From the May / June 2011 issue of The Quarter Roll.
According to the US Bankruptcy court, over 1.5 million
bankruptcies were filed between March 2009 and March 2010. That is a
number that has steadily risen over the last 5 years. The last decade was
particularly brutal when it came to bankruptcy, and it is likely you or
someone you know filed. Between January 2000 and December 2009, 13,363,085
personal bankruptcy petitions were filed. Bankruptcy has often been
considered both a financial option of last resort and a fresh start.
Bankruptcy has sticky, long term financial affects that have a direct
impact on your financial health and well-being. This article will uncover
many of the factors that may put you at risk for bankruptcy and present
ways of protecting yourself against bankruptcy’s harmful effects.
So what makes you a potential bankruptcy?
Banks have a mostly unknown tool, called the bankruptcy
risk score, which provides them more in depth information about your
chances of going broke. As of today, banks are not required to share this
report and information with consumers. However, that doesn’t mean we can’t
identify some of the factors that make us a potential bankruptcy risk.
According to TotalBankruptcy.com, bankruptcy affects all demographics,
however, some groups are more susceptible to bankruptcy then others. For
example, more bankruptcies were filed by these groups: women, Caucasian,
those with a job, those who had graduated high school and had some college
study, and those between the ages of 35-44. Single women with children, in
particular, compose an unproportionate number of bankruptcies.
Outside of those personal identifiers other factors played a role in your
likelihood of filing for bankruptcy. For example, household instability,
divorce, large medical bills, job loss or underemployment, high student
loan payments, and high rent/mortgage payments predispose you to difficult
financial conditions that can lead to bankruptcy.
What would a bankruptcy mean to you?
Years on credit report
As mentioned before bankruptcy is sticky in the fact that it is a long
term addition to your credit record. Your credit report can show your
bankruptcy filing for up to 10 years, but many credit reporting agencies
will remove it after 7. In fact, if you look at your credit reports, you
will often see there is a removal date listed below the record of debt.
During the time a bankruptcy resides on your credit report you will be
subject to more intense credit discrimination, less favorable credit
terms, and higher interest rates.
Not getting a job
In February 2011 a federal appeals court ruled that it is ok for an
employer to discriminate against a job seeker who has filed for
bankruptcy. Note that it is illegal to fire someone who is already
employed and has filed bankruptcy. The court noted that while there is a
law stating the government may not discriminate against applicants who
have filed for bankruptcy, the law doesn't not put the same requirements
on private employers. Why would an employer care? Whether their logic is
right or wrong, some employers believe your bankruptcy is an indicator of
your personal responsibility.
In addition to the costs you will occur in the future because of a
bankruptcy, you must pay a $300.00 filing fee. Also, most attorneys will
charge between $1,000.00 to $2,000.00 to work on your behalf during the
What is not covered in a bankruptcy?
Many people see bankruptcy as a fresh start, but they may not realize that
bankruptcy protection does not eliminate all types of debts. The following
is not an all-inclusive list, but rather an example, of some debts not
discharged through Chapter 7 bankruptcy. Consult a bankruptcy attorney for
specifics relevant to your own individual situation.
-Back taxes up to 3 years old
-Alimony owed or child support
-Money owed for property of money obtained under false pretenses
-Judgments against you as a result of you driving while intoxicated
-Claims from a previous bankruptcy where you were denied a discharge
-Consumer debts of more than $500.00 for luxury goods and services owed to
a single creditor within 40 days of being granted relief
-Cash advances up to $1,000.00 as extensions of open-end consumer credit
obtained by the debtor within 20 days of the relief
Read the rest of the story in the May /
June issue here.