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What is the Downside of Filing for Bankruptcy?

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While filing for bankruptcy brings a lot of relief and benefits, including giving you a fresh financial start, it’s good to understand the other side of taking this course to resolve your drowning financial situation. 

Most people are blinded by the good of the deal, and especially the speed with which Chapter 7 bankruptcy can eliminate your debt. It’s equally advisable to weigh down the drawbacks of filing for bankruptcy, however.

JPP Law wants to make sure you have all the information you need to make the best decision for your financial future. Here, then, are some things you should consider before filing for bankruptcy.


Drawbacks to Filing for Bankruptcy

What does it mean to file for bankruptcy? Is it a good thing or a bad thing? The answers to these questions may vary depending on your unique situation.

In general, though, some of the disadvantages of filing for Chapter 7 and Chapter 13 bankruptcies are as follows:

1. Bankruptcy Doesn’t Discharge All Debts

While filing for bankruptcy comes in handy in discharging most of your existing debts, it doesn’t come through for all the debts. Some of the debts you shouldn’t expect bankruptcy to discharge are:


  • Student loans
  • Child support
  • Recent tax debts (3 years taxes)
  • Alimony
  • Reaffirmed secured debt
  • Debts related to criminal or fraud cases such as penalties and court fines


While considering the options at your disposal, look at whatever debts chapter 13 and chapter 7 can discharge before deciding on the bankruptcy to file.

2. Bankruptcy Negatively Impacts Your Credit

Chapter 13 bankruptcy appears on your credit report for up to 7 years. Chapter 7 bankruptcy is even worse, appearing for up to 10 years. This will hurt your credit, though this largely depends on your credit situation before filing.

If your credit score was bad, filing for bankruptcy may not have such a big impact on your credit. However, if you had good credit, expect your score to drop sharply once it appears on your report.

The good news is that filing for bankruptcy allows you to have a fresh start, presenting you with an opportunity to improve your score fast.

3. Getting a Car Loan or Mortgage is Difficult for a While

This should emphasize the previous point on credit score. With bankruptcy on your credit report, no creditor is willing to give you a car loan or mortgage. Instead, they’re quick to disqualify you, and if they accept your application, chances are they’ll charge higher fees and interest on the loan.

Slowly by slowly, you can build your credit to qualify for lower interest rates after some time.

4. You Risk Losing Valuable Assets

It’s worth noting that you may not successfully exempt all your assets. Therefore, you may find the bankruptcy court seizing some of your real estate and personal property to sell and pay your debts. 

Laws governing bankruptcy exemptions vary from one state to another. So, it’s good to talk to your attorney, who’ll guide you on what to expect in your state.

5. You’re Not Getting a Discharge Anytime Soon

Title 11 of the U.S. Code states the time limits between filing for particular bankruptcies. Unfortunately, the Bankruptcy Code doesn’t make it an easy ride. The timelines are as follows:


  • Between consecutive Chapter 7 bankruptcies – 8 years
  • Between consecutive Chapter 13 bankruptcies – 2 years
  • Between a Chapter 7 and Chapter 13 bankruptcy – 4 years
  • Between Chapter 13 and Chapter 7 bankruptcy – 6 years


This is disadvantageous, especially if you received a discharge and fell into financial problems again. You cannot file for bankruptcy prior to the expiration of the time limits whatsoever.


Need Help Filing for Bankruptcy?

If you’re thinking about filing for bankruptcy, it’s important to understand its advantages and its drawbacks. For more help and assistance with filing for bankruptcy, a JPP Law bankruptcy lawyer in Stroudsburg, PA, will guide you through the process of deciding which form of bankruptcy is best for you.


Call us today to schedule a free consultation.

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