Side Effects of Bankruptcy: Weighing the Pros and Cons
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Side Effects of Bankruptcy

If you're considering filing for bankruptcy as a way to relieve your personal debt, you're probably wondering what sort of side effects bankruptcy might have – and that's a valid concern. Bankruptcy is a major financial move and can affect various aspects of your life.

Every person's situation is unique. To ask a bankruptcy attorney about specific potential side effects of bankruptcy, please fill out this form and arrange a free, no-obligation consultation with an attorney near you.

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Side Effects of Chapter 7 and Chapter 13 Bankruptcy

Whether you choose to file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you will likely receive significant financial relief in some form - through a repayment plan in Chapter 13 or through a full discharge of some debts in Chapter 7.

Additionally, you may find that some of these bankruptcy side effects occur:

  • Temporarily weakened credit: A bankruptcy filing is seen as a negative action on your credit report and the bankruptcy filing itself will appear on your credit report for seven to 10 years. However, the overall effect your bankruptcy has on your credit diminishes as time passes and your more recent actions begin to fill up your credit report.
  • Difficulties getting loans: Because of the effect a bankruptcy filing has on a person’s credit, qualifying for a loan tends to be very difficult in the months directly following bankruptcy. Most people can expect to qualify for only high-interest, low-dollar-amount loans in the months and years immediately following bankruptcy.
  • Difficulties getting work: These days, many employers conduct credit checks in addition to criminal background checks for potential employees, and, unfortunately, it seems that some employers see a bankruptcy filing as reason not to hire someone.

Positive Side Effects of Bankruptcy

Of course, not everything related to filing for bankruptcy is negative – after all, bankruptcy protection is designed to ease the burden of debt for people struggling to make ends meet. So here are some of the specific positive occurrences you can generally expect when you file for personal bankruptcy:

  • Cessation of creditor contact: When you file your bankruptcy petition with the court, a legal protection called the automatic stay takes effect. This protection prevents creditors of all sorts from contacting you, which means you will no longer have to deal with threats of repossession, foreclosure or garnishment over the phone or through the mail during your case.
  • A fresh financial start: Filing for bankruptcy is a major financial step, and it offers a major reward: a chance to start over financially. Assuming your bankruptcy case proceeds normally, you can look forward to a chance to rebuild your finances so that they're stronger than they were before you filed.
  • Stronger credit than before: In the months immediately following bankruptcy, your credit rating may take a hit, but as you apply what you learn in your debtor education course, you have a chance to build strong, healthy credit.

Connect with a Lawyer to Learn about More Bankruptcy Side Effects

If you’d like to speak with a bankruptcy lawyer about how bankruptcy might affect your life specifically, take this opportunity to arrange a free legal consultation today. Simply fill out the form on this page to get started.

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