One of life’s truths is that the future cannot be predicted. We never know what’s coming next, and sometimes a curveball can cause drastic changes in our finances. When that happens, whether we want it or not, bankruptcy may be an option to consider. If you are considering bankruptcy, here are six things you should know before you file.

  1. You Must Pay Fees in a Bankruptcy
    Bankruptcy oftentimes can come at a big cost. More specifically, there are filing fees you must pay in order to have your bankruptcy considered in court. Effective on June 1, 2014, the federal fee for filing chapter 7 bankruptcy is $335. If you choose to hire an attorney to handle your bankruptcy, their fees will be in addition to the federal filing fee.
  2. It Stays on Your Record for Ten Years
    The relief bankruptcy can bring is immediate, but the effects of filing bankruptcy are long lasting. Chapter 7 bankruptcy stays on your credit report for up to ten years. This does not mean you will be unable to obtain credit during that time, but your rates and options will be much more limiting than before you filed bankruptcy.
  3. You Will Appear in Court for Your Bankruptcy
    As part of the bankruptcy process, you will have to go to court for a meeting of creditors. This is a short meeting but you must go. Once you have filed for bankruptcy, you will receive a notice in the mail telling you when the meeting will be (which is usually several weeks in advance so you have time to make arrangements).
  4. Does Not Ruin Your Chances for Credit
    While filing for bankruptcy will affect your ability to obtain credit, the door will not be completely closed. In fact, you may find that you receive more credit offers in the early part of your bankruptcy than you had before you file, mostly from creditors taking advantage of your distress situation. These offers will generally have much higher interest rates and will actually place you further in debt. This is not the help you need.
  5. Bankruptcy is a Life Event
    When you consider filing for bankruptcy, you might not be able to look very far into the future under the weight of the stress you are enduring. It is important to know now that bankruptcy is a major ordeal in someone’s life, one that you will not easily recover from mentally or emotionally. It will impact the way you think about money and credit for many years to come.
  6. Not all Debts are Erased
    Lastly, and perhaps most importantly, bankruptcydoes not automatically discharge all debts. Certain debts, such as student loans, child support and specific taxes, are not able to be discharged in a chapter 7 bankruptcy. It is a good idea to talk with an attorney to find out which of your specific debts will be discharged and to determine if it is worth it for you to file.

While filing for bankruptcy may seem like an easy way out, it’s not. Instead of forfeiting your credit, look for ways you can work towards getting out of debt without having to declare bankruptcy. Nonprofit debt management organizations like CreditGuard are here to help you get out of debt. They negotiate with your creditors on your behalf to consolidate and reduce your debts—making it easier for you to pay them off.

By being prepared and understanding what to expect, you’ll have a better idea of what bankruptcy is and why you should avoid filing.