To say that bankruptcy negatively affects a family unit and its individual members would be a severe understatement. Bankruptcy is an incredibly stressful event and can affect a family financially, emotionally and physically if steps are not taken to lessen a bankruptcy's impact. A family has to work together through difficult times if it is to survive. During tough economic environments, personal bankruptcy is an all too common occurrence which devastates families and result in an increase in divorce, separation and estrangement.
The most prominent negative affect of bankruptcy on a family is a lack of financial resources resulting from damaged credit. Few consumers realize how important a good credit report is until they no longer have it. A personal bankruptcy is one of the most negative black marks which can appear on a credit report making it next to impossible to qualify for a mortgage, receive approval for an auto loan, or successfully obtaining any other lines of credit. Not having readily available access to various forms of credit puts already distressed families even further behind financially. Bankruptcy is a direct result of not having enough money to pay existing outstanding debt. This means no accumulated savings in an emergency fund. If a car breaks down or a child gets sick then how do these emergencies get paid for? Access to credit is what gets most families through difficult times and a bankruptcy eliminates the safety net.
A personal bankruptcy is the end result of a long financial downward spiral of missed or late credit card payments, missed car payments resulting in repossession and possible foreclosure on a home. This type of environment creates significant uncertainty for all family members about whether or not they will be able to make it to work, put food on the table or have a place to live in the future. Children are especially susceptible to emotional distress as a result of their own fears but also witnessing their parent's struggle. The amount of stress involved when safety and security are thrown into question is a primary reason for divorce. Perceptions about stability, reliability and the ability to provide come into question. During difficult times like these, families either come closer together and are stronger than ever or splinter apart failing altogether.
The physical manifestations of a family going through bankruptcy are twofold. First, there is the personal physical toll family members take as a result of stress. Many adults will lose weight and will have a weakened immune systems due to poor eating habits and sleepless nights. Children tend to internalize stressful events and have behavioral issues by lashing out at school and at home. They may also become severely introverted and pull away from friends or family feeling as if no one understands what they're going through or aren't able to help them. Second, depending on the state you're in, bankruptcy may result in the loss of personal property such as a home or vehicle. This in turn means adjustments are made by staying with family members or using public transportation until back on their feet financially. This creates logistical issues which leads to conflict and additional stress.
Bankruptcy can be one of the most significant financial catastrophes to befall any family. This is because of the financial turmoil in the months or years that led up to the bankruptcy as well as the resulting fallout after bankruptcy is declared. Exorbitant medical bills or loss of employment mean a family will of struggle for years prior to declaring bankruptcy. Once bankruptcy is declared, while it should mean a fresh start, it often makes things worse by limiting access to credit. Since bankruptcy appears on personal credit reports it may also limit the family's ability to rent an apartment or to obtain new employment when trying to get reestablished financially.