Are You A Potential Bankruptcy Waiting To Happen?

Bankruptcy

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Are You A Potential Bankruptcy Waiting To Happen?

From the May / June 2011 issue of The Quarter Roll.

avoid possible bankruptcyAccording 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.

Bankruptcy cost.
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 filing.

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
-Student loans
-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.

 
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