What are the consequences of bankruptcy?


Quick Answer

When filing for bankruptcy, a primary negative consequence is that the bankruptcy can be listed on a person's credit report for 10 years and may cause credit scores to decrease significantly, according to the Waltzer Law Group. In addition, when filing bankruptcy, filers may lose possession of personal property.

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Full Answer

The loss of privacy with a person's financial records is also a consequence of filing for bankruptcy, according to the financial experts at About.com. For example, a person filing for bankruptcy must submit all financial records, including assets, income, debt and expenses, which ultimately become public record when bankruptcy is filed. There are also positive consequences associated with filing for bankruptcy. For example, a bankruptcy filing issues an automatic stay ruling, which prevents debt collectors from filing suit, calling the individual and writing letters to collect debt, according to About.com.

One of the most beneficial positive consequences includes a personal discharge of some or all of a person's debt, according to About.com. Debts such as credit card balances, second mortgages, personal loans, repossessions and past due rent may be wiped clean through a bankruptcy, according to Waltzer Law Group. Some personal property may be seized, though, such as a home or vehicle if it is named in the bankruptcy filing.

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