Neil Robertson

The Cost of Bankruptcy - Don't Expect it to be Small

What are the emotional and financial costs of bankruptcy?  They are larger and will go on for longer than you might expect.

The cost of bankruptcy will hit you in a number of different ways.  There is the actual cost of filing for bankruptcy, the legal and counseling fees that you will probably have to pay and the increased cost of credit and insurance premiums over an extended period after your bankruptcy.

Cost of Bankruptcy - Filing Costs

The filing costs for bankruptcy are actually quite small and are as follows:

Chapter 7 - $299

Chapter 13 - $274

Cost of Bankruptcy - Legal and Counseling Costs

You will probably need to assistance of a attorney to file for bankruptcy.  There are also new regulations that require you to attend credit counseling before declaring bankruptcy.  Typical costs for these are going to be in the region of $700-$2000

Getting Credit and Insurance After Bankruptcy

Your bankruptcy will stay on your records for 10 years (or 7 years for chapter 13).  During this period you will find it much more expensive to get credit, including mortgages (for chapter 7 bankruptcy you will probably be unable to get a mortgage at all for 2 years).  In the current climate you might find it hard to get a mortgage at all.  Insurance companies will use credit records, and consider people that have been bankrupt a higher risk.  This will increase your premiums.

The Emotional Cost

There is much less stigma attached to bankruptcy than there used to be, but it's still there.  The effect on your family and relationships might be significant, you are certainly going to find out how strong your relationship is.  If you have been hiding debts from your family then the double shock of also declaring bankruptcy will push a lot of marriages to breaking point.

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