Over the years, we have seen hundreds of clients successfully file for bankruptcy and experience the freedom offered by bankruptcy proceedings. They escape their crushing debts and get a new start. Unfortunately, few other people get to see that side of bankruptcy. Almost everyone who walks into our office brings an apprehension about bankruptcy proceedings.
So many people have groundless fears about filing for bankruptcy that hold them back from a financial decision that would actually help their families. While choosing to file for bankruptcy is a decision not to be taken lightly, no one should be choosing not to file due to fear. It’s time to face your fears about bankruptcy, so you can make a smart decision grounded in common sense and logic for your family. To help you face those bankruptcy fears, we have provided you with the six most common fears people express about bankruptcy along with the truth about them. You may find that you have little to be scared about.
Six Most Common Bankruptcy Fears (and Why You Don’t Have to Be Scared)
I’ll never be able to get a mortgage (or car loan or credit card or other line of credit) again.
Yes, you will. In fact, sooner than you expect. While most people assume it takes seven to ten years for your credit to recover enough to get any credit options, because that’s how long a bankruptcy will appear on your credit report, you actually can get new credit right after your discharge is granted. Although your rates will not be as good as a person with perfect credit, a bankruptcy is often viewed as a responsible financial decision for people in trouble. In fact, with good payment history following the bankruptcy, you usually can get loans (not just credit cards) within two or three years at a reasonable rate you can manage.
I’ll ruin my credit forever.
What most people fail to recognize is that large debts and missed or late payments do much more damage to your credit in the long run than a bankruptcy. After all, a bankruptcy requires a certain amount of responsibility for your actions—much more than ignoring the problem. While your credit score takes a hit with a bankruptcy, it will bounce back in a few years. Plus, now that you have few (or maybe even no) debts, you are more attractive to lenders than someone with tons of debt dragging them down.
I will lose all my possessions.
Actually, people only lose personal possessions in about two percent of bankruptcy filings. Most of the time, your personal property and the equity in your real estate are exempt from turnover under state and federal exemption schemes. While particularly wealthy people may see assets liquidated in a bankruptcy, you are unlikely to need to turn over treasured personal property to a bankruptcy trustee. Plus, your bankruptcy lawyer can work with you and the trustee to protect assets that you need or love.
My family, friends, and colleagues will find out and judge me.
While bankruptcy filings are theoretically part of the public record, the days when your name will make it in the newspapers for defaulting on debts are over. Only public figures and other newsworthy bankruptcies ever get discovered for the most part. After all, how often have you looked up bankruptcy records yourself? Only your creditors and certain government agencies will be notified by mail. Otherwise, it is generally confidential. Plus, one in ten people in the U.S. experience a bankruptcy at some point in their lives, so the social stigma is less than most people assume. Next time you go to work, or church, or a public event, recognize that you are probably in good company.
I’ll have to explain myself to a judge or jury of my peers, and I don’t have a good excuse.
Actually, bankruptcies are only in front of judges, and unless there is a special dispute during the filings, you won’t have to even speak to the judge in person. The law doesn’t require you to explain how you got into financial trouble; it provides you with the right to a discharge regardless. Don’t worry. The law does not look down on any reason for a bankruptcy. Unless you broke some law or committed fraud to get into debt, you will be able to get a bankruptcy without needing to explain yourself to a judge.
I’ll never be able to face myself after the shame of not living up to my financial obligations.
It is a tough decision to file for bankruptcy, and this reason often is the one holding people back. While we feel responsible for our debts, we are also responsible for our families, our retirement, our jobs, and a number of other things. Often, when you are too far in debt to handle it, you let your other responsibilities slide. It’s not worth it. You owe your other responsibilities the same, if not more, consideration. The reason that credit card and loan interest is so high sometimes is that there is a chance you won’t be able to pay. Your creditors took a risk, and sometimes it does not pay off. You shouldn’t feel guilty about that. You simply must move on and make sure to never get in the same situation again. Bankruptcy gives you a clean slate so you can do that.
Although these fears are valid concerns to bring up when making such a big decision, we hope you now see that you have less to be scared of than you might have thought. Bankruptcy doesn’t have to be scary. In fact, for many homeowners, it is a saving grace in a difficult time.
If you are overwhelmed by bills and don’t know what to do, bankruptcy may be able to help you get on track. It’s time to face your fears and discuss your best financial options with an experienced bankruptcy professional. As established bankruptcy lawyers in Ohio, we have helped many people objectively decide if bankruptcy truly can help. Call the Cleveland bankruptcy attorneys at Luftman, Heck & Associates today at (216) 586-6600 to find out how we can help in your specific situation.