The Effects of Bankruptcy for Consumers

Generally, speaking the effects of bankruptcy will remain on a consumer’s record for at least ten (10) years, but with the ease of accessing these filings, which are public, the effects could last much longer. In general, as part of pre-bankruptcy planning, an individual should take the time to understand the long-term implications of filing bankruptcy with his or her lawyer. These effects will not only include financial responsibilities for non dischargeable debts, but also, concerning consumer related affairs, such as ability to obtain financing from lenders, impact of filing on future employment, and a number of other case-specific considerations.

Effect of Bankruptcy on Employment

Federal law prohibits discrimination in employment hiring based on the past financial history of the applicant, and in practice, most employers will not delve this deep into a person’s background. However, depending on the certain occupation, filing bankruptcy may result in complications regarding professional licensing in a limited number of situations, or in certain cases, positions involving financial oversight or management may look unfavorably upon an individual having a poor personal financial history. On the other hand, depending on each state’s laws, wage garnishments stemming from outstanding debt obligations may influence the employment of an employee in certain scenarios.

Effect of Bankruptcy on Ability to Obtain Financing

A huge issue following bankruptcy concerns the ability of a consumer to obtain future financing from lenders, including lending for auto purchases, home purchases, and general credit card accounts. In general, most bankruptcy filings will prevent the ability to obtain major financing (homes and autos) for at least five (5) years, but possibly longer. In reality, a number of other factors play a role in the eligibility for financing, including the amount sought, the income earning figures of the consumer, the most recent credit history of the consumer, and others. The final decision is one made solely by lender, and in turn, the outcome and factors playing a role in this decision can widely fluctuate from lender to lender. Typically, credit card companies will still consider virtually anyone for membership in their lending programs, but more often than not, consumers will not benefit from these transactions in the short or long term.

Getting Legal Help with Filing for Bankruptcy

In practice, it is undeniable that bankruptcy will preclude consumers from obtaining financing and other benefits otherwise available to consumers with a good credit history. However, the fact of the matter in many bankruptcy cases is that without filing bankruptcy, the consumer would be in a worse financial situation than if he or she had not filed. Though not ideal, bankruptcy can become the first step towards regaining financial stability, but the decision to do so should involve insight and guidance from legal counsel, specifically a bankruptcy lawyer.