Reaffirming a Mortgage After Bankruptcy – What is the Downside of Filing For Bankruptcy?
Bankruptcy can have many negative consequences. Only 33 percent of Americans consider their financial health to be good, but two thirds of Americans are in serious financial trouble. With the average American indebted to $90,460, times are difficult for most of us. The downside to bankruptcy is that it can have a negative impact on your credit score, causing you to be turned down for credit card offers. You may also lose your home. In this article, we will discuss the downsides of filing for bankruptcy, including how you can reaffirm your mortgage loan during the process.
Discrimination
You don’t have to file for bankruptcy if you aren’t a good employee. Actually, bankruptcy filings can actually improve credit ratings. Employers are allowed to run a credit check on prospective employees with your permission. Employers can use your poor credit history or debts to assess your ability to be responsible in the workplace. This creates the impression that you cannot be trusted or depended upon. This type of discrimination is protected by laws.
Ruining your credit score
Although it is a negative effect of bankruptcy, it is not as serious as many people believe. There are ways to improve and maintain your credit score after bankruptcy filings. There are two options to improve your credit score. You can apply for bankruptcy and make new payments. You will increase your debt ratio and risk defaulting if you do both simultaneously.
Losing your home
Although losing your home is one of the most common negative consequences of bankruptcy, it is not necessarily inevitable. It depends on what type of bankruptcy you file, how your mortgage status is, how much equity you have, and the laws in your state. As you can see, the most important part of filing for bankruptcy is protecting your home and paying your mortgage. It is important to also consider the benefits of filing bankruptcy.
Reaffirming a mortgage during bankruptcy
Most bankruptcy law firms advise against reaffirming a mortgage after a bankruptcy. If the mortgage defaults, this practice can make the debtor liable for hundreds or thousands of dollars. Most homeowners who reaffirm are left with little or no upside. Reaffirming a mortgage is a good option for lenders, but there are many downsides. Continue reading to learn more about the negatives of reaffirming your mortgage during bankruptcy.
Nondischargeable debts
When filing for bankruptcy, most debts are eliminated. Some debts, however, are not dischargeable. These debts are given a special status under the U.S. Bankruptcy code. They are nondischargeable due to a public policy interest. For example, a creditor may not be able to collect on child support if you filed for bankruptcy. Criminal restitution can also result in non-dischargeable obligations.