If you're finding yourself getting deeper into a financial hole that you can't see a way out of, you might be thinking about filing for bankruptcy. Bankruptcy is a viable option for some, but it's not right for everyone. Here are some things to consider before making a decision about filing for bankruptcy.
Your finances will be scrutinized.
When you file for bankruptcy, you essentially hand over all the details of your finances to the court for review. You will be asked about purchases you have made in the past and debt you have incurred. Every receipt, bank statement and financial document will be reviewed under a microscope. If you're uncomfortable with this level of scrutiny, you might want to consider another option, such as debt consolidation.
Your spouse's finances may be reviewed, too.
If you're married with joint tax returns or bank statements, your spouse may be susceptible to the same level of scrutiny that you will undergo. Your spouse may have to answer difficult questions about your lifestyle, purchases and bank accounts. Since the line of separation between personal and joint finances in your marriage may be blurred, your spouse may experience personal invasion of privacy.
All your debts won't disappear.
Even after bankruptcy, you'll still be accountable for some financial obligations. Debts like child support and alimony will remain your responsibility, as will any outstanding student loans. Debts incurred from being sued will also remain. You should consider this carefully, especially if the sum of these debts after bankruptcy could still prevent you from getting back on your feet financially.
The effect on your credit is long lasting.
Your bankruptcy will appear on your credit record for between seven to ten years, depending on whether you file for Chapter 7 or Chapter 13 bankruptcy. That black mark on your record could be used to deny you a job, a bank loan, a credit card, a rental apartment, a car rental and more. Your spouse's credit record will likely be blemished as well.
Experts generally advice that bankruptcy should be only be undertaken when you have exhausted all other options. A bankruptcy attorney can answer your questions about your individual circumstance. In some cases, they can help you to explore alternatives that will help you to avoid bankruptcy and retain your financial integrity. If bankruptcy is the best choice for you, your attorney will guide you through all the steps.