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Here is something you don’t expect to hear people say, “If you file bankruptcy, your life will get better.”
Well, I did file bankruptcy, and my life did get better. Within three years after our bankruptcy, we had purchased a house and had to rebuild great credit using secured credit cards before that.
And don’t believe me alone, read what the Federal Reserve Bank of New York said in Those That File Bankruptcy Do Better Than Those That Don’t.
In fact, for me, my financial failure and bankruptcy became my greatest strength in helping people. Without my personal bankruptcy, I wouldn’t be here helping you.
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Want to know the one thing I would change about the process? Without a doubt, I’d have eliminated all the fear, shame, and stress that came along with filing bankruptcy. All of that was created by my silly unfounded assumptions about life after bankruptcy. None of it was based in reality; I would come to find out. Unfortunately, my bankruptcy attorney just did a lousy job helping me overcome my incorrect assumptions about bankruptcy.
Famous People That Filed Bankruptcy
When you file bankruptcy you join a whole host of others who have lived through the financial tough times and survived. Not only will you have joined me in that bankruptcy club but also some others you might recognize like:
Business Moguls and Famous People
Radio, Television & Movie Stars
Bankruptcy Isn’t the End of Your Life.
It’s the Beginning of the Next Chapter.
I’ve been helping people with tough debt problems since 1994. In all those years, I can count on one hand the number of people that played the system—all the other thousands and thousands of people who filed bankruptcy needed to restart their lives.
Nobody runs out and says I’m going to make mistakes and be the subject of an accident, illness, job loss, or natural disaster so they can wind up in bankruptcy. Stuff happens.
Would you rather be poked in the eye with a sharp stick instead of filing bankruptcy? How about lose the love of your life? There are lots of things that are worse.
Let’s look at what filing bankruptcy actually means. First, it means you are seeking the legal protection afforded to you under the law so that you can get a second chance and a fresh start. Second, it is a road from an impossible financial past to a better financial future so you can financially protect your family better and move forward with your life.
Filing bankruptcy means you accepted responsibility for your financial mess, took action afforded to you under the U.S. Constitution, and have made the decision that doing better is the best revenge against failure.
The question you really need to answer is this, “Do you want to spend the next five years trying to fix your financial past and struggle or the next five years building a stronger financial future and creating a safety net for you and your kids?.”
Popular Bankruptcy Myths
So often, I hear people say things about bankruptcy out of total ignorance. They make these statements from assumptions, not reality.
- I Can’t File Bankruptcy. I Have to Repay My Creditors: Nothing about bankruptcy prevents you from repaying your creditors as you can afford to if that’s your wish. But I think you may discover, as I did, that after bankruptcy, your creditors don’t know what to do with your payments anymore. If that’s what you want to do, give it a shot. But at least you won’t be getting collection calls, hiding from creditors, worried about getting sued, fearing a wage garnishment, or getting a judgment against you. All that went away with your bankruptcy.
- Bankruptcy is Immoral: No it’s not. See Is Bankruptcy Sinful and Bad or Right and Moral? An Examination
- Bankruptcy is not Ethical: Really? Take a look at this situation and tell me what was the ethical choice.
- The Bible is Against Bankruptcy: Well that is clearly not true. See What Does the Bible Say About Bankruptcy? Is Bankruptcy Scriptural?
- I’ll Never be Able to Buy a House: Not true. in fact, the reality is that most likely, unless you file bankruptcy, you will not be in a position to save money for a downpayment. You might want to read How Long After Bankruptcy Can I Buy a House?
- I Won’t Be Able to Get Another Credit Card: Actually, what you will find is you will start getting new offers for credit right after bankruptcy.
- My Credit Will Be Ruined for a Long Time: Again, another fallacy. it is actually stupidly easy to rebuild your credit again and have excellent credit. Read How to Easily Rebuild and Repair Your Credit After Bankruptcy. And if you rebuild your credit, it actually won’t matter if it’s listed.
- I Won’t be Able to Get a Job: Wrong. This is just another false statement people make that is not supported by the facts. See Getting a Job After Bankruptcy.
- Bankruptcy Will Appear on My Credit Report: That is actually true. And it will be listed for seven years if you file a chapter 13 bankruptcy and ten years if you file a chapter 7 bankruptcy. But if you are behind or delinquent on your debts, that will be reported for seven years as well.
- I’ll Have to Tell People for the Rest of My Life I Filed Bankruptcy: Well, there are other things you have to report for the rest of your life if asked. How about, did you ever have mumps or chickenpox? So what if someone asks if you ever filed bankruptcy? I would bet if you are reading this, you have a good reason to file bankruptcy. Are you supposed to feel bad for the rest of your life for something beyond your control? Should the farmer who goes bankrupt from lack of rain feel ashamed for the rest of his life? Or how about the airline that filed bankruptcy and praised for taking action? Bankruptcy is an act of people that are being responsible for their lives. Not people running away from responsibilities.
