Bankruptcy does not last forever. Usually, its protection lasts only a year. During the period, the individual’s financial affairs will be put under restriction. That means there are certain privileges that the bankrupt person may not possibly enjoy even after bankruptcy has been lifted.
Furthermore, being bankrupt is not a guarantee that a person will be totally free from any financial obligation. In many cases, the individual is still required to pay a certain amount to repay debts from creditors following an assessment of current inflow and outflow of income. The repayment scheme under bankruptcy may continue even after the individual is discharged from the provision.
Needless to say, bankruptcy brings about serious implications. Its impact can never be underestimated and overlooked. Aside from the embarrassment and eroded self esteem, an individual can face the greatest setback in his financial aspect.
Destruction of credit history
As far as credit record is concerned, becoming bankrupt is similar to committing suicide. It can completely erode one’s credit history. That is because it is considered the most serious offence any person can do in the financial aspect of his life. Becoming bankrupt can completely wipe off all the good records in one’s credit.
The black mark demonstrates a history of how a person takes credit and fails to repay it. It will eradicate financial credibility of that individual. Consequently, the person’s credit history will become more of a liability. It will disable him to apply for new credit products like loans at least until the proceeding is over.
What’s worse, the effect of bankruptcy on the credit history will stay for long even after the individual has emerged out of being bankrupt. On the average, the black mark can stay for as long as seven years. During this period, the person may not expect to get approval on any loan (except for some bad credit loan products). He will also have to exert greater effort and determination in re-building his credit record after that.
Bankruptcy record may not permanently stay in one’s credit history. But it will surely be a flaw in one’s financial aspect in the long term. A person may have a hard time emerging from it in terms of self esteem and financial confidence. It may even leave behind some psychological consequences, which should be assessed by an expert.
After a person has emerged out of being bankrupt, he is still obliged to always declare getting into it especially when filling out forms for mortgage or other loans. It is actually a legal obligation, which should not be concealed or intentionally withheld in any financial application. This is logically like declaring one’s high risk as a potential borrower. But some lenders still approve loans from formerly bankrupt individuals provided there are additional fees and higher interest rates imposed to counter the risks.
Fortunately, becoming bankrupt usually does not pose impact on one’s career, except of course if it affects professional performance due to anxiety. During bankruptcy, some companies prevent the individual to hold a directorship position, but it can be lifted after the period. In the end, bankruptcy is an opportunity for a new start after a person has committed wrong decisions and actions financially.