5 Reasons You Should Avoid Bankruptcy

Instinctively most people want to avoid bankruptcy, or at least use it as a last resort. The following list articulates some of the many reasons why avoiding bankruptcy is typically your best alternative.

1. Bankruptcy affects your credit negatively for up to 10 years. In today’s fast moving world committing yourself to tarnished credit for that long of a period of time is rarely advisable.

2. Any time you’re asked “Have you ever filed bankruptcy?” on a loan or job application, you’re legally obligated to answer “yes.” Even if you answer “no” thirty years from now on a loan application, you’ve technically committed criminal fraud.

3. More and more employers are checking credit reports before making hiring decisions. With the internet boom, accessing information has become much easier in the past 10 years, so the number of companies pulling credit reports prior to making employment decisions is increasing rapidly. When you couple this with the fact that bankruptcy stays on your credit for up to 10 years, filing makes even less sense. Sure you’ll get relief in the short-term, but how much money will this decision cost you down the line in higher interest rates, potential career moves, etc.?

4. If you earn more than the median person in your state, you’ll be forced to file Chapter 13 bankruptcy. Chapter 13 Bankruptcy is a “payment plan” mandated by the court where a debtor turns over their disposable income for up to 5 years to pay back their creditors. Even though you’re paying back the debt, with interest and fees in many cases, your credit still suffers. For credit card debt, this debt relief option rarely makes sense.

5. The emotional baggage associated with filing bankruptcy can be overwhelming. Many consumers who have filed bankruptcy describe feelings of guilt, anxiety about the future, and a sense of failure all at once. The emotional implications when combined with the severe financial ones make most consumers want to avoid bankruptcy if at all possible.