Filing for bankruptcy is an indication to your creditors that you are unable to repay your debts. On the other hand, bankruptcy provides you with protection from your creditors. It provides you with an opportunity to develop an effective debt repayment and management plan.
Key Takeaways
- Filing for bankruptcy is an indication to your creditors that you are unable to repay your debts. On the other hand, bankruptcy provides you with protection from your creditors.
- However, keep in mind that although it is a viable option, bankruptcy is still a drastic solution that will have negative effects upon your finances and your credit history. A bankruptcy stays on your credit report for 10 years.
- Understand that declaring bankruptcy may provide you the fresh start you need, but also understand the consequences of choosing the option and how it will affect your life and your finances for the next 10 years. Keep a good perspective.
However, keep in mind that although it is a viable option, bankruptcy is still a drastic solution that will have negative effects upon your finances and your credit history. A bankruptcy stays on your credit report for 10 years. A bankruptcy will impact your ability to get a home or rent an apartment. A bankruptcy will also affect your ability to obtain future credit. In addition, bankruptcy will not discharge some debts such as federal student loans, IRS debt, and child support. “Your pension or profit sharing plan may be affected” (Citicards.com, “Is Bankruptcy an Option,” 8/17/2013). Lastly, bankruptcy may affect your ability to obtain employment especially in fields specific to finance, insurance, and investing.
Understand that declaring bankruptcy may provide you the fresh start you need, but also understand the consequences of choosing the option and how it will affect your life and your finances for the next 10 years. Keep a good perspective. Ten years is a long time to pay your debts, but 10 years is also a significant amount of time to plan your financial comeback.
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Tax Debt and Bankruptcy Questions?
Some federal income tax debts can be discharged in bankruptcy, but the timing and eligibility rules are specific. If you’re considering bankruptcy with significant tax debt, a review of which debts qualify can significantly affect your strategy.
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