[COLUMN] Is there life after bankruptcy?

WHEN contemplating bankruptcy as a way out of debt, one is often faced with the question: What would my life be like after I file bankruptcy? When can I have credit again? Will I be shut out of the American dream forever or is it nothing more than a fresh financial start so I can start dreaming of a secure financial future once again?

These are important questions and not to be taken lightly because filing bankruptcy is often a serious decision with consequences. The question is: Will the consequences be against me or in my favor in the long run? So, it really often comes down to a cost-benefit analysis.

Filing a Chapter 7 bankruptcy is a short process that only lasts 4-5 months for most people. Of course, if your budget was already tight before filing, without obtaining any additional income, the situation does not change except for the fact that getting rid of debt payments now allows you to prioritize your spending by putting your needs first. People in survival mode who live paycheck to paycheck are often forced to sacrifice their own needs just to keep up with the bills. Even worse, they resort to borrowing to account for the shortfall which even puts them in a bigger financial hole each month. Chapter 7 allows you to wipe out debts you can no longer afford to pay so you can have more disposable income available to meet your monthly living expenses.

In Chapter 13, depending on your ability to pay, you may or may not need to pay all your debts. And the ones that don’t get paid are also often wiped out at the end of the repayment period which could be anywhere from 36-60 months. I see a lot of people who owe so much that if they only paid the minimum amount due each month, they are bound to be in debt for the rest of their lives. They seem to think that they are “doing OK” as long as they are able to make minimum payments. But they don’t realize the lost opportunities caused by enriching their creditors instead of saving their hard-earned money for themselves and their families. Imagine what it would be like if you were debt-free. Perhaps you can finally start saving for your kids’ college education, put money into your employer’s 401K plan, save money for an emergency fund, etc. The list of possibilities is endless.

What holds people back from filing bankruptcy although they really need it is the stigma often associated with bankruptcy. They have heard from their friends and family that “bankruptcy is the worst thing that you can do” and that “your life will never be normal again”. Hogwash. After having represented more than 6,000 clients in bankruptcy over the last 23 years, I can say that without our bankruptcy laws, a lot of people will never be able to get out of debt on their own. While no one ever wants to file bankruptcy, in a lot of cases I’ve handled, there is no other way to get out of the financial mess they are in. Filing Chapter 7 stops all collection actions against the debtor, protects wages, bank accounts, property, and other assets- allowing the person to breathe again instead of dealing with all the financial stress and having sleepless nights. Most of my clients rebuild credit in only 2-3 years, allowing them to buy cars, homes, etc. as if they never filed bankruptcy at all.

Rebuilding credit after Chapter