- Bankruptcy Should be the Last Resort: That’s ridiculous. Bankruptcy isn’t in a list of options from best to worst; it is an option. The time to file bankruptcy is when it is the best option for your situation, not the last option. That’s a bit like saying you can only be rescued from a cliff with yellow rope. It makes no sense. You might want to read Bankruptcy Should Be the Last Resort Many Say. But That’s Not True.
- I’ll Lose My Home or Car: Most don’t. But it really depends if you want to keep your home and expensive car though. You might decide it’s best to give it back.
- It will Take Years for Bankruptcy to Discharge My Debt: Not true. About 70 percent file a chapter 7 bankruptcy. In chapter 7 bankruptcy, your debt is typically fully discharged in 90 days.
- I Make Too Much Money to File Bankruptcy: Again, another untrue statement. People of any income level can file bankruptcy, and if your bankruptcy attorney spends time qualifying you for a chapter 7 bankruptcy, most people qualify for it even with high incomes.
- Bankruptcy is No Longer Available: If anyone tells you that, run away. They have no clue what they are talking about. Legal protection under bankruptcy remains available and is written into the U.S. Constitution.
- Bankruptcy Can’t Discharge Credit Card Debt: Wrong. Bankruptcy can discharge (eliminate) both secured and unsecured debt like credit cards and medical debts.
- You Have to Pay Tax on Forgiven Debt in Bankruptcy: No, that is not true. Debt forgiven under bankruptcy is not a taxable event. The IRS says, “If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income.” If you want to read more about this, you can set aside some time and enjoy IRS Publication 908 Bankruptcy Tax Guide.
- I Have to File Bankruptcy With My Spouse: No you do not. Depending on the situation, one person in a legal relationship can file bankruptcy as an individual. You are not required to file together unless something about your specific situation would make it advantageous to do so.
- I Heard I Will Not Be Able to Vote After Filing Bankruptcy: Whoever told you that doesn’t have a clue what the facts are. That is completely untrue. Bankruptcy has nothing to do with your voting status.
- Bankruptcy Can’t Eliminate Taxes: That’s actually not true. Bankruptcy can eliminate taxes owed, including taxes owed to the IRS.
- If I File Bankruptcy I’ll Lose My Bed and Dishes: Not true. If you had something of tremendous value that was not exempt from bankruptcy, then it is rare and doubtful but theoretically possible that the bankruptcy trustee could sell the item to raise cash for creditors. But I’ve never seen a single person that ever had household items sold. Quite frankly, your used bed, linens, dishes, hairdryer, etc., are effectively worthless and not worth anyone’s time to deal with. They may have value to you, but the trustee does not want to be bothered with them.
- I Don’t Owe Enough to File Bankruptcy: Filing bankruptcy is not about the amount of debt you have but the situation and needs you have for legal protection from creditors, collectors, lawsuits, wage garnishments, etc. If it makes sense, you could technically file bankruptcy owing only $1 if the situation warrants it. The amount you owe should never be a factor in determining if bankruptcy is right for you.
- I Only Want to File a Medical Bankruptcy: When you file bankruptcy, you must include all of your debts and liabilities. You don’t get to pick and choose. But that being said, nothing prevents you from including but repaying any creditor you want to.
- If I File Bankruptcy I’ll Lose My Security Clearance: Bankruptcy is not an exclusion to having, maintaining, or getting a security clearance. In fact, the military is quite clear that bankruptcy is a process available under the law and can be viewed more favorably than being in problem debt. For more information on this, click here.
- If I File Bankruptcy I Will Lose My Professional License: I have never met anyone that has. Many lawyers and contractors file bankruptcy. In fact:
A governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act. – Source
- I Will Not Be Able to Rent a Home or Apartment: While it might be slightly tougher after bankruptcy to rent with a large commercial complex, I can’t remember anyone I’ve ever known who has been refused by a private landlord. And I have known people who could rent at large apartment complexes immediately after bankruptcy but had to put down slightly larger security deposits.
- If I File a Chapter 13 Bankruptcy the Trustee Will Have to Approve My Expenses for 60 Months: Not true.
Bankruptcy is a Gift, Not a Curse
It’s time to set aside all the assumptions and wrong information you may hear about bankruptcy and instead start dealing with facts and reality.
Part of that reality is unless you deal with your situation, it can harm you. People remain paralyzed in the worst spot possible between the stress, depression, fear, and guilt of the bad financial situation. Some even develop debt related PTSD. Others develop such stress and depression, get ill, find it tough to work, can’t sleep, or find their relationship destroyed. How is that better than bankruptcy?
Fact: Bankruptcy remains the only debt relief option that is backed by the power of law. It is a right afforded to all under the U.S. Constitution, and with millions of people filing bankruptcy each year, you are not going to be alone. I’m right there with you.
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