Whenever you make big financial decisions, it’s important to understand both the good and bad. Bankruptcy is a financial tool that eliminates unpaid bills and lets you get a fresh financial start. However, bankruptcy also has cons. Before you file for bankruptcy, understand its consequences. Consulting with a bankruptcy attorney in Katy can help you make an informed decision. Keep reading to understand the consequences of filing for bankruptcy in Katy:

Credit Consequences

Usually, people do not file for bankruptcy due to its impact on their credit. A bankruptcy filing with show up on the credit history report for up to ten years. Your credit score will suffer if you file for bankruptcy. A poor credit score can impact credit card or loan interest and may make it more difficult to rent a house. 

But bankruptcy may not come up all at once. Usually, the creditor score of those who want to declare bankruptcy is already low. Before they file, they may skip payments, have a high debt-to-income ratio, and carry high balances, which also hurt their credit score. By filing for bankruptcy, such balances are discharged, resetting your debt and providing you with the opportunity to rebuild your credit history with affordable payments. For a lot of people, bankruptcy filing gives them better credit than they did before the filing. 

Other Consequences

A lot of those who are thinking about filing for bankruptcy fail to look at the full picture.  Taking into account the long-term impacts of bankruptcy allows you to make a more informed decision about whether filing for bankruptcy is right for you. Below are bankruptcy consequences you may want to know:

• Not all debts are discharged. Bankruptcy does not discharge all debts. Secured debt such as a home equity loan or mortgage will continue once the case is concluded. Other debts that cannot be discharged through bankruptcy include recent tax debt, debts from a divorce judgment or settlement, student loans, and debts associated with civil lawsuits and criminal lawsuits. If a lot of what you owe belongs to any of these categories, the drawbacks of bankruptcy filing may outweigh the benefits. However, planning how to manage your debt with your bankruptcy lawyer can help you prioritize payments for non-dischargeable debts before you file. 
• You may give up some of your possessions when you file for Chapter 7 bankruptcy. With a Chapter 7 bankruptcy, your debt can be reset by liquidating your assets to satisfy the debt before the rest can be discharged. Under Chapter 7, you must sell a lot of your belongings such as boats, second vehicles, recreational vehicles, and even your house. But under state law, you can set aside huge amounts of property, so they can be exempted from liquidation. 
• Chapter 13 restricts your ability to borrow. If you file for bankruptcy, lenders will think carefully about your financial situation before they provide you with credit. After filing, you cannot qualify for a car or home loan immediately. But if your debts are consolidated under a repayment plan by filing for Chapter 13 bankruptcy, you promise not to take on more debt without the permission of the court for up to five years while you pay off your outstanding debt. But this is not a significant obstacle at all. In general, bankruptcy trustees approve post-petition debt as long as it can help you complete the repayment plan more easily. Your repayment plan will include the new debt payments, which limit your extra out-of-pocket costs. Also, you can open credit without the approval of the bankruptcy court if you pay the balances using the money left over after paying your Chapter 13 obligations.