Have you asked yourself the question, should I file bankruptcy? If so, you probably have a lot of questions. You may be unsure if filing bankruptcy is right for you and what the effect will be on your credit. You may even be concerned about what others may say. There are a lot of misconceptions out there and bankruptcy is one of those things that nobody talks about but everybody is doing it. Here is the truth you should know:
Should I File Bankruptcy and Is Filing Right for Me?
Many people mistakenly assume that filing for bankruptcy will ruin your credit. That is simply false. In fact, filing and obtain a discharge can greatly help you rebuild your credit. Think of it this way. If you stop paying your credit cards so that you can try to settle your credit card debt, then you will be receiving late reports on your credit every month. 30, 60 and 90-day late reports every month. Your credit would be shot, as bad as it could be. If you were to file for bankruptcy, your creditors can no longer report 30, 60 and 90-day late payments and instead must report that the account was included in a bankruptcy.
Help Your Credit
Which do you think is worse: going the next 7 years with late reports on your credit each month, or having a bankruptcy on your credit but no late payments over the next 7 years. In case you are still wondering, I will tell you. Definitely, a bankruptcy would look better on your credit and would reflect a higher credit score. Many of my clients who have late payments on their credit report come and see me with a credit score in the 400s or 500s. Most of these same clients have a credit score in the low 600s one to two years after they file. For these clients, they have witnesses for themselves that a bankruptcy looks better on your credit than repeatedly late reports each month. In fact, even before your case is filed, we can pull your credit report along with a projected 15 month credit score (where you can expect to be 15 months down the road), which for most clients is higher than their credit score before bankruptcy.
Social Stigma
If you’re worried about what you perceive as a social stigma about bankruptcy, don’t be. It just plain doesn’t exist anymore. Chances are your friend, your boss, your coworker, or the teller at your bank, has needed debt relief and filed bankruptcy.
Bankruptcy is what everybody’s doing but nobody is telling you about. Over the past decade, according to data obtained from the Administrative Office of the United States Courts, there have been approximately one to two million bankruptcy filings each year in the U.S. Some years there are a greater number of people seeking relief, and in some years the numbers drop. A large percentage of the U.S. consumers seeking relief are in California. The large proportionately high numbers of cases in California means it is highly likely that one or more persons where you work, or people you know, have filed but haven’t told you about it.
Sure, in the past, the word bankruptcy was sometimes stereotyped as taboo and was thought of as the unthinkable result of financial irresponsibility. Today, bankruptcy is being seen by more and more people as a positive solution to help you get out of debt. The word has transformed into what it was intended by our founding fathers: a legal form of debt relief. Indeed, filing bankruptcy is today viewed as a common, responsible, and very socially acceptable form debt relief.
As more Americans file for relief from creditors every day, the shock value of the word bankruptcy no longer exists. More and more people are starting to accept that filing for relief from creditors just may be the most financially responsible things that they can do to help themselves and their families and get out of debt and get started on the road to a more secure financial future. Bankruptcy definitely is no longer taboo. Instead, it has now become, and it is viewed as, a financially logical and necessary solution to attaining real debt relief.
Your Constitutional Right
You should also know that bankruptcy is your constitutional right, given to you by our founding fathers who gave vision to our country over 200 years ago. When our founding fathers drafted the U.S. Constitution, they foresaw that bad things can happen to good people and sometimes good people need a fresh start. You may buy a home at the top of the market or taken out a home equity line and now your home is upside down (you owe more than what it’s worth) as the result of the bursting of the real estate bubble. You may have been working hard at your job but were laid off due to budget cuts. There are an endless variety of situations in which good, honest people are in a situation where they have more debt than they can afford to repay and need debt relief. If this describes your situation, don’t be afraid to exercise your constitutional right to file bankruptcy. It’s there so you can use it when you need it most. Use it.
Continuing to Pay High Interest Debt
If you have high interest credit cards with payments that are breaking your back, the worse thing you can do is to continue paying on them for the next several years. For starters, you’ve probably already paid the balances in full through all the finance charges you’ve paid. What’s worse, if you have high interest credit cards and can only afford to make the minimum payments, your balances will not go down. You’ll make minimum payments for the next 5 years and still be in the same boat you are today. If you file bankruptcy, you can become debt free and start rebuilding your credit immediately. You can have less debt (actually, no debt) and have a better credit score.
I Need a Fresh Start
In the end, it comes down to this one question. You have to ask yourself, do I need a fresh start for me and my family? If you need a fresh start, then you should do the financially responsible thing (for you and your family) and file bankruptcy and eliminate your credit card debt and other unwanted debt. Your credit score may improve substantially, depending upon where it is now, and you won’t have to worry about the outdated social stigma that you might have encountered in the past. If you need a fresh start, exercise your constitutional right to file bankruptcy and obtain debt relief.
