Bankruptcy 101: What are the Risks of Filing Bankruptcy?

Here are some reasons why filing for bankruptcy might be risky:

1. When someone goes bankrupt, it can affect their credit report for 7 to 10 years, making it harder to get loans and costing more if they can get one.
2. During and after bankruptcy, it may be more difficult to get credit. So, it could strain relationships with some people you owe money to or who co-signed for you.
3. If you file for bankruptcy, you might have to give back things you haven't finished paying. Chapter 13 bankruptcy might help keep some of your property.
4. You can only get a Chapter 7 bankruptcy once every eight years, so you can't use it too often.
5. There might be other ways to protect your income and property without going through bankruptcy.

Also, the following types of debt will remain even after a bankruptcy:

• Unpaid child support payments,
• Unpaid maintenance or alimony payments,
• Unpaid fines,
• Student loans (usually),
• Most unpaid state and federal taxes,
• Criminal restitution orders,
• Debts due to fraud, theft or embezzlement,
• Damages to another person caused by drunk driving or something done on purpose, and
• Debts from a property settlement in a divorce.

There are some problems that bankruptcy cannot solve for you:

• Bankruptcy cannot remove debts tied to collateral, like a mortgage or car loan.
• If the court ordered an eviction before the bankruptcy filing, it won't stop the eviction.
• Bankruptcy won't protect friends or family who co-signed with you, unless they also file for bankruptcy.
• It does not wipe out credit card debts from right before or shortly after filing for bankruptcy.
• Debts created after filing for bankruptcy cannot be eliminated.
• If the court determines you have enough income, you may still need to pay back some of your debts.
• Bankruptcy won't let you keep certain valuable items, like a vacation home, an RV, or expensive jewelry.