• Though bankruptcy can bring some relief, it does have certain negative consequences.pay here sign. spending money. money concept image by L. Shat from Fotolia.com
  
  Bankruptcy is a legal process allowed by the federal government to help a debtor incapable of paying any of his debts to eliminate most of them. Debtors that are past the possibility of paying debts and that have interests getting higher and accumulating are good candidates for a bankruptcy filing. However, even in such cases, there are several negative consequences of filing for bankruptcy that must be weighed before you decide to file.
  
  

Debts

• The purpose of a bankruptcy filing is to give you relief when you cannot pay your debts. In a Chapter 13 filing, the government does not erase your debts, but it accords you a "recovery period" to allow you ample time to get back on your feet before paying. In this type of filing, you must present a repayment plan to the court that will apply to you five years after filing. Therefore, you still have to pay your debts.
  
  In a Chapter 7 filing, the government does erase your debts. However, not all debts can be erased in such a filing. Some debts, such as student loan debts, will never be erased, and filing for Chapter 7 bankruptcy will not affect them.
  
  

Properties

• If you are filing for a Chapter 7 bankruptcy, there is a high possibility of losing a great part, if not all, of your valuable property. In a Chapter 7 filing, the court legally relieves you from paying most of your debts, but it pays off your debts for you by forcing you to recover as much money as possible from the sale of your assets. Depending on your state's laws, some of your "necessary" properties, such as a house or a car, might be protected, and you will not lose them. However, any extra vehicles, investment properties, or other assets could be subject to seizure and sale.
  
  

Credit Score

• Filing for bankruptcy will produce the worst credit score you can have. Even though you do not need to pay most of your creditors anymore, bankruptcy produces a negative in your score that will stay visible for seven years in the case of a Chapter 13 filing or 10 years in the case of a Chapter 7 filing. That will affect anything else you try to do during those years, such as buy a house, purchase a car, or get an important loan or line of credit. In cases where you can get a loan or line of credit, it will be offered at high interest rates.
  
  

Other Negatives

• Even when creditors are pestering you and you do not know how you can pay off your debts, you might not qualify for a bankruptcy filing. In a Chapter 7 filing, your income must be lower than the median income of your state. In a Chapter 13 filing, you will be protected from creditors for a period of five years, but the fact that you must spend those five years saving in preparation for payment means that you will probably need to change your way of life. In any case, find out as much as you can on the U.S. Courts website before deciding on whether or not to file for bankruptcy.