I often meet with folks who are just downright afraid to seek the protection that a Chapter 7 or Chapter 13 Bankruptcy would give them.  Usually those fears are based upon misinformation, untruths, and advice from well-meaning friends of family.

I’ve lost count of the number of bankruptcy cases I’ve filed in Knoxville for people living in Knoxville, Sevierville, Maryville or Jefferson City.  In almost every case when the first court appearance is completed I hear, “That wasn’t as bad as I thought.”

Congress established the bankruptcy system so that good people who were in difficult financial straights could get a fresh start.  Let’s dispel some of the fear you might be experiencing today.

Fear No. 1:  I’m embarrassed to file bankruptcy.

We’ve all been raised to honor our obligations.  In our minds we can hear our mothers saying, “Do what you say you’ll do.”  That’s good advice.  However in these financial times many folks simply can’t.  If you are concerned about what others think about you ask yourself this question, “Do you know anyone else who got into severe financial difficulty and had to file bankruptcy?”  When I ask this question I always get a “yes” answer.  I then ask, “Do you think any less of them.”  The response is without fail the same, “Oh no, they had no choice.  They had to file their bankruptcy.”  Isn’t that what you are experiencing?  Don’t be embarrassed.  You are being much harder on yourself that you are on others.  This is not something you are rushing into.  Unfortunately it’s a matter of the times in which we live.

Fear No. 2:  I’ll never be able to buy a house again

Most people who seek bankruptcy protection have already had their credit scores to tank because they’ve been unable to pay credit card bills and/or other debts.  When those payments are not made your credit score will drop.  Therefore often filing a bankruptcy where you discharge all of your unsecured debt begins you on a road to rebuild your credit.  Of course the bankruptcy filing will be on your credit report.  BUT you never start rebuilding your credit until you start paying on-time again.  For most folks that’s not going to happen until the bankruptcy is filed.  Amazingly, you will get credit card offers in the mail immediately after you file your Chapter 7 bankruptcy.  DON’T SIGN UP FOR THE CARDS!!!  Rebuild your credit by paying as agreed.  Develop a spending plan that will allow you to have an emergency fund for “emergencies” so you won’t get in a financial mess again.  That’s the surest way for you to be in a position to buy another home or car after your bankruptcy is over.

Fear No. 3:  I will not be able to rent a house or apartment after filing for bankruptcy

This is simply untrue.  It is illegal to discriminate against anyone because they have filed a bankruptcy.  You can explain to a potential landlord that you now owe very little debt (for example your car) so you are a great credit risk.  Most of the time a prior bankruptcy will not even come up in the discussions.

Fear No. 4:  I will lose my home and my car or other personal belongings

Again, simply untrue.  After filing Chapter 7 bankruptcy cases in Knoxville for over 25 years I can say that very few of my clients have lost property as a result of filing bankruptcy.  Understand that if you own a home that you can’t pay the payments on then a bankruptcy will not allow you to keep the home.  The creditor has a mortgage that you must satisfy in order to keep the home.  Often folks find that once they no long have to pay the credit cards and medical bills owed they have plenty of money to pay their home mortgage.  The same holds true for your car.  Chapter 7 allows what is called a “reaffirmation” of secured debt where you and the creditor to treat that debt as if you weren’t in bankruptcy, i.e. you keep making the payments. That’s how my clients keep their car and their home.  If you are behind on payments you can often cure those overdue payments in a Chapter 13 case.  I’ve found this to be very helpful for someone that has had a temporary circumstance such as a job loss or medical disability.

Fear No. 5:  I’ll never get credit again.

This is simply a lie that is propagated by creditors in order to extort money from you.  As mentioned above, it’s likely that fairly immediately after filing a Chapter 7 bankruptcy that you’ll receive credit card offers in the mail.  You’ll be a pretty good credit risk since you will no longer owe most of the debt you owed the day before you filed bankruptcy.  Additionally you won’t be able to file another Chapter 7 case for 8 years so creditors know they are safer.  Your biggest challenge after your bankruptcy is avoiding the same spending habits that put you in financial difficulty in the first place.

As is easily demonstrated the fears mention are easily dispelled.  These fears are based upon misinformation, untruths, and advice from well-meaning friends of family.  The only way for you to know for sure if bankruptcy is a good option for you is to see an experience bankruptcy attorney.  That’s why I offer a free consultation.  A visit with me may be the first step on your road to financial recovery.