Viability of bankruptcy?

6 Replies

What are some of the long lasting financial side effects of declaring bankruptcy after a bad investment? I caught up with one of my old school mates, who has found herself in crippling debt after blowing all her seed capital on a unit that didn't turnover. She suffered a pretty serious car accident, and has not been able to make payments on her cards and expenses for the past 4 years. I would recommend she seek bankruptcy as a potential option, but I thought to ask you, biggerpockets community, first.

Well, your credit score takes a dive, and getting a loan is virtually impossible. I have a friend who declared bankruptcy in another country, and seems to face little to no consequences back in the US. Maybe she should relocate post bankruptcy?

Credit counselling and debt consolidation should be considered ahead of bankruptcy if she has not already done so.

Bankruptcy should only be considered as a final resort not as a escape plan.

Haven’t been able to make payment for 4 years? I feel like there are more to the story.
What is she hoping to get out of paying? And what is she hoping for in the future?

Originally posted by @Shiela Zhao :

What are some of the long lasting financial side effects of declaring bankruptcy after a bad investment? I caught up with one of my old school mates, who has found herself in crippling debt after blowing all her seed capital on a unit that didn't turnover. She suffered a pretty serious car accident, and has not been able to make payments on her cards and expenses for the past 4 years. I would recommend she seek bankruptcy as a potential option, but I thought to ask you, biggerpockets community, first.

 You can't bankrupt out of student loans or of taxes, child support.

Two years out of bankruptcy you can do an FHA loan if you have rebuilt credit.

Some banks will never deal with you again if you declare bankruptcy but most banks will.

@Shiela Zhao   Does she have any assets that she wants to protect?  If she qualifies for Chapter 7 then it might be a long term benefit.  Most attorneys want all of the money up front for a Chapter 7.  Many people file for Chapter 13 when they shouldn't because lawyers take payment plans for these.

If a mortgage is one of the debts, she'll need to build up a history of on-time payments for (I believe) 2 years as per Fannie Mae guidelines. A quick Google search will bring those up though.

As far as the accident, if it  wasn't her who was at fault, she may still be able to go after the driver and/or owner of the vehicle (or her own insurance if other driver was under-insured depending on limits and her own coverage). I know Ohio's minimum liability has been $25/50k since the end of 2013, but it can't hurt to try especially if all of the financial constraints have been because of the accident. I would advise an injury attorney before bankruptcy, just in case.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.