Filing bankruptcy is obviously a very difficult decision for anyone. Aside from the social stigma that some feel exists (by the way, that stigma has gone away, especially after the financial meltdown that occurred between 2008 to 2012), many feel ashamed, don’t want to stiff their creditors, and others are concerned that their credit will be ruined. Today I want to educate you on the facts so that you can make a more informed decision about whether or not to file bankruptcy.
FICTION
- If you file bankruptcy, you will lose everything you have and be left on the street penniless, and shirtless.
- Filing bankruptcy will destroy your credit score and/or you’ll never have credit again
- You’ll never be able to finance a house or car ever again
- You will get fired from your job or never be hired by anyone due to a bankruptcy being “on your record”
- You will never be able to get a credit card again
FACT
- You absolutely will not lose everything you have, nor will you be in the street penniless or shirtless. In California the bankruptcy exemptions are quite generous. In 12 years of filing bankruptcy I have never had a single client give up or surrender any of their property to a bankruptcy Trustee. The exemption limits allow you to keep, in most cases, everything you have, including significant equity in your home.
- If you’re thinking about filing bankruptcy, your credit score probably already is doing poorly. It sounds hard to believe, but filing bankruptcy in most cases actually helps you increase your credit score. It is common for me to see my client’s credit scores improve by anywhere from 120 to 150 points within twelve months after filing for bankruptcy.
- You will also certainly be able to finance a car and a home in the future, after filing a bankruptcy. I’ve had clients even just six months after their case closes, get excellent deals on their car loans. Certain home loans may require you to wait for two years although recently I’ve heard private lenders giving somewhat competitive rates on people looking to purchase a home within a year of filing.
- Under Federal Law it is illegal for an employer to discriminate against you for having filed a bankruptcy. There are certain types of employment where a bankruptcy filing may be beneficial (sometimes where security clearances are involved), and other jobs in which a bankruptcy may hinder you, however these are typically jobs involving you having a fiduciary duty over people’s money.
- You most certainly will get bombarded by new credit card applications once you file bankruptcy.
That’s it for now! Just a short blog post today to help dispel some of the myths. In the countless bankruptcy cases that I’ve filed over the years, the only complaint I’ve ever heard from my clients is that they wish they had done it sooner so that they could have moved on with their life earlier.
