When Life Gives You Lemons — Call an Attorney

When you file Chapter 7 bankruptcy, you will experience several consequences. While some of these may be negative, there are others that will be positive. Before you file, it is important to understand what these are so you can fully determine if this is the right way to go. You can discuss your individual case with a bankruptcy attorney to learn more, but he or she is likely to talk about the following effects you will probably experience after filing for bankruptcy.

Drop in Credit Score

Chapter 7 bankruptcy will appear on your credit report shortly after you file, and it will appear as a derogatory remark. This mark will remain on your credit report for up to 10 years, and there is no way to get it to come off any faster. In most cases, a Chapter 7 bankruptcy will cause a person's score to drop anywhere from 160 to 220 points. While this is a significant drop, there are ways you can begin rebuilding your credit shortly after filing.

One of the best ways is to get a secured credit card. When you do this, make sure you choose a company that reports to the credit bureaus. If you do not, it will not help your score. The reason this helps is by building up a positive credit history with the card. Once you get the secured account, use it each month and pay it off in full when the bill comes. This is one of the negative effects bankruptcy will have on your life.

Difficulty Getting Loans

The second negative effect you may experience through bankruptcy is trouble getting credit. You can get approved for a secured credit card relatively easily, because you will be placing money on account with the lender, but getting other types of loans may be hard.

When you apply for loans, the lenders will view your credit report, and they will see that your score is low. They will also see the bankruptcy mark on your report. This may cause you to get denied for home loans, car loans, or personal loans.

To qualify for a loan after bankruptcy, you may need to wait for a few months or years. Another option is to visit a credit union. Credit unions are often more willing to look at a person's entire financial situation before automatically denying a loan to someone with bad credit. They may listen to your story to find out what happened, and this is not something that is always possible with traditional types of lenders.

No More Debt

A Chapter 7 bankruptcy will usually allow a person to get rid of all unsecured debts they have. If you owed thousands of dollars of debt to credit card companies and were paying hundreds of dollars each month towards the payments, you will no longer have this worry anymore. The bankruptcy will wipe away these debts, leaving you with more money in your pocket.

In addition, you will no longer have to worry about being bothered by creditors who are demanding money from you. This will all stop as soon as you file your bankruptcy paperwork. This is called an automatic stay, and it prevents creditors from contacting people that have filed for bankruptcy. This is one of the main positive effects bankruptcy will have on your life, and this is the reason most people use it.

If you are not sure whether you should file or not, you should contact a bankruptcy lawyer through firms like Wade Bettis, J.D., Ph.D., PC. You can discuss your situation with the lawyer and learn more about the pros and cons of your options.