What are the Long-Term Consequences of Bankruptcy?

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There’s no doubt that filing for bankruptcy can be advantageous if you have considerably more debts than you can pay. However, there are also long-term consequences. Consulting with a skilled bankruptcy lawyer such as Marty Martin Bankruptcy Law could help you out immensely if you are going through bankruptcy and need some advice or someone to help walk you through it. Let’s take a look at some advantages of bankruptcy and some of the long-term consequences. 


Filing for bankruptcy gives you the following advantages:

  • It stops creditors from harassing you for debt repayment.
  • It allows you to stop paying your low-priority, unsecured debts.
  • It stops, or at least forestalls, foreclosure of your home.
  • It stops, or at least forestalls, repossession of your vehicles.
  • If you file for Chapter 7, the court discharges virtually all of your consumer debt, including credit card debt, in about six months.
  • If you file for Chapter 13, the court allows you to renegotiate your debts, devise a repayment plan, and pay down your debts over a 3-5 year period.

Long-term Consequences

Unfortunately, your bankruptcy goes on your credit report and remains there for up to 10 years. It also substantially lowers your credit score, usually between 130-200 points. Bankruptcy can also raise your auto insurance premiums substantially. 

In addition, when you go to rent an apartment, the landlord will undoubtedly check your credit. When he or she discovers your bankruptcy, he or she may take this into consideration when deciding to approve your rental application. Keep in mind that public housing landlords cannot deny you housing based on your bankruptcy, but private landlords can. If one of them chooses to do so, however, he or she must give you an adverse action notice stating the reason for the denial, the name and contact information for the credit reporting bureau, and the fact that you have the right to obtain a free report.

Your bankruptcy can likewise pose a serious red flag when you apply for certain kinds of jobs. For instance, it might prevent you from getting a security clearance. It also will likely prevent you from obtaining any type of job that requires you to work with money. This would include, for instance, bookkeeping, accounting, and payroll jobs. If you’re already employed, however, your current employer cannot fire you simply because you filed for bankruptcy.

Perhaps the most frustrating long-term consequence of bankruptcy is that it makes it difficult, if not impossible, for you to obtain any kind of credit, at least immediately after your bankruptcy. In other words, you can expect to have to deal in cash only for all of your purchases for at least a year or so. Even then, any credit you apply for, such as a new credit card or a car loan, likely will come with a high rate of interest, assuming your credit application is approved at all.