Sunday, August 28, 2011

Advantages and Disadvantages of Filing Bankruptcy -- Disadvantages: Part 2

Credit and Reputation Concerns. Although on the surface they appear to be very collateral concerns, the filling of bankruptcy will effect both ones credit and reputation. The extent to which these will be effected differs on a case by case basis. First, lets look at credit. The filing of bankruptcy will be reported by credit reporting agencies, under current law, for 10 years. Anytime one pulls your credit report during the time it is reported, the bankruptcy will be disclosed. The effects of this could actually, theoretically, last longer than 10 years, if you have need to transacting business with someone that had previously pulled your credit report during that 10 year period. 

This does not mean you can not rebuild your credit prior to waiting 10 years; such rumors are not true. In fact, you can start rebuilding your credit immediately after your bankruptcy. In many cases credit is actually improved upon completion of the bankruptcy, because debts are discharged; the person obtains a fresh or new start. Bankruptcy is only one of many factors creditors consider when choosing whether or not to extend credit.

As for reputation, this is more of a concern some than for others. Well known individuals that file bankruptcy usually end up in the news. But for the vast majority of people that file bankruptcy, only your creditors have any reason to know that you have filed. This, of course, is on a case-by-case basis, as individuals that live in smaller communities may be affected differently. In that case, one must weigh the advantages of filing bankruptcy with the possible impact on ones reputation. Always remember, that even if a creditor is discharged in bankruptcy, the debtor may voluntarily repay a creditor, at the debtors discretion.

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