What are some of the disadvantages of filing for personal bankruptcy?

If you are overwhelmed by personal or business debt, you might be considering filing for bankruptcy.  You are not alone.  Many people have been turning to bankruptcy for a fresh start, especially in this economy.  But, it is important to be aware that with all of the advantages bankruptcy can bring, there are certain disadvantages as well. 

One drawback associated with bankruptcy is that many of the rules vary from state to state.  So, you must be aware of these state specific rules and regulations before moving forward with your filing.  It is also important to understand that you must list all of your property and debts when filing a bankruptcy petition.  Everything, with the exception of exempt property, will be considered part of your bankruptcy estate.

Another pitfall of filing for bankruptcy is the effect it has on your credit report.  The bankruptcy will be noted on your report for 10 years.  This can make it difficult to get credit cards, loans and other types of credit in the future.  You will also have to work extra hard to establish a good credit score moving forward.

Secured debts, or those that involve collateral, will not go away in bankruptcy.  They will still have to be paid, albeit, most likely not according to the original terms.  Bankruptcy also does not get co-signors off the hook.  They will still be liable for the entire debt whether you are released from it or not.  In addition, any collateral can still be repossessed and used to pay back the debt.

One of the largest disadvantages of filing for bankruptcy is that it does not get rid of all debts.  Certain debts are usually non-dischargeable including student loans, taxes and domestic relations payments (alimony and child support)

While there are certain drawbacks associated with bankruptcy, it is important to determine whether the advantages outweigh the disadvantages in your specific situation.  If you would like to discuss your case, please do not hesitate to contact our Miami Valley bankruptcy attorneys today by calling (937) 262-4789 for a consultation today.