One reason people in Spring Hill who are struggling with unending debt are reluctant to consider personal bankruptcy is that they think having a bankruptcy on your record can ruin your life. People have told them that filing for bankruptcy permanently destroys your credit rating and makes it impossible to get a loan at a decent interest rate ever again.
This is not true, but there are ways that Chapter 7 or Chapter 13 bankruptcy will affect your life. Here are a few examples, as well as about how long you can expect these effects to last.
Renting a home may be more difficult
For about two to four years after completing bankruptcy, it can be a challenge to rent an apartment or house, especially in a professionally-managed building. Be prepared to pay extra deposit fees or advance rent. Individual landlords of smaller properties might be more sympathetic. Ultimately, you would be best off if you find a place to rent before declaring bankruptcy and stay there for a few years.
Qualifying for a mortgage may be more challenging
It’s a myth that people who go through personal bankruptcy will never qualify for a mortgage again. Depending on which form of bankruptcy you use, you could qualify for an FHA or VA mortgage after about two years. After three to four years, you likely will qualify for a conventional mortgage, though probably at higher than average interest rates.
A different type of credit card
While you probably won’t get approved for a new credit card the traditional way at first, you can use a secured credit card to start rebuilding your reputation with the card companies. A secured credit card has you pay a refundable safety deposit, then lets you spend that deposit on the card. After a year of making on-time payments on this card, you should be able to obtain a regular credit card again.
Finding a new job or starting a business
Depending on the type of job you apply for, the fact that bankruptcy appears on your background check might not matter at all or it may remove you from consideration. Employers in certain industries, such as finance and accounting, won’t hire someone who has filed for bankruptcy. If a hiring manager brings it up in a job interview, it can help to have a story explaining why bankruptcy was necessary.
Meanwhile, financing a new business can be a challenge in the next few years after personal bankruptcy. You may have to rely on your own capital or borrow from friends. Better yet, find a partner with good credit who you can work well with.
As you can see, bankruptcy can make some things more challenging in the short term. But you can still move to a new home, use a credit card, and even start a new business. Overall, your daily life could be much better without the burden of debt hanging over it.