• People file for bankruptcy hoping to get rid of their debts, to stop a foreclosure of their house or to keep their car from getting repossessed. An examination of the pitfalls of personal bankruptcy will help you decide whether bankruptcy is the best option. Understanding the costs of bankruptcy, and knowing how it may affect your financial options in the near future are some of the things that should be researched.
  
  

Nondischargeable Debts

• Student loans and taxes are typically not dischargeable in bankruptcy. Alimony, child support, money or loans obtained through fraudulent activity, and criminal fines are some of the debts that cannot be discharged in bankruptcy, as stated in U.S. Code section 523. After filing for bankruptcy, these debts still need to be paid.
  
  

Credit Score

• Your credit score may be lowered after filing for bankruptcy. The bankruptcy will be reflected on your credit report for up to 10 years from the date the case was filed. If you were delinquent with paying bills over an extended period of time, the credit score may actually increase after filing for bankruptcy since you will have less overall debt. It is possible to get credit cards or loans after filing for bankruptcy, but the amount of available credit may be low and have a high interest rate.
  
  

Costs of Filing for Bankruptcy

• Some of the costs associated with bankruptcy include attorney fees, court filing fees, and fees for credit counseling and financial management courses. Tax refunds are considered property of the estate. If you file for Chapter 7 bankruptcy, any tax refund received either that year or the next year has to be submitted to the trustee. If you file for Chapter 13 bankruptcy, the tax refund for every year of the bankruptcy plan needs to be submitted to the trustee. The trustee will distribute the funds to the creditors. Consult with a bankruptcy attorney to find out whether it will be more financially feasible to file for bankruptcy or to use alternative methods to resolve debts owed to creditors.
  
  

Dismissal of Case

• A bankruptcy case can be dismissed without a discharge for a number of reasons. If you don't pay your Chapter 13 plan payments on time, the trustee may file a motion to get the case dismissed. Not completing the credit counseling and financial management courses will get the case dismissed. If you don't disclose all of your assets in the bankruptcy, the trustee may request a dismissal. When a case is dismissed, you have spent money to file the bankruptcy case but were not able to get the benefit of having any of your debts discharged. Creditors will be able to resume collection activity. Confirm with a bankruptcy attorney everything that needs to be done to ultimately get the bankruptcy case discharged.