Unfortunately there are dozens of ramifications that goes along with filing for bankruptcy. Each year it seems it gets harder to complete the bankruptcy process and there are more strings attached.

• A bankruptcy will leave a major black mark on your credit for either 7-10 years. This means you will have trouble finding a loan for just about anything, a car, a house, credit cards… Can you pay 10k+ upfront for a car? Imagine trying to live your lifestyle without an automobile, it is a scary thought.
• Employers have been known to look at credit reports over the past decade as one more way to check out potential employees. Do not be surprised if you lose out on a potential job because of your bankruptcy case, stranger things have happened before.
• In addition the bankruptcy process is no walk in the park. You will likely have to enlist the services of a bankruptcy attorney, which could potentially set you back thousands of dollars. You have to pay 200-300 dollars to even file your case with no guarantee of the outcome. The case will last several months and it will be a very trying experience altogether.

You have to be completely sure that filing for bankruptcy is your only option financially. This is nothing to play around with, it will be one of the most pivotal 4-6 months in your life.

I hear this question all the time: Are bankruptcies good are bad? This is an extremely vague question, but I’ll try to tackle it.

Why are bankruptcies good:

1. Bankruptcies give consumers a chance to start over financially. With the economy in the shape it is in and so many with major secured and unsecured debts it is very easy to be “done” financially.
2. New bankruptcy laws passed in 2005 make a bankruptcy an entire financial learning experience. You are now required to undergo financial credit counseling, which could completely change your lives. Everyone struggles with something, it may just be that you struggle with your finances. Credit counseling can be found at little to no cost and they could steer you towards the right direction.

Why bankruptcies are “bad”:

1. People have traditionally viewed bankruptcies as a get out of jail free card, it is anything but that. Depending on which bankruptcy chapter you chose to file you will either have to lose most of your assets or continue to make payments on some of your debts. Either way you are not out of the clear financially.
2. Bankruptcies are grueling. You have to pay hundreds of dollars to file for bankruptcy and potentially thousands for bankruptcy lawyers and credit counseling. They take 4-6 months to complete and you are definitely not guaranteed to have the case go the way you want it.

Bankruptcies are a necessity for few, but there are other options. Do anything you can to avoid them!

Nearly five years ago a bill was passed through the US congress that completely revolutionized bankruptcies as we know it.

• Credit counseling is no longer advised, it is mandatory. Before filing for bankruptcy you must see a credit counselor. This is a move in the right direction, yes you may have to shell out a few hundred dollars to see an approved counselor but it will be worth it in the long run. You want to learn from this experience and become a better person, financially and all around because of it. Many file for bankruptcy more than once in their lives, you do not want to be one of them.
• It is now tougher to qualify for a Chapter 7 bankruptcy. In the past many used bankruptcies as a get out of jail free card, over the past 5 years and into the foreseeable future you will have to pass a bankruptcy “means test”. If you make more than the median income in your state and you can afford to pay your creditors at least 100 dollars a month you are no longer eligible for Chapter 7 and must look into Chapter 13 bankruptcy.
• There are also stricter laws in place regarding child support payments. Paying child support is now one of the highest priority payments in a bankruptcy.

Bankruptcy’s are no longer easier, and they have never been fun. If you have no other options a bankruptcy may be for you.

Bad news for a lot of people out their with college degrees struggling to find jobs: The majority of the time you will not be relieve of student loan debt in a bankruptcy.

You need to prove that you are in “undue hardship” to a bankruptcy lawyer in order to even have your student loans considered to be involved in your bankruptcy. Undue hardship means different things to different people, but regardless of your situation I would not count on getting your student loans involved in your bankruptcy if that is the situation that you are facing.

If you have student loans you can still qualify for a bankruptcy, but your loans will not be forgiven in all likelihood. If you have 10′s of thousands of dollars in student loan debt and you cannot pay it off, you are truly between a rock and a hard place. I would do two things if I were in your situation:

1. Talk to a financial advisor. Yes it will likely cost you a few hundred dollars, but find a way to come up with the money [legally of course]. These guys/gals know what they are doing and will give you solid advice. It may not be what you want to hear, but it will be the truth.

2. Talk the the people behind your student loans. Explain your situation, ask for advice and see if there is any way you can restructure your loan. It does not hurt to ask, the worst case scenario is that they cannot do anything to help you, which is not any worse than not calling them in the first place. A phone call can go a long way sometimes.