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Bankruptcy can set you back for 26 years
Posted By Miranda Marquit On 10/24/2013 @ 2:30 pm In Personal Finance | 6 Comments
Most people aren’t surprised to discover that personal bankruptcy can set you back by quite a lot financially. After all, you have to be in a pretty poor financial position to file for bankruptcy in the first place. But the effects of bankruptcy on your financial situation might be greater than you imagine.
According to a study  from Ohio State University and University of Maine researchers, it can take 26 years for bankruptcy filers to catch up to their nonbankruptcy-filing peers in terms of net worth.
The study used data from the National Longitudinal Survey of Youth, which has been gathering information from randomly selected Americans in the same group since 1979. In this case, the researchers compared respondents with similar economic and social backgrounds. They considered those who had filed for bankruptcy with those who hadn’t, and made determinations about how far behind filers end up.
Here are some of the interesting findings from the study:
One of the most interesting findings from the study is the fact that car ownership wasn’t that impacted by bankruptcy. Indeed, 90 percent of those who file for bankruptcy have a car less than a year after the process. Most of these car owners have auto debt, though. But it seems as though bankruptcy is no bar to getting a car loan a year after filing.
Also interesting is the fact that 74 percent of those filing bankruptcy have a job after one to five years, while that number is 73 percent for non-filers. Perhaps someone filing for bankruptcy is more interested in re-establishing him- or herself, and is more likely to take any available job in order to “fix” the situation.
The type of bankruptcy protection  sought also seems to matter. Those asking for Chapter 7 protection, which allows you to discharge most of your debts (after your assets are sold to pay off as much of your debt as possible) take longer to recover from bankruptcy than those filing Chapter 13, in which a filer creates a payment plan and discharges the debt that way.
While bankruptcy is the only way some will ever get out from under huge debt loads, it’s also important for them to understand the gravity of the situation. How long do you think it would take you to catch up after a bankruptcy?
(Photo: Ada Gonzalez)
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 study: http://www.stjohns.edu/media/3/36c8e92b2bcd41f68293a800313c8a47.pdf
 type of bankruptcy protection: http://www.bargaineering.com/articles/types-of-individual-bankruptcy.html
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