Recently a client come into the office and shared with me her list entitled: My fear of filing bankruptcy:
- Fear of losing her home,
- Fear of not being able to get new credit afterwards,
- Fear that she would be seen as a bad person.
I fear that fear holds too many people back from filing for bankruptcy. Fear of filing bankruptcy. Though filing bankruptcy is a serious decision, most fears that people have regarding bankruptcy are incorrect or exaggerated. I think to many people listen to a co-worker in the lunchroom tell stories about bankruptcy and fail to learn the real facts. Here is the truth about these common fears that hold people back from filing bankruptcy. Bottom line there should be nothing to fear about bankruptcy.
Losing Your Home or Car
A Chapter 7 bankruptcy does require you to surrender certain property in the process. The property is sold and then the proceeds will be distributed to your creditors. However, there is something called a bankruptcy exemptions that can protect much of your property from being lost such as a car or home. In fact, the vast majority of Chapter 7 cases are no-asset cases, where the debt does not have any property available to be liquidated. A word of warning however, if you have a home or car and don’t want to lose it – make sure to use an attorney to do your bankruptcy – the new do it yourself bankruptcy places are merely helping people loose their homes because they do not know or help you with the ins and out of bankruptcy law – believe or not it is actually a complex field of law. So do yourself a favor and use an experienced bankruptcy lawyer – it might cost a few bucks but it is way better than ending up without a car and homeless.
You may also be able to choose to reaffirm some of your debt if you’d prefer to continue making payments rather than give up your property under certain circumstances. Make sure to discuss these options with your attorney.
Not Being Able to Get New Credit
Many people worry that a bankruptcy filing will forever stop them from getting a mortgage, a car loan, or credit of any kind. This is sooooo not true. You may be eligible for a mortgage within two years after receiving your bankruptcy discharge, depending on the type of mortgage and other factors. See my web page on Life After Bankruptcy to learn more.
You may face higher interest rates on a car loan but you can usually improve your credit over time by paying your bills when they are due and taking on debt responsibly. The fact that you filed for bankruptcy actually lowers your credit risk in some situations since you will not be eligible for another bankruptcy discharge for years.
You are a Bad Person if You File Bankruptcy
Some people are lead to believe that they are letting down their families and themselves by filing for bankruptcy, or that a bankruptcy makes them irresponsible. Fact is most bankruptcies are caused by divorce, job loss, illnesses, or other circumstances that can affect almost anyone at anytime and cause severe financial problems.
Bankruptcy is merely an acknowledging that you need some help and that you will make responsible financial decisions going forward.
Fear of filing bankruptcy. Working with an experience bankruptcy lawyer can help ease your fears. Most bankruptcy lawyers I know offer a free consultation so in and talk to them – they understand fear and can show you way out of the problems you face.
Utah Attorney Douglas Barrett, The Utah Bankruptcy Guy, main office is located in Orem, Utah. 801-221-9911