Overwhelming debt can affect anyone due to losing a job, accumulating credit card debt or running into unexpected medical expenses. Over 700,000 individuals in the United States filed for personal bankruptcy in 2017. Naturally, personal bankruptcy rates vary by state with Virginia falling well within the middle range.
Having a bankruptcy on one’s record mainly harms an individual’s credit score, causing the interest rates of subsequent loans to increase. Although this may come as no surprise, it is actually good news; it was found that 65 percent of those who had declared bankruptcy managed to bump up their credit score to 640 two years after the fact and up to 672, close to the national average of 692, five years after filing. In other words, the effects of bankruptcy are reversible; all that is needed is time.
Nevertheless, it is necessary to be aware of the cost of going bankrupt, especially until the credit score improves. When it comes to car loans, a $ 15,000 loan that is meant to be paid over five years will cost someone who’s gone through bankruptcy $2,171 more than someone with a clean slate. Similarly, a three-year $10,000 personal loan, also known as an unsecured loan, will cost $1,426 more for people who have declared bankruptcy. Mortgages are where the largest price differentials are apparent: A 30-year $250,000 loan can cost upwards of $8,887 for those who have experienced bankruptcy.
For people who are drowning in a sea of debt, filing for Chapter 7 bankruptcy may be the right choice. However, it is a complex process, which is why it is advisable to consult an experienced lawyer during that difficult time. Armed with the right council, an individual opting for Chapter 7 may be able to keep a sizeable portion of their assets.