Bankruptcy can be full of unknowns and uncertainty, and it can be easy to become fearful about the future. You may worry about getting credit for large purchases and wonder if you’ll be discriminated against based on your past. To mitigate the negative consequences of filing, I always encourage my clients to do everything they can to avoid bankruptcy, such as trimming their expenses and negotiating with creditors. However, bankruptcy is often the best choice, and it’s good to be prepared for rebuilding your finances.
Government Debts and Agencies
Filing bankruptcy will lower your credit score, but discrimination based on your financial past is illegal, especially when it comes to government agencies. A bankruptcy will not keep you from getting or renewing your government-issued licenses or permits, and it also will not lead to a suspension or revocation of any current licenses or permits you have. If you’re a government employee, you cannot be fired because you filed bankruptcy, and a bankruptcy in itself cannot be used as a reason not to hire you for a government job. A bankruptcy will not affect your public benefits, and you cannot be evicted from public housing, as long as you stay current on your rent. A state university cannot withhold your transcripts based on bankruptcy.
It may be possible to discharge some types of government fees through bankruptcy. If you had previously experienced a negative consequence due to not paying a fee (a suspended driver’s license, for example), discharging the fee through bankruptcy would show the fee as paid. In this case, you would then be eligible for your driver’s license once again. If a fee is not discharged during your bankruptcy, you’ll need to pay the fee before getting your license again.
Before approving you for a government loan, the agency will look at your full credit report, and it’s completely legal for them to use your bankruptcy as part of their decision. They may deny your loan based on your credit history and/or income. However, if you’re seeking federal loans for college tuition, your credit will not be a factor. These types of loans are considered entitlements, as long as you’re an eligible student.
The Private Sector
Private companies have more leeway when it comes to using your bankruptcy as a deciding factor. You can’t be fired for filing bankruptcy, but an employer could decide not to hire you due to the bankruptcy. Your strongest assets will be your job skills and interviewing techniques. Depending on the employer, you may be able to explain your circumstances and get the job.
Your landlord cannot evict you just for filing bankruptcy, but if you’re looking for a new place, you may have some challenges along the way. Nearly all landlords run credit checks before renting to someone, so it’s best to be up front about your bankruptcy. You might consider attaching a note to your rental application, explaining your circumstances and demonstrating that you have the income required to cover your rent. You may also be required to provide a larger than usual deposit or pay a few months of rent in advance.
Prepare for the Future
It’s important to not only prepare for filing your case, but for the long-term financial implications you may need to deal with. Part of my role is to educate you about all aspects of bankruptcy so that you always know what to expect next. And if you ever have questions, I’m here for you.