When you find yourself in dire financial straits, bankruptcy provides an opportunity to clear your slate and begin again. For at least a short period, it gets creditors off your back, and you’ll emerge with an actionable plan for clearing your debt and rebuilding your credit. However, bankruptcy isn’t an easy fix. It takes a toll. Being realistic about the actual impact of a bankruptcy petition allows you to prepare yourself and better weather the process.
The emotional toll of bankruptcy
Filing bankruptcy is a life-altering decision that often comes on the heels of an equally life-altering situation. Nearly 7 out of 10 American bankruptcies are tied to serious medical issues. Reduced income, job loss, and divorce are among the next most common precursors to a bankruptcy petition. That can ratchet up the emotional toll of bankruptcy.
Declaring bankruptcy can trigger feelings of failure or embarrassment. These feelings, in turn, exacerbate pre-existing anxiety or depression related to the conditions that led to the petition. This can create a positive feedback loop that stirs up high emotions throughout the process.
While bankruptcy isn’t ideal, it is an opportunity for a fresh start. Remember to rest, get exercise, and spend time with friends and family to combat stress and negative feelings.
The interpersonal toll of bankruptcy
While divorce can certainly lead to debt and bankruptcy, bankruptcy can also take a toll on a marriage. People often have different ways of thinking about money and responding to a financial crisis. This disparity can create tension and put a strain on relationships, especially if one spouse’s individual filing has a negative impact on the other spouse’s finances.
To lessen the impact on relationships, be sure that you have professional legal counsel to avoid pitfalls or errors that could compound problems. If the option is available to you, consider investing in couple’s counseling to keep communication honest and positive through the process.
The practical toll of bankruptcy
Bankruptcy remains on your credit score for up to ten years, and that can take a toll on your day-to-day. Some employers perform credit checks on new hires or when considering offering a promotion. Bankruptcy can impact these opportunities. It can also prevent you from getting new credit, including a car loan, and it creates new hardships when renting properties. Landlords, for example, may require more stringent credit enhancements to protect against default payments.
Whether or not you file bankruptcy, overwhelming debt will take a toll. Ignoring or avoiding the trouble will only result in garnished wages and a grim credit score down the line. Choosing bankruptcy means taking control of the situation and getting your financial record back on the right track.
If you’re facing bankruptcy and worried about the impact, schedule a consultation with the Law Offices of Jeffrey Lohman today.
Attorney Jeffrey Lohman is admitted to practice law in Arizona, not CA. For a list of attorneys licensed in California, please visit our team page.