Filing for bankruptcy seems like a big, scary decision, mainly due to its reputation and image painted by our media. High ranking officials and celebrities, such as George McGovern and Larry King, receive a lot of negative attention when they file bankruptcy. As of late our media is focused on Detroit, an entire city, going bankrupt. Unfortunately, the fact that individuals, businesses and even cities, are filing bankruptcy is the only part of the story that is “newsworthy,” and we don’t get to see their return to normalcy – to debt freedom.
We often hear three worries over and over again sited by our clients as reasons they were scared to or haven’t filed bankruptcy. Don’t let the following unfounded bankruptcy misconceptions scare you away from meeting with a bankruptcy attorney to discuss your options. It isn’t as scary as you think and we are here to help you get back to living happily and comfortably again.
#1 – You Won’t Lose All the Property You Own
The Bankruptcy Code contains protections to make sure you don’t lose your house, car and almost all personal property. In fact, chapter 13 bankruptcy allows you to keep your property and set up a repayment plan to take care of your debts without liquidating assets; there is no such thing as non-exempt property in a Chapter 13 bankruptcy. (Chapter 7, on the other hand, does involve liquidation of nonexempt property.)
If you’re worried about what may happen to your property when filing bankruptcy, set up a consultation with us to discuss. Often, bankruptcy gets directly associated with liquidation, and this is often not the case. Many people who come to see us find out, contrary to their initial belief, that a Chapter 13 bankruptcy is more appropriate for their financial situation than a Chapter 7.
#2 – You Won’t Impair Your Credit for a Long Period of Time
Although filing bankruptcy is a negative credit event, it often enhances your ability to rebuild your credit in the future. In fact, 80-90% of our clients experience an increase in their credit score; their credit score is typically higher one year after they file bankruptcy than it was the day before they filed.
This surprises most debtors and provokes the question, “Why?” One of the main components of a credit report and credit score is the ratio you carry between your earned income and the debt that you owe. A bankruptcy discharge, granted in Chapter 7 or 13 cases upon approval, eliminates most or all of your debt. This debt elimination straightens out your income to debt ratio, therefore making you more credit worthy, not less. For this same reason, many of our clients receive offers for credit shortly after their bankruptcy discharge is granted.
#3 – You Won’t Be Featured in the News
If you are filing a personal bankruptcy your name will not appear in any local papers or at the courthouse. The only place it will appear is on the bankruptcy website. If anyone is deliberately searching for you on this website they will have to pay to access any information. You won’t be front page news or the topic of conversation as politicians and celebrities are; likely, the only people who will know you have filed bankruptcy are you, your attorney, your court trustee, your creditors and anyone else you deem trustworthy enough to tell.
What is often forgotten is that we, along with politicians and celebrities, are human. We make mistakes. And the best thing we can do for ourselves is admit it, and make the decision to do something about it. Most often, people who file bankruptcy end up restructuring and rebuilding, and come back to create very successful and comfortable lives for themselves.
Bankruptcy gives you the fresh start you need, a brand new canvas to paint the life you want to live. So don’t let these bankruptcy misconceptions stop you or scare you away from getting your life back any longer. Talk to a bankruptcy attorney today to determine the best route to debt freedom.