Bankruptcy may be the last option to save you from a financial crisis and present a chance to live a new debt-free life. But remember, bankruptcy is a legal decision that comes with both positive and negative outcomes depending on your unique situation.
Bankruptcy on your credit report does have adverse consequences on your future buying prospects. First, bankruptcy remains on your credit report for long, which makes it hard to obtain credit such as auto loans, home loan, credit card etc. Even if you manage to locate lenders willing to work with you, the interest rates will be higher, and you will end up paying significantly more money. However, you can use these loans to rebuild your credit. Discuss your situation with a Bankruptcy Lawyer in Cleveland to gain insights on how you can streamline your financial situation post-bankruptcy.
Believe it or not, your future employment options are negatively affected by bankruptcy on your credit report. While it is against the law for employers to fire an employee simply because s/he filed for bankruptcy, there are instances where the court has backed the employer. Bankruptcy in your credit history can prevent you from qualifying for government jobs or those in the financial services industry. You cannot continue to be a Director or remain in the management of a company during the term of the bankruptcy without explicit permission from the Court. In addition, certain trade associations restrict memberships for a duration of the bankruptcy. You can seek counsel from a Cleveland Bankruptcy Law Firm to assess the restrictions that apply to you.
On the upside, the biggest positive of completing the bankruptcy process is the discharge. This legally protects you from harassing creditors trying to recover their dues from you. However, be aware that some debts such as certain taxes, alimony, child support, student loans etc., cannot be discharged through bankruptcy. Also, discharge does not apply to your property, so if there are any liens on your house, it will remain even after bankruptcy. The lender reserves the right to foreclose, should you default on the loan. A discussion with a qualified Cleveland Bankruptcy Attorney can help you learn more about the assets that you can keep.
The biggest hit from bankruptcy is on your credit score. But since 35% of FICO score is affected by late payments or bankruptcies, your score will likely not decline further if you file for bankruptcy after a string of failed debts and delinquencies. The next significant factor, at 30%, affecting the FICO score is the amount of debt you owe. Therefore, bankruptcy can prove helpful here by a discharge of the said debt.
Discharging debts through Chapter 7 bankruptcy can help improve cash flow immediately. However, with Chapter 13 bankruptcy, your debts are restructured and can take away all your disposable income, forcing a cash crunch for the duration of discharge, which is between three and five years. It is, therefore, imperative that you seek legal advice from a Bankruptcy Lawyer in Cleveland to assess your debt management options. Contact Cleveland bankruptcy lawyer, Mona Rubinstein, at (216) 539-2565.