For those struggling to find a way to pay off their debt, bankruptcy may be one option that immediately comes to mind. It's true that bankruptcy may be necessary depending on your specific circumstances, and it may indeed provide a fresh start for you and your family financially. Nevertheless, there are some drawbacks to filing for bankruptcy that you should be aware of, and you should never take this step without considering all of your options carefully.
The most obvious negative consequence when you file for bankruptcy is the damage done to your credit rating. This means that for several years your bankruptcy will remain on your credit report, and it may be difficult to get a loan for a car or a house (or at least at a reasonable rate).
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Of course, your credit score is probably the least of your worries if you're at the point of considering bankruptcy. Nevertheless, it is something to consider.
You also want to keep in mind that some kinds of debts will not be discharged during bankruptcy, and these may include child-support back payments, criminal fees, federal taxes and student loans. If these are the kinds of financial obligations that you're most worried about, then bankruptcy may not solve your problems. On the other hand, if you are mainly dealing with credit card debt or similar forms of debt, bankruptcy may help you resolve your financial woes.
A significant drawback of filing for Chapter 7 bankruptcy is that you will have to liquidate some assets in order to help pay off any of your debts. The truth is that you probably don't have much to speak of in the way of assets anyway, so this may not be such a disadvantage in the end. Nevertheless, bankruptcy does have a number of drawbacks that you should discuss carefully with a bankruptcy lawyer and financial advisor.
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Rating of Credit After Bankruptcy
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