5 ways life gets harder after you file for bankruptcy


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Before you rush into filing for bankruptcy, think about the consequences.

If you’re saddled with debt and can’t see the light at the end of the tunnel, filing for bankruptcy seems like a good solution. A Chapter 7 filing will liquidate your assets to pay off your creditors and forgive your remaining debt (although there are exceptions). A Chapter 13 filing reorganizes your debt so it’s easier to repay over time.

Many people assume that after bankruptcy, with a clean slate or a manageable debt-repayment plan, they’ll just move on and call it quits. But bankruptcy has consequences. A Chapter 7 filing stays on your credit report for 10 years, while a Chapter 13 filing stays there for seven years. Here are some things you may be struggling with during this time.

1. Rent a house

It is common for landlords to conduct a credit check on tenants before signing a new lease. If your credit report says bankruptcy, your landlord may deny your application, even if you make enough money to pay your rent and more.

2. Take out a mortgage

A mortgage is a huge loan – one that your mortgage lender wants to be able to repay. But with a bankruptcy filing on your credit report, a lender might worry that you’re not managing your money well. Your home loan application could easily be denied even if you have funds for a down payment and earn a respectable salary that should allow you to keep up with your mortgage loan.

3. Take out a personal loan

When you take out a mortgage, the property serves as collateral for that loan. If you default, your lender can force you to sell your home and get their money back. With a personal loan, you do not put up any specific asset as collateral. Rather, personal loans are unsecured. Therefore, your credit score is a big factor in determining if you qualify. And filing for bankruptcy could make that pretty difficult.

4. Get a new credit card

Your income isn’t the only thing credit card issuers consider when deciding whether or not to approve your application. They also look at how well you manage your money. And with a bankruptcy on your credit report, a credit card issuer could easily scrap your application for fear you’ll pick up a storm and try to walk away.

5. Get a job

Potential employers do not always carry out a credit check on job applicants. But if you’re applying for a job that involves managing money, your employer might examine your personal credit history. It’s a legal thing, although they must get your permission. And if your credit report says bankruptcy, you may be passed over in favor of a job applicant who doesn’t have that red flag.

Bankruptcy can be a reasonable solution if you’ve landed in debt and are looking for a way out, but you should know that there are consequences. Be prepared for what you may face if you choose to file under Chapter 7 or Chapter 13. Above all, explore alternative options such as debt consolidation or settlement. You may find that you can escape the hole you’ve dug yourself into without going to the extreme of declaring bankruptcy. Bankruptcy could serve as a black mark on your credit report for years to come.

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