Even if unsure about the textbook definition, we know filing such a financial status as bankruptcy in a legal court couldn’t possibly be good news for your credit. But what exactly happens?

When a consumer’s debts become highly unmanageable, bankruptcy means a legal declaration about an inability to pay creditors has been filed. Debts owed are as sizable as they are numerous, from mortgages to credit card balances to business loans. Bankruptcy is a last resort and almost never recommended by financial experts.

This action causes a series of reactions, such as the creditors filing a petition to recoup a portion of the debt or the judge’s decision to turn a Chapter 7 into a Chapter 13, which involves a repayment plan rather than a clean slate. Abuse and frequency of Chapter 7 bankruptcies bought the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) law into effect. And no matter what you file, some loans are impossible to erase, like student loans.

Not only will all your creditors report negative activity, but your credit report takes the darkest mark ever with a claim: bankruptcy. Depending on what chapter you filed, it can take a decade and beyond to remove this. And remember, you are likely going to end up paying a portion of the debts off.

Following a bankruptcy, you will be ineligible for loans, credit cards and many other types of credit, as this link states. Although the Bankruptcy Code prohibits termination of employment, it can affect whether or not you will be hired or granted a housing lease, as loan inquirers have the right to check your credit. Bankruptcy makes you look like a liability and a risk.

Your best bet if you claim bankruptcy is to start improving your credit right away. Get a secured credit card. Pay your new bills on time. Buy with cash. Stick to a budget. Bankruptcy is a long lesson learned and one not to repeat.