Making the decision to file for bankruptcy is not easy, but that may be your only option when you cannot keep up with your bills anymore. Some are scared about their financial future, while others worry about their public image. Remember that it is human to make mistakes, and there is no shame in starting new. However, knowing how your finances will be affected afterward is important.
Having another financial start can be overwhelming, mainly because bankruptcy has consequences. Your credit history will be greatly affected, which may affect other areas of your life. But the potential impact on your credit score before bankruptcy should not be ignored too. Consult with a Chapter 11 business bankruptcy attorney today.
Ways bankruptcy can affect your financial future
It is no secret that bankruptcy is a big step and can certainly affect your financial future. Even though it has several benefits for those who are financially struggling, it is still important to know its cons to make an informed decision.
Here are some consequences of bankruptcy:
-
Bad credit history.
Your credit score depends on your ability to repay debt at the right time. The later you pay, the poorer your score will be. Needless to say, filing for bankruptcy is destructive to your credit history. The bankruptcy records remain on your credit history for up to 10 years and will continue to affect your scores for that long. However, it is still possible to build your credit score after bankruptcy by making timely payments again.
-
Loss of tax refund.
If you have filed for bankruptcy, you cannot pay your creditors. Therefore, when you receive your tax refund, you will be required to hand it over to your trustee, who will then use the amount to pay off your debt. You won’t be allowed to spend your tax refunds.
-
Inability to obtain new credit.
Post-bankruptcy, your ability to access new credit will be decreased significantly. Even if you qualify for collection lawyers, those will have high-interest rates and low credit limits. Getting qualified for a mortgage also becomes difficult. You may also have to wait up to four years before qualifying for a home loan.
Focusing on your financial future post-bankruptcy
While bankruptcy affects your credit score, dstvportal this will not last forever. It may be more harmful to you if you do not file for bankruptcy and keep making late or no payments to your creditors. Many debtors do not file because they are not aware of the benefits. This is why it is recommended to hire a bankruptcy attorney.
