Bankruptcy is often seen as, essentially, a “get out of jail free” card for those who are having a tough time financially. Unfortunately, though, life isn’t a game of Monopoly, and bankruptcy may not always be your best (or only) option. In fact, filing for bankruptcy could potentially set you back for years in the future, keeping you from opportunities such as finding better employment, housing, or loans.
The most commonly known disadvantage of filing for bankruptcy is the fact that you’ll be affected by it for anywhere from seven to ten years after. But did you know that you might also still be required to pay off at least a portion of the debt in the end, anyway? Although the chances may be small, it is still a possibility to consider before filing.
There are several different scenarios where you’ll be stuck with the short end of the stick when filing for bankruptcy. In these cases, it’s likely that you’ll be stuck with bankruptcy affecting your credit for seven to ten years, on top of still having to pay off at least some of your leftover debt. Keep reading to find out more about these potential scenarios and reasons to avoid bankruptcy.
You Might Make Too Much Money
If your income is higher than that of the average person in your state, you’ll likely be forced into filing for a Chapter 13 bankruptcy. When you file for Chapter 13 bankruptcy, things can get a little tricky. You’ll need to pay an appointed trustee all of your disposable income, as determined by the court. Your disposable income is determined based on the average of necessary expenses, which means you won’t get a pass just because you’re paying for a fancy car or sending your kids to a nice private school.
On top of that, the court may immediately find you in contempt if you miss a single payment. Although cases like this may be rare, it is still a possibility that holds severe consequences. In the end, Chapter 13 bankruptcy cases are often so difficult that the majority of them aren’t even ever completed. This is the biggest reasons many avoid bankruptcy filing.
You Might Lose Your Assets
If you own any assets, the court may order you to sell them during your bankruptcy to have more money available for your debts. Some assets are exempt depending on your state, but, in many cases, you may be required to sell your house, car, or even liquidate your investments if those assets are not exempt. An attorney would be able to help you determine what assets are exempt in your state; they may also be able to help you consider a better alternative.
Your Creditors May Be Able to Prove Fraudulence
There are some cases where your creditors may be able to prove that you had no intentions of paying them back after or during your bankruptcy. If they can prove you were being fraudulent, your case may be dismissed, and you’ll still be required to pay them back the full amount that you owe. Speaking with an attorney may be able to help you determine if this situation is likely for you.
In many cases, bankruptcy simply doesn’t make sense. You’ll be stuck with negative consequences for a significant amount of time, and you may even still be required to pay back the debt you were trying to get out of in the first place. For better, safer results, you should always consider a bankruptcy alternative such as debt consolidation or credit counseling.