Consequences of Bankruptcy
In these uncertain times a large number of people will be facing financial challenges that are scary and often times insurmountable. It is important to research and carefully consider the impact debt settlement or bankruptcy will have down the road. In certain cases bankruptcy may be inevitable, in which case planning is of upmost importance to a successful strategy. JLG Lawyer’s experienced team can help answer questions and map out a strategy that is right for you and your family.
Perhaps the most well-known consequence of bankruptcy is the loss of property. As previously noted, both types of bankruptcy proceedings can require you to give up possessions for sale in order to repay creditors. Under certain circumstances, bankruptcy can mean losing real estate, vehicles, jewelry, antique furnishings and other types of possessions.
Your bankruptcy can also affect others financially. For example, if your parents co-signed an auto loan for you, they could still be held responsible for at least some of that debt if you file for bankruptcy.
Finally, bankruptcy damages your credit. Bankruptcies are considered negative information on your credit report, and can affect how future lenders view you. Seeing a bankruptcy on your credit file may prompt creditors to decline extending you credit or to offer you higher interest rates and less favorable terms if they do decide to give you credit.
Depending on the type of bankruptcy you file, the negative information can appear on your credit report for up to a decade. Discharged accounts will have their status updated to reflect that they’ve been discharged, and this information will also appear on your credit report. Negative information on a credit report is a factor that can harm your credit score.
Getting a Credit Card or Loan after Bankruptcy
Bankruptcy information on your credit report may make it very difficult to get additional credit after the bankruptcy is discharged — at least until the information cycles off your credit report. Lenders will be cautious about giving you additional credit, and they may ask you to accept a higher interest rate or less favorable terms in order to extend you credit.
It will be important to begin rebuilding your credit right away, making sure you pay all your bills on time. You’ll also want to be careful not to fall back into any negative habits that contributed to your debt problems in the first place.
Getting a Mortgage After Bankruptcy
Just as bankruptcy can hinder your ability to obtain unsecured credit, it can make it difficult to get a mortgage, as well. You may find lenders decline your mortgage application, and those that do accept it may offer you a much higher interest rate and fees. You may be asked to put up a much higher down payment or shoulder higher closing costs.
Rather than give up your home and try to get a new mortgage after bankruptcy, it may be better to reaffirm your current mortgage during bankruptcy proceedings. You would be able to keep your home, continue paying on your current mortgage — free of other debts — and stay in your current home.
Bankruptcy Alternatives
When you’re struggling with unmanageable debt, bankruptcy is just one solution; there are others to consider. Most will also affect your credit, but probably not as badly as a bankruptcy — plus, these alternatives can allow you to keep your property, rather than having to liquidate it in bankruptcy proceedings.
Some bankruptcy alternatives you might consider are:
- Seek help from a government-approved credit counselor or debt management plan. A counselor can work with your creditors to help arrange a workable plan for repaying what you owe.
- Take out a debt consolidation loan. These types of loans can aggregate multiple high-interest, costlier debt into a single, lower-interest loan. Research debt consolidation loans to see if consolidation can lower the total amount you pay and make your debt more manageable.
- Approach your creditors and see if they’re willing to agree to a more manageable repayment plan. Defaulting on your debt is not something your creditors want to see happen to you, either, so they may be willing to work with you to arrange a more achievable repayment plan. Settling your debt will have a negative effect on your credit scores.
Be aware that whenever you fail to honor the debt-repayment terms you originally agreed to, it can affect your credit. That said, bankruptcy will still have a more significant negative impact on your credit than will credit negotiation, credit counseling and debt consolidation.
A Last Word About Debt Relief
Whenever you fail to repay a debt as you originally agreed to, it can negatively affect your credit. Some types of debt relief come with consequences that are more damaging and long-term than others. Before you make any decision about debt relief, such as declaring bankruptcy, it’s important to research your options, get reliable advice from a qualified credit counselor, and understand the impact your choices can have on your overall financial well-being.
Regardless of what type of debt relief you choose, you can begin taking better care of your credit immediately by putting simple, responsible, credit-positive actions into practice such as:
- Paying all your bills on time.
- Avoiding taking on additional debt.
- Monitoring your credit report.
- Creating and sticking to a personal budget.
- Using credit in small ways (such as a secured credit card) and paying the balances in full, right away.
Contact Us:
We understand debt settlement and bankruptcy is a challenging topic to face both financially and emotionally. The processes can become very complicated in a system that is difficult to navigate and frequently changes. Consulting with a good lawyer as soon as possible is incredibly important to the success of your debt settlement or bankruptcy strategy. At JLG Lawyers we offer solutions to help advise you and answer questions all the way to a full attorney handled case. Contact us now for a free case review and strategy session.
JLG Lawyers and Michael Jaurigue, Esq. are located in Glendale, California and specialize in debt settlement and bankruptcy matters. Michael Jaurigue is a UCLA and Berkeley Law graduate and has been practicing law for 20 years in Los Angeles and worked at Sheppard, Mullin, Richter, and Hampton representing several Fortune 100 clients prior to forming his own firm 10 years ago. JLG Lawyers is located at 300 W Glenoaks Blvd. Suite 300, Glendale, California 91202. 818-630-7280.