Maybe you’ve been thinking about it. You know that your life might just get better if you do it. But, like most people, you’re downright scared of filing bankruptcy.
That’s not necessarily a bad thing. Bankruptcy doesn’t have to be a last resort, but it is a serious step, and it does carry consequences.
That said, most of the dire predictions people hear (on the Internet and elsewhere) about the “tragedy” of filing bankruptcy, or the inescapable complications they’ll face, just do not materialize. Let’s explore why. . . .
Of course, you will be able to buy a house or a car or get a credit card again, and it will happen much sooner than you would probably think. Most people believe that they can’t get any credit for seven or 10 years, based on the length of time a bankruptcy will appear on their credit bureau report. In reality, you’ll be able to get credit very soon after your case is concluded and your debts are discharged.
How can that be? After all, didn’t you just wipe out a bunch of credit balances? Who would want to take a chance on you? As it turns out, plenty of lenders will. There is no law that would prevent a creditor from extending credit to you. In fact, there are creditors who market to people who recently completed bankruptcy cases. These creditors know that your future bankruptcy options are limited for 4 years, so their chances of losing money on you through bankruptcy are very, very small. Plus, these lenders can use your recent financial circumstances to justify charging you a higher interest rate. Add to that the fact that you’ve just freed up resources by getting rid of debt and suddenly you’re a person they want to extend credit to.
Companies offer secured and unsecured credit cards to recent bankruptcy filers. Many debtors also report that local car dealerships send them letters offering to help them re-establish credit with new and used car deals. In fact, many borrowers can qualify for an FHA or VA loan just one year after a Chapter 13 bankruptcy or two years after a Chapter 7 bankruptcy.
No doubt you’ll probably pay more for your credit immediately after a bankruptcy, but within about two years or so, with a clean record and good payment history, your credit score could rise to a very respectable level that will allow you to obtain good, if not excellent credit rates very quickly.
In less than 10% of personal bankruptcy cases will individual debtors be required to turn over any property or assets to the bankruptcy trustee. For most filers, their personal property and the equity in their real estate will be exempt and protected. Each state either has its own exemption scheme or makes use of the scheme included in the federal bankruptcy laws. For the most part, these exemptions will be generous enough to cover your property. In Massachusetts you have a choice of either federal or state exemptions and the exemptions are quite generous.
What our friends and family think of us is a powerful motivator. The fear that our bankruptcy filing will become public knowledge can be paralyzing and overwhelming. For many, the stress of dealing with obnoxious bill collectors pales in comparison to the possibility that someone we know will find out about our bankruptcy case and that you have money troubles.
Bankruptcy cases are public court records, but generally, the information on an individual bankruptcy case is not published unless it is newsworthy. The filer’s creditors are notified by mail, along with certain government agencies, but the days of publishing a bankrupt’s name in a list in the legal notices of the local newspaper are long gone in Massachusetts. The chances of your acquaintances finding out are very low unless you tell them yourself or they go to the Massachusetts Bankruptcy Court’s clerk’s office to research your name.
It may ease your mind a little bit to know that about one in 10 adults will file bankruptcy sometime over the course of their lives. It is a lot more common than you believe. So, next time you’re in church or at a family gathering, think about how there’s a good chance someone sitting near you has or will file bankruptcy. You’re not alone at all.