Many a time, you may find yourself in this challenging situation. You want to make ends meet, but overwhelmingly, you are faced with several debts to settle. When multiple agents start calling for debt recovery, things may become a nightmare, and yet you are still in financial jeopardy.
Perhaps, this could be the best time to file for bankruptcy to save your peace of mind. If you struggle to repay your debts, you will have to follow the legal process to find relief. Filing for bankruptcy will stop these agency collection calls, salary garnishment, and debt lawsuits.
However, while you might feel relief from debtors’ headaches, declaring bankruptcy can taint your credit score. It is also likely to affect your relationship with future lenders. A poor credit score exposes your inability to finance and service any credit facility.
Bankruptcy Affects Your Credit Score
Credit agencies, otherwise known a Credit Reference Bureaus, are agencies responsible for individual credit reporting.
Whenever you fail to repay your debts, or under any circumstance, fail to service your bank loan, your debtor bank normally forwards the customer’s details to the bureau.
When listed with these bureaus, it becomes difficult to access any credit facility from any traditional financial institution until you are cleared.
With the declaration of your bankruptcy, things might take a different turn. You may be relieved by the recovery agents. You will have ample time and a friendly repayment plan to settle your debt.
However, your credit report will read negatively, and you can’t qualify for any personal loan with bad credit. Financially, you will have several mountains to climb as it may take at least ten years to be otherwise considered for a loan.
Bankruptcy Affects Your Property Ownership
The well-known effect of bankruptcy is that it involves the loss of property. You will be required to give up possession of essential assets to recover part or all of the pending debts.
You will have very little or absolutely nothing that can support the borrowing of finances as collateral in the long run.
Though it will come as a reprieve and a chance to start over, filing for bankruptcy will leave you with non-dischargeable debts that will require clearance as well.
Debts like child student loans, criminal charges, tax debt, child and spousal support will not be dismissed, and therefore, you will have a way forward to settle them.
Affects Your Future Borrowing
Your immediate financial future will be at stake because it will be more expensive or impossible to acquire credit from the known traditional institutions. With this fact, you will be exposed to the extreme loan facilities tied to costly fees and inflated interest rates.
You will only have a few options to attain your financial goals concerning poor credit performance and bankruptcy declaration.
These options will compel you to deposit security or collateral to obtain a credit loan. As they say, cheap is expensive; most available online credit platforms are brutal regarding interest charges and repayment time.