You can lose your assets
If you file Chapter 7 bankruptcy, you may be required to liquidate some of your assets in order to pay off as much of your debt as possible. Of course, most people who file Chapter 7 don’t have many assets to speak of, so this usually ends up being a mute point. In addition, your primary residence will probably be protected by a homestead exemption, but in some cases it is possible to lose your home depending on the laws in your state and how much your home is worth.
Bankruptcy is a matter of public record
If someone wants to know about your financial history, he can probably find out that you have filed for bankruptcy. After all, so much of our information is being stored online these days, so sifting through this kind of information has become easier for anyone nosey enough to search.
Bankruptcy will damage your credit rating
Yes, it’s true that bankruptcy will have a harsh effect on your credit rating, but so many people who have reached this point in their financial lives really couldn’t care less about their credit history (especially when you consider the fact that you can rebuild your credit over the next couple of years).
You may even become a favorite target of certain credit card companies who are eager to give you another credit card because they realize that you’re now free of debt after you have successfully filed bankruptcy. Of course, you want to be careful about accumulating a huge amount of debt all over again. Just know that you will be able to re-establish your credit rating over time, even if you’re required to pay higher interest rates for the first few years after bankruptcy.
Your friends and family may have to give back money
If you have paid your friends or family members within the last year (even if it is a repayment on a legitimate loan), they may be forced to return this money to the bankruptcy trustee in order to pay off as many creditors as possible.
Bankruptcy may affect your reputation
Many family members may look down on you if you decide to file bankruptcy, and this is especially true for parents from an older generation. If you live in a small town where your business is everyone else’s business, your financial history may be published and talked about and you may be left with a stigma.
Bankruptcy discrimination
Technically, employers are not supposed to discriminate against you if they find out you have filed for bankruptcy. But of course, they may still do so in a circuitous way.