Did you know that bankruptcy filings rose 16% during the 12-month period ending March 31, 2024? The bankruptcy rate was similar to the December 31, 2023 quarterly report and new bankruptcy cases remain lower than before the start of the coronavirus (COVID-19) pandemic.
According to statistics released by the Administrative Office of the U.S. Courts, total filings rose to 467,774 new cases, compared with 403,273 cases reported during the year ending March 31, 2023.
How does bankruptcy affect your job and future credit? Some employers tend to pay greater attention to your financial background than others, especially in situations where trustworthiness and responsibility become issues. Your credit record may suffer badly, hindering your ability to secure loans in the future.
Learn more about the effects of bankruptcy and how to deal with it in this article.
Understanding Bankruptcy: Types and Processes
Bankruptcy knowledge may help one recover financially from the burdens of debt.
Two basic forms of bankruptcy one might consider are Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, a person may be able to discharge most unsecured debt and have a fresh start. A means test will be necessary for a Chapter 7 bankruptcy.
Chapter 13 involves a plan for payment over a period of three to five years. This is suitable for an individual with a steady income.
In order to file for bankruptcy, one must first go through credit counseling, attend a meeting of creditors, and then file a petition.
The Impact of Bankruptcy on Employment Opportunities
Bankruptcy will relieve some stress from financial obligation but make it harder to find a job.
Bankruptcy is viewed negatively in some industries, such as finance or anything else requiring security clearance.
Some employers understand that a person can go through financial difficulties, and they may even deem your skills and experience following bankruptcy to be valuable.
Medical debt lawyer Lindsay Steele says being honest about your financial situation and bankruptcy will show your accountability. Being bankrupt doesn’t define your value or abilities. When finding a job, concentrate on what you can offer for the company instead of dwelling on your bankruptcy.
How Bankruptcy Affects Your Credit Score
Bankruptcy stays on your credit report for ten years. This usually lowers credit scores by 100 points.
To lenders, bankruptcy means serious financial trouble, which leads to a harder time borrowing money, obtaining credit cards, or even securing rental agreements. When you do get credit, it’s usually at a premium interest rate.
It is important to be aware of the long-term ramifications of bankruptcy on your credit score.
Rebuilding Your Credit After Bankruptcy
Check your credit reports for any errors. Correcting any inaccuracies will positively affect your score. Think about applying for a secured credit card. This will allow you to increase your credit rating while controlling spending.
Pay your bills on time. Your payment history significantly influences your credit score. Try to keep your credit utilization low, ideally below 30%. Balancing a small loan with a diverse credit mix can help if you are able to manage it wisely.
Strategies for Managing Career Concerns During Bankruptcy
Focus on improving yourself. Enrolling yourself in online courses or workshops may strengthen your skills and give you a more marketable presence. Get in touch with people who may provide leads or referrals.
Take care of yourself. Stress management is important for maintaining productivity and positivity.
Doing the things listed above will reduce career disruptions and allow you to focus on preparing for the future as you deal with the effects of bankruptcy.