individual has to make a special request to view the records, so you can be sure that no one will go through the effort to dig up this dirt on you (unless you're a famous celebrity or politician, of course!).
- You'll be inundated with credit cards. Fact. Yes, you certainly read that right: people who file for bankruptcy are inundated with credit cards as soon as their debts are dismissed. You might think that these lenders are crazy, but think about it: since you can't file for another bankruptcy for several years, lenders know you can't discharge the debts. Additionally, these credit cards aren't exactly kind to your finances: the interest rates typically reflect the risk these lenders are taking in offering credit to you. Choose a secured credit card with a small limit and make little purchases each month and pay them off.
- You'll be faced with temptation. Fact. There's no denying that you'll be faced with temptations when your debts are discharged. Those negative financial behaviors don't exactly change overnight. That's why it's crucial for you to pay attention to the credit counseling classes offered by the bankruptcy courts. In many states, these counseling classes are mandatory, so don't waste this necessary - and extremely helpful - responsibility.
Filing for bankruptcy may seem like a scary process; however, if you prepare yourself accordingly, it will all go a lot smoother.