Consequences of Filing for Bankruptcy

 

Bankruptcy is a legal declaration of inability to pay creditors. It is oftentimes filed by an individual or organization. The purpose of doing such is to give the debtor a "fresh start" because doing so will relieve him of most of his debts, and this will also help him in paying his creditors by using his properties.

 

Not all properties are included when it comes to paying debts in bankruptcy. Some states exempt personal items of little economic value like clothing, toothbrush, journals, or other personal items. Houses and cars are exempted in some states, but included in others.

 

The consequences of filing for bankruptcy depend on the financial crisis the debtor is undergoing as well as the reason he is filing such. Before filing for bankruptcy, one must be aware of these consequences he will face should he wish to go on with his plan.

 

1. Bankruptcy filing fee

 

Should one opt to file for bankruptcy, a large fee has to be paid. This may amount from a few to several hundreds of dollars, money that can otherwise be spent paying off the debtor's obligations.

 

2. Filing for bankruptcy does not relieve one of all his obligations

 

Filing for bankruptcy does not mean that all of one's debt will disappear. There are still some creditors who may be permitted to confiscate the individual's properties even after the filing. One would also have to face his spousal and child support obligations and pay for them as well as his tax debts even after the bankruptcy declaration has been done.

 

3. Filing of assets and liabilities should be done immediately

 

The assets and liabilities of a debtor should be filed within fifteen days of the bankruptcy declaration. If one is not able to do this, the bankruptcy petition will be dismissed and one will not be allowed to file bankruptcy again for several months.

 

4. Fraudulent claims merit criminal offense

 

Should a debtor give fraudulent information, this may cause dismissal of the bankruptcy petition. Punishment may also be given, and in the U.S., giving fraudulent information and fraudulent acts are considered a criminal offense and are punishable as such.

 

5. It will remain on the person's credit history for ten years

 

When one files for bankruptcy, it will remain on his credit history for ten years making it difficult for him to obtain credit from companies for that period of time. This will be very difficult for someone living in the U.S., where credit is often needed to purchase and pay for even basic needs like housing, insurance, education and medical/health services. One will be forced to pay out of available funds (cash, check, money order) for all of his and her family's needs.

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