Financial burdens are overwhelming. Too much debt could overtake your life, affecting your physical and mental health. Fortunately, you could declare bankruptcy if you need to. Doing so could provide you relief, helping you restart your finances.
However, filing for Chapter 7 bankruptcy has specific repercussions based on your circumstances. The consequences are not strictly negative but might hinder your financial recovery. You could experience the following effects of filing for Chapter 7 bankruptcy:
- Lower credit score: It indicates your ability to meet debt payments. Declaring bankruptcy could significantly impact your credit, remaining on your record for a maximum of ten years.
- Inability to access new credit: Bankruptcy could affect your access to new credit. If you do receive approval for a loan, you might face lower credit limits and higher interest rates than before.
- Reduced or lost tax refunds: You could still receive tax refunds despite declaring bankruptcy. However, it could cover the debt, depending on the circumstances.
- Liquidated belongings and assets: After filing for bankruptcy, certain property types could face liquidation to pay for debts. However, exceptions do exist that could allow you to keep specific assets.
- Undischarged debts: Certain types of debts could persist even after declaring bankruptcy. You would need to deal with them separately while recovering financially.
Additionally, declaring bankruptcy could affect your business partners or loan co-signers. It would help to keep them in mind when assessing your financial situation.
Get help before filing for bankruptcy
When you need help managing your debt, you could seek advice from credit counselors and professionals. Filing for Chapter 7 bankruptcy could be a last resort. These specialists could help you determine alternatives that could have fewer repercussions.
You could also take measures to minimize damage, such as filing your taxes correctly and avoiding unnecessary debt. Organizing your finances could help you better understand what to do next.