Sure, filing for bankruptcy provides individuals with a clean financial slate to work with, but what is the downside to declaring bankruptcy? In this article, Alabamians who are considering bankruptcy will gain a better understanding of the consequences associated with filing.
The Cons of Filing for Bankruptcy
- Bankruptcy won’t erase all debt.
A common misconception surrounding bankruptcy is that it will allow for all of a person’s debt to be completely erased. Gone. Wiped away and never to be found again. The truth of the matter is bankruptcy doesn’t erase all debt. There are certain debts such as money owed in taxes, child support, and student loans that the government typically doesn’t discharge. Instead, an individual is still on the hook for satisfying this debt, even if they file for bankruptcy.
- The trustee gets access to everything.
When a person files for bankruptcy, such as a Chapter 7 bankruptcy, a trustee will be assigned to their case and this person will be responsible for combing through all of their financial records including bank accounts. The trustee will assess all of a person’s assets and debts and determine what needs to be liquidated in order to satisfy some of their outstanding debt.
While there are certain assets that are exempt, anyone looking to file for Chapter 7 bankruptcy should be prepared to lose some property.
- Filing for bankruptcy will remain on a person’s credit report for seven to 10 years.1
While bankruptcy does allow for a substantial amount of debt to be erased, the filing itself will remain on a person’s credit report for a good period of time. This means lenders, credit card companies, landlords, etc. will all see the bankruptcy should they need to review a person’s credit history. And depending on who the lender is, they may be leery of loaning money or giving a person access to their property if they see bankruptcy listed on their credit report.
Despite the drawbacks of filing for bankruptcy, there is plenty of good that can come out of it. For instance, if a business falls into a financial rut but isn’t ready to close its doors, bankruptcy will allow for the company to stay open while it reorganizes and pays off some of its debt.
Still considering filing for bankruptcy?
If an individual or business is considering bankruptcy but needs more information, the Riverside, Alabama bankruptcy lawyers at Hill, Gossett, Kemp & Hufford, P.C. are available to answer any questions they might have. There is a lot to be considered before filing for bankruptcy and the attorneys at Hill, Gossett, Kemp & Hufford, P.C. will help an individual weigh the pros and cons of filing so they are able to make an informed decision on whether they should start the process.
Disclaimer: No representation is made that quality of legal services provided is greater than the quality of legal services provided by other attorneys.
Hill, Gossett, Kemp & Hufford, P.C. can be reached at:
2603 Moody Parkway, Suite 200
Moody, Alabama 35004
Phone: (205) 640-2000
7900 Parkway Drive
Leeds, AL 35094
Phone: (205) 699-5500
6441 U.S. Highway 11
Springville, Alabama 35146
Phone: (205) 467-2225