An Overview of Post-Bankruptcy Challenges

The purpose of filing bankruptcy is to obtain relief from a financial crisis and start anew. However, all your problems are not automatically solved as soon as you file bankruptcy. Depending upon the type of bankruptcy you pursue, you will have to modify your lifestyle to re-gain financial stability and maintain it. You cannot afford to take on additional debt and assume that everything will fall into place after bankruptcy. Sometimes, bankruptcy backfires because individuals, families, or businesses do not improve their financial management system.

Filers are advised to work with a professional financial advisor to mitigate and overcome the trials of bankruptcy. Arkansas Bankruptcy Law Attorney helps their clients manage finances and make better financial decisions post-bankruptcy. Below is an outline of challenges you can expect in the aftermath of filing bankruptcy:

1. Improving Credit Score

Whether you file for personal or business bankruptcy, your credit score will take a hit. Many people are wary of filing bankruptcy, specifically because of how it affects one’s credit. On the contrary, if your score is already bad because of growing debt, this would be the least of your concerns. You will lose your credit privileges after filing bankruptcy because lenders will not view you as someone who can be trusted to pay back. You shall have to redeem yourself by improving your credit score, which requires time and effort. 

2. Acquiring a New Loan or Credit

Your application for a new loan or credit will likely be rejected due to the bankruptcy on your credit report, which remains there for 7-10 years. Many people think that they can never borrow money again or qualify for a lease after bankruptcy, though that is not the case. You just have to wait a few years until you earn a reasonable credit score. Sometimes, it is possible to acquire a loan shortly after bankruptcy, but it is levied by a very high interest rate. It is better to work on recuperating your financial situation before you consider applying for new credit or loan.

3. Keeping a House/Securing Assets

Many people file bankruptcy to prevent foreclosure or liquidation of property. If you have filed for Chapter 7, know that the automatic stay is temporary. If you want to keep your home, you will have to make up for outstanding mortgage payments within the provided time extension. Failure to settle debt in time may eventually lead to eviction. Your bankruptcy trustee may liquidate your non-exempt assets to compensate creditors. If you file for a reorganizational bankruptcy like Chapter 13, you will be able to retain your assets, as long as you abide by the bankruptcy repayment plan.

4. Shift of Lifestyle and Priorities

If you qualify for Chapter 7, you should be able to get rid of all your unsecured debt. However, secured debts, such as a mortgage, car lease, student loan, taxes, and spousal support cannot be discharged. You will have to live on a budget in order to keep up with due payments. People who sign up for a reorganizational bankruptcy also have to give up a luxurious lifestyle. Their spending is closely observed by the bankruptcy court, thus there is no room for profligacy. 

5. Sustaining a Business

Saving a business post-bankruptcy is definitely the most challenging of all challenges. You can start by limiting operations and minimizing day-to-day expenses. Any plans for company expansion will have to wait and it recommended to limit business to fewer establishments until your finances improve. At times, you have to consider the option of closing down business and seeking an alternate source of income. If a business is not generating revenue, any attempts to save it are futile.