Reviewing legal resources on places like LegalZoom can help you to understand your rights and the consequences of certain legal courses. One place where this can be beneficial is when you are considering a course of action such as bankruptcy proceedings. While bankruptcy proceedings are intended to provide relief for individuals who cannot fulfill their financial obligations in certain situations, it is not a proceeding which lacks consequences. Before you decide that this is what you want to do, you need to have a basic understanding of what the long term impact will be.
Not Everything Will Be Discharged
Bankruptcy can only remove certain debts. This means that while you may not have to make payments on consumer items on your credit card, you are still likely to have to pay your home lender for the lien on your house. Otherwise, you risk losing it. The discharges which are permitted are typically of a personal nature and do not apply to those with secured creditors.
Loss of Credit Rating
Once you file for bankruptcy, your credit score goes down significantly. While you will be able to gradually build it up over time, it will remain on your record for many years to come. This can make obtaining additional financing very difficult as banks and credit institutions are going to be unlikely to trust you unless you can give them good reason to.
Restrictions on Purchases
After you go bankrupt, you must wait for two years before you can purchase a house. You cannot even be considered for another loan until those two years are up. At that point though, it is likely to still be difficult to obtain a loan. More than likely you will have to demonstrate that you have been employed and kept your debt under control, and in some cases, you may be required to make a significantly larger down payment.
Lack of Privacy
A difficult part about the bankruptcy process is that you will lose a significant amount of privacy. Bankruptcy proceedings require significant amounts of personal information including all of your financial information and bankruptcy schedules. While sensitive information such as account numbers and social security numbers will not be available to the public, the general proceedings and how you spent your money will be available to the general public if they choose to look into it in many states.
Depending on the situation and the kinds of creditors involved, you may still end up having to sell a certain portion of your property to make some of the payments. This depends primarily on whether you have successfully managed to exempt your property. This is one of the risks, however, which you will be far more likely to reduce by hiring a good attorney who can walk through the process and ensure that most of your property is exempted. If you do not choose to have an attorney, bear in mind that you may be required to sell certain things which would result in a net value which would help to pay your creditors.