ABA Family Legal Guide

Consumer Bankruptcy

Introduction to Bankruptcy

The Process of Filing for Bankruptcy

What are the disadvantages of filing for bankruptcy?

Bankruptcy may be the best, or only, solution for extreme financial hardship. Although there is still a stigma associated with bankruptcy in some circles, that stigma has faded over the years as many people—including celebrities—have filed. However, it should be used only as a last resort, since it has long-lasting consequences. The record of a Chapter 13 bankruptcy can remain on your credit record for up to 12 years, which is a long time in today's economic system. Moreover, once a bankruptcy petition is filed, there are strict time periods that must expire (two to eight years) before you can file another bankruptcy case and receive a discharge. If you have equity in your home or car, you may lose it, since that equity may be realized for the benefit of your creditors, depending on state laws.

In a Chapter 7 bankruptcy, you might also have to surrender some of your nonexempt personal property or your home to a bankruptcy trustee.