Most of my articles have concentrated on the advantages of a bankruptcy filing, such as discharging of debts, stopping foreclosures, garnishments, tax liens, sale of personal property and many more benefits. During initial consultations, I am frequently asked what the disadvantages of filing for bankruptcy are. There is not a simple answer to this question and mostly the bankruptcy filing consequences depend on how the Bankruptcy Petitioner handles his or her finances post filing. Please note, our legal assistance does not stop after the bankruptcy proceeding is over, we are available to answer questions regarding future purchases, daily budgetting and anything relating to your financial future.
In today’s economy, credit scores are very important for terms of future loans. Generally, at the time one is struggling financially and considering bankruptcy their credit score is not the best it has ever been. Bankruptcy reduces or eliminates debt depending on what chapter of bankruptcy the Petitioner is filing. Therefore, post-bankruptcy the filing party will have greater disposable income in that they will no longer be burdened on a monthly basis with exorbinant payments on debt. Since the filing party’s debt to income ratio has decreased this will lead to an increase in credit score, savings and disposable income. The increase in credit score will not happen overnight, generally, it takes a year of timely payments for the credit score to rise and is based on the filing party’s financial management post-bankruptcy.
Another concern is whether a filing party will be able to obtain another credit card post-bankruptcy filing. Since the filing party has eliminated or reduced their debt through bankruptcy, the credit card companies are quick to make new offers. Often the terms on such cards are not favorable to the consumer. In the event that the consumer needs more than a debit card, they should consider a secured credit card to help and/or accelerate the time for an increase in credit score. After such an increase in credit score has been obtained, then one may obtain a credit card for emergency purposes.
It is the goal of most consumers to own a house or a car. Post-bankruptcy filing one may purchase a home or car, however, not right away. I always advised my clients to wait at least 6 months to start shopping for a car and one year to consider purchasing a home. Reason being, this gives a potential lender sufficient amount of time to review an extended, timely payment history and observe a lower debt to income ratio post bankruptcy filing.
Lastly, a major concern is whether the filing party will be able to continue or obtain gainful employment post-bankruptcy filing. In accordance with 11. U.S.C. Section 525, it is illegal to discriminate against a person that filed for bankruptcy. Although this is a major concern, in my experience with clients, spanning many different professions, I have never been made aware of an employment issue stemming from a bankruptcy filing.
If there are any general questions or topics you would like to read about relating to bankruptcy law in the Philadelphia, Pennsylvania region, you may contact the Philadelphia Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or email brad@sadek-cooper-site. Thank you.