Question

Todd and mary love the finer things in life. they both like to drive expensive cars and wear designer clothes and jewelry. the problem is that they cannot afford to live this lavish lifestyle. they have been living well beyond their means for many years. they have extremely high debt and have missed many of their payments over the last six months. they want to buy a home, but they have not been able to get a mortgage. both todd and mary are realizing that they have made poor financial decisions, and they are thinking of declaring bankruptcy. what effects are mary and todd likely to face if they declare bankruptcy? check all that apply.

Answer 1

If Todd and Mary declare bankruptcy, the effects they are likely to face include:

- Elimination or reduction of some debts.

- Damage to their credit score.

- Difficulty in obtaining credit in the future.

Step-by-step explanation:

Declaring bankruptcy can have significant financial implications. Firstly, it can result in the elimination or reduction of certain debts, providing relief from some financial burdens. However, this doesn't necessarily cover all types of debts, such as student loans or taxes.

Secondly, one of the most impactful consequences of bankruptcy is the negative impact on the individual's credit score. This can significantly affect their ability to secure credit or loans in the future. It stays on the credit report for a considerable period, making it challenging to access credit on favorable terms.

Additionally, obtaining credit or loans after declaring bankruptcy becomes notably difficult. If approved, it often comes with higher interest rates or stringent terms due to the increased risk perceived by lenders. This financial stigma might persist for several years, making it harder for Todd and Mary to make significant purchases, such as a home or a new car.

Overall, while bankruptcy might alleviate some immediate financial strain by discharging certain debts, its long-term consequences, particularly the damage to creditworthiness and financial opportunities, can significantly impact Todd and Mary's financial future.