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How Big are the Downsides of Filing for Bankruptcy?


CNBC has an interesting article on challenges consumers can face going forward should they file for personal bankruptcy. The list is accurate. However, the article doesn’t give consumers a realistic sense of the seriousness of these costs.

As seasoned Plantation bankruptcy attorneys, we have listened as many clients expressed their fears of filing. Fortunately, many of these fears are overblown and our clients can take small, concrete steps to undo most of the damage of bankruptcy.

Apartment Rentals

CNBC correctly notes that many property management companies require a credit check as part of the application process. Landlords are looking to see if you are a risk for defaulting on your rent. A history of late payment or default is a reasonable indicator that someone is a risk, so they will want to see your credit history.

Can you rent if you file for bankruptcy? Yes, but you need to do some extra work. For example, you might save up more money and offer to pay a larger security deposit or several months of rent. This provides added protection to a landlord and makes you more attractive.

Of course, someone with many accounts in default will also look like a risk to a landlord. Filing for bankruptcy might not really harm your prospects of finding a place if your credit is already poor.

Job Searches

Employers also typically perform a credit check, but their reasons vary. If you work with money, then they obviously want to see whether you are a risk of stealing from them.

In many ways, however, a bankruptcy could help you in the job search. You should have wiped out most of your large debts, which would actually decrease the temptation to steal from an employer. Someone with a large debt load and accounts in collection would look like a greater risk than someone who has started over fresh after filing for Chapter 7.

Obtaining a Mortgage

It is not unusual for people who have gone through bankruptcy to eventually become homeowners. As CNBC points out, borrowers probably must wait a few years before they can get approved. If you are seeking an FHA or VA loan, then you usually need to wait two years after a Chapter 7 discharge.

If you don’t want to wait, then there are things you can do to improve the odds of being approved. For one, save up a larger down payment. This will reduce the amount you borrow. For another, you should increase your income as much as possible, which also reduces the riskiness of lending to you.

Credit Cards

We have written before about how our clients successfully rebuild their credit, often starting with a secured credit card. Many are shocked by how quickly they will start receiving offers for traditional credit cards. There is a simple reason—you become less of a risk because you cannot file for bankruptcy again for several years.


CNBC didn’t mention this one, but we might as well. Filing for bankruptcy can actually halt a divorce. The bankruptcy court wants to preserve the bankrupt estate, and divorce threatens to cut it in two. For this reason, we encourage that you carefully consider when to file for bankruptcy if you are considering a divorce.

Contact Nowack & Olson Today

We are a leading South Florida bankruptcy law firm that has helped tens of thousands of people like you. Call the Plantation bankruptcy lawyers today at Nowack & Olson, PLLC to schedule a free consultation.



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