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Impact of bankruptcy on finances improves over time

One of the biggest fears that a debtor may have about filing for bankruptcy is the financial challenges they will experience once they have secured their discharge. Despite feeling the crush of overwhelming loans and fees, a Tennessee resident may choose to forego an opportunity to file for bankruptcy because they believe the harm that it will impose on their future is too great. While individuals who file for bankruptcy do often suffer from hits to their credit scores, the challenges they face in the years after their discharge decrease over time.

A recent report looks at how a person's interest rates may be impacted by having filed for bankruptcy. In an example, the report noted that a person who sought a car loan a year after filing for bankruptcy might receive an offer of 10.3 percent on their loan, while a person with no bankruptcy history may be offered a rate of 7.8 percent for a similar loan. That difference in rate would translate to about $2,200 more for the bankruptcy filer than the non-filer over the course of the repayment.

This may seem like a lot of money, but the report further discussed how waiting even a year after one's bankruptcy discharge can make a big difference in the interest rates and financing options they are able to secure. This is because over time, a person's credit score may improve due to their responsible use of credit.

Filing for bankruptcy is certainly not without sacrifice. Depending upon the form of bankruptcy that a person chooses to pursue they may have to sell off possessions of property or allocate significant portions of their income to the repayment of their debts. However, the costs of bankruptcy can decrease over time and leave individuals in strong financial positions as they move into the future.

Source:, "Here's How Much Borrowers Pay on Loans After a Bankruptcy", Chris Neiger, Apr. 21, 2018

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-954-7180
Phone: 423-624-4002
Fax: 423-624-0509
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