5 Ways Life Gets More Difficult After You File For Bankruptcy
When you’re in debt and can’t see a light at the end of the tunnel, filing for bankruptcy might seem like a good solution. With a Chapter 7 filing, your assets are liquidated to pay off your creditors and your remaining debts are written off (although there are exceptions). With a Chapter 13 filing, your debts are reorganized so that they are easier to repay over time.
A lot of people assume that following bankruptcy, they will simply switch to a clean slate or a manageable debt repayment plan and call it a day. But, there are consequences to filing for bankruptcy. A Chapter 7 filing will stay on your credit report for 10 years, while a Chapter 13 filing will stay there for seven years. Here are some issues you might struggle with during this time.
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1. Rent a house
It is common for landlords to perform a credit check on tenants before signing a new lease. If you have bankruptcy on your credit report, your landlord might reject your claim, even if you earn enough money to cover your rent and more.
2. Get a mortgage
A mortgage is a huge loan – one that your mortgage lender wants paid off. But with a bankruptcy filing on your credit report, a lender might be concerned that you are not good at managing your money. Your home loan application could easily be turned down, even if you have funds for a down payment and earn a respectable salary that should help you meet your mortgage.
3. Obtain a personal loan
When you take out a mortgage, the property is used as collateral for that loan. If you fall behind, your lender can force your home to sell and get their money back. With a personal loan, you don’t put a particular asset as collateral. On the contrary, personal loans are unsecured. As such, your creditworthiness is an important factor in determining whether you will qualify. And filing for bankruptcy could make that quite difficult.
4. Get a new credit card
Your income isn’t the only thing credit card issuers take into account when deciding whether or not to approve your application. They also take a look at how you manage your money. And with bankruptcy on your credit report, a credit card issuer could easily turn down your application lest you charge a storm and try to walk away.
5. Get a job
Potential employers don’t always perform a credit check on job seekers. But if you are applying for a position that requires you to manage money, your employer could be digging into your personal credit history. It’s a legal thing to do, even if they have to ask your permission. And if there’s bankruptcy on your credit report, you can be ruled out in favor of a job candidate who doesn’t have that red flag.
Bankruptcy can be a reasonable solution when you are in debt and need a solution, but you should know that it has consequences. Be prepared for what may happen to you if you decide to pursue a Chapter 7 or 13 filing. Most importantly, explore alternative options, such as debt consolidation or settlement. You may find that you can escape the hole you sank into without having to go so far as to file for bankruptcy. Bankruptcy could serve as a black spot on your credit report for many years to come.