Although bankruptcy can be a good solution for certain people, it is not the right solution for everyone. There are several possible bankruptcy pitfalls that you need to be aware of. Most people are aware that bankruptcy can remain on their credit report for up to 10 years. What is not commonly known is that your bankruptcy remains recorded throughout the court public records for 20 years. This can cause difficulty when applying for financing, and when being hired by future employers. The 20 year court-record may also cause you to receive high interest credit card offers and sub-prime loan offers.
Other possible bankruptcy pitfalls include paying for the attorney fees, and the costs associated with mandatory financial counseling. According to the new bankruptcy rules, all bankruptcy filers are required to undergo two separate financial counseling sessions. The first is a credit counseling session (that you are required to pay for) through an agency approved by the U.S. Trustees Office.
After finishing this counseling program, you must submit a completion certificate to the court. Next, you are required to undergo a “means test” if you are filing Chapter 7. If you fail the “means test,” you will not be allowed to file Chapter 7, and must instead, file Chapter 13. Another unexpected pitfall is a “Ticket Out” program which requires you to complete a financial management course. These are new loopholes that you must jump through to complete a bankruptcy filing.
If you’re filing Chapter 13, another unexpected bankruptcy pitfall is having your property repossessed. The court can come to a bankruptcy filer’s home and repossess property as a partial repayment to creditors. Failure to make payments on time, and failure to complete the required counseling and financial management programs can cause your bankruptcy case to be dismissed. If this happens, the bankruptcy remains on your credit report, and you have gained absolutely nothing from the process. If you are filing bankruptcy, be sure to make payments on time (for Chapter 13), follow all guidelines, and complete the required credit counseling and financial management programs. Talk with your bankruptcy attorney about the possible bankruptcy pitfalls and ways to avoid them.