Shame / Guilt / Desire to Honor Debts
Although there are some people out there who think they are entitled to a bankruptcy once every 8 years, and file every 8 years like clockwork, most people try to avoid bankruptcy. They were taught by their parents to honor contracts, and that if you incur a debt, it’s on you to pay it. This is an admirable goal, and I’d be lying if I said I didn’t share that sentiment. But my role as your bankruptcy attorney is to ensure that you do what is in your financial best interests, and that you don’t have to repeat this again in the future. Sometimes, as distasteful as it may be, bankruptcy is the most fiscally responsible thing you can do for yourself. If you feel really, really bad about bankruptcy, visit a psychologist with all the money you’ve saved from the bankruptcy. Don’t make a bad financial decision based on a bad emotion. Chances are, that’s what landed you in financial troubles in the first place. Also, consider this. Say you have $20,000 in debt. You consider bankruptcy, but decide against it because you feel obligated to pay that $20,000 back. Five years later, you have been unable to get caught up. With interest, late fees, and penalties, your debt has now mushroomed to $40,000. You finally give in and file for bankruptcy. Now, instead of discharging $20k, you have to discharge $40k. Did you do the creditors any favors? No. Sometimes, the best advice is to nip a problem in the bud before it swells into something worse.
Fear of Being Outed
A lot of people are convinced that if they file for bankruptcy, their family, friends, and neighbors will all find out about it. Generally, this is untrue. Sure, bankruptcy is a matter of public record. Of course, all of your current creditors find out when they receive notice of your case from the bankruptcy court. People who have to pull your credit report, loan officers, landlords, etc. – they will know. Your employer, on the other hand, will not know unless they are a creditor of yours, you have a current wage garnishment, or you will be under payroll deductions for a Chapter 13 Plan. Same goes for family and friends – they’ll only know if they are one of your creditors. Bankruptcy is a matter in federal courts, not state courts. Therefore, it is not listed on free, public-access court case databases like CCAP. To find a bankruptcy case, you have to search on PACER, which is a fee and account based search engine. And generally, the only people who execute PACER searches are attorneys engaged in the same kind of work I am involved in. Bankruptcy cases are not published in any newspaper that I am aware of (high-profile celebrity or corporate bankruptcies sometimes make headlines, but we don’t do newspaper notices like they do in state court). Just remember that tens of thousands of people file for bankruptcy each year in Wisconsin. Chances are, you know someone who has filed for bankruptcy. You just don’t know that they filed for bankruptcy unless they feel like sharing that with you.
Fear of Losing Property
Many people fear that by filing bankruptcy, they lose all of their worldly possessions, or some other variation on that theme. I certainly can’t promise that you won’t lose something in a bankruptcy. However, events like that are relatively rare – usually reserved for the extreme cases where someone is sitting on an oil well or a gold mine. The vast majority of my clients lose nothing, except for their debt. They don’t make enough money to need to file Chapter 13, and they don’t own anything of sufficient value to pique the trustee’s interest. Of course, which category you fall under depends on the specific facts of your case, so talk to an attorney before convincing yourself that you’ll lose it all in bankruptcy.
I can’t file due to the new bankruptcy laws.
Rubbish. I wouldn’t be practicing bankruptcy if the new laws banned new filings. In 2005, Congress attempted to make bankruptcy more difficult to file, and did create laws that force more people into Chapter 13 repayment plans. But really, they weren’t very successful. In fact, I have found people qualifying for Chapter 7 who would not have qualified under the old laws. Congress made the process slightly more annoying, but only marginally so. It literally is something to sneeze at.
Obviously, if you’re in a position to file for bankruptcy, you’re probably not at home, rolling around in Ben Franklins. On the other hand – like everyone else in this world, we don’t work for free. Most Chapter 7 debtors average somewhere between $20,000 to $80,000 in unsecured debt. Even on the low end, the benefit to cost ratio is extremely high, especially when you consider the interest rates on most unsecured debts. I encourage you to shop around for the best value attorney. However, I do not recommend jumping at the lowest price tag. Remember – you get what you pay for. Know exactly what you’re getting for what price. Be especially careful that you know the full price – many attorneys just quote you their own costs, and leave off the court’s filing fees to make their price sound cheapest. Make sure you know about ALL of the fees, including the court’s fees, so that you are comparing apples to apples, not apples to oranges.