A Bankruptcy Lawyer’s Blog

The Impact of Bankruptcy

Even when life hits you from behind, bankruptcy should be the last resort. Newer bankruptcy laws can make it harder to file, with additional requirements for lawyers and filers alike. If you are behind on loans, it will be easier to negotiate with them directly than to file a bankruptcy. If you are worried about the drop in your FICO score, you can still bring it up later using payday lenders (which require no credit check) or a secure credit card. There are ways to deal with late payments to float you momentarily, like a cash advance, and credit scores can always be fixed eventually. A bankruptcy, on the other hand, can mar your credit profile for up to 10 years. There are times to file and times not file, but if you borrow responsibly you won’t end up in bankruptcy court in the first place.

Negotiate With Your Lenders

Call your lenders if you are having trouble making payments. Odds are, they want to keep you from going into bankruptcy as much as you want to avoid it too. Once you fall into bankruptcy, they will be forced to discharge most of your debt. This may seem like a windfall to you, but the costs are heavy and will drop your credit score like a stone.

The Costs

You will have to liquidate your assets and hope to get a good amount of money for them. If you don’t do it, the courts will do it and get whatever they can, even if it’s not what they are worth. You will have paid several thousand dollars to retain a bankruptcy lawyer and have to attend debt management classes that are approved by the state. All of your disposable income will go to paying debt for many years to come once a settlement is reached. On the positive side, once the bankruptcy is over, you start off with a clean slate. Use that time to build a good credit history and learn how to manage your money well.