Why You Should Not File for Bankruptcy in Your 20s | Personal Finance Views

Wednesday, November 12, 2014

Why You Should Not File for Bankruptcy in Your 20s

The worst part of young age is that at this time you will probably have numerous of loans and such people find it tempting to file for bankruptcy. However, bankruptcy does not solve your problem rather it increases the same.

Here are some worst effects of filing for bankruptcy in your 20s.

It Won’t Wipe the Slate Clean

According to the recent survey it has been noticed that one out of every five people are carrying student loans for bad credit debt on themselves. This is because now-a-days graduates are not getting jobs because of the bad economic condition and those who are getting jobs are not getting an adequate salary because of the bad market conditions and hence, they are not able to pay off their student loan debt.

Bankruptcy

For the people facing such situations, filing for bankruptcy to get free from it might seem like an option but it is not a good choice in the long run. If the reason behind getting into debt is because of the bad economic condition then there is a legal solution available for them to cope up with debt, which is that the lender will garnish 15% of your retirement benefit which will be given to you by your employer.

You’re Neglecting the Real Issue

Most people in the age of 20s get their first job, in which they get a nominal salary and then they realize how difficult it is to earn money and managing their finances within their salary. As when you start your job, then you have to think for your better future and for it you have to take many things to make your life and future secure. The very first thing for which you have to make a proper plan is to save money for buying a house as you can’t spend your whole life in a rented apartment. You have to save some money for purchasing a house. After that you need to take some insurance policies like health insurance, retirement policy to make your life secure. As health expenses are very high which can not be managed by your income if you get any serious disease. It is important to take a health insurance plan following with that a retirement plan in which you will have enough money which you’ll get after retirement as there will be no income after retirement by which you can sustain your life.

You will also have to save money for unexpected expenses or emergencies like repair of cars, or for buying any house appliances. And you have to save money for your family’s future like your wife and children as you have to pay for their studies, college fees and their basic expenses. You have to plan your whole life at the age of 20 and make your plans accordingly that what are the requirements that you will need to manage and live your life peacefully. If you don’t manage your finance at the very beginning of your life, then you will face many difficulties in future which will affect your life badly.

You Could Hurt Your Job Prospects

The worst effect of filing a bankruptcy is that it will be mentioned in your credit report for the next 7 to 10 years. If a bankruptcy is filed and gets mentioned in your credit report then you will face difficulties in getting jobs or switching from your previous job to another job. Although there are no such mandatory requirements for employers to check your credit score before giving you a job, but it comes under the formality of checking the whole background in which your credit score will also be checked and an employer might deny giving you a job because of your bad credit score. This is because your credit score is the indicator which decides that how good you are in managing your finances and for employer it will be risky you giving job because when you can’t even manage your finances properly then he will assume that you may not even manage your work properly.

You Could Become Homeless

Another ill effect of filing for bankruptcy is that you may end up losing your home. And you cannot even buy another house for at least next 7 to 10 years because bankruptcy will be mentioned in your credit report and your credit score will be so low that you will not qualify for loans with no credit check anywhere. You will not even have any valuable asset which you can pledge as collateral against the loan amount. Even you will face difficulties in getting house for rent as your credit score is also checked by landlords before giving home on rent as to see that you are not a risky tenant.

Credit Will Be More Expensive and Limited

When you file for bankruptcy, then it will be mentioned in your credit report and your credit score will be lowered down by which if you apply for small finances, then also you will have to face problem in getting approved for a loan. And if in case your loan gets approved, then also you will be charged with a very high interest rate as there’s a risk involved for lenders for losing money.

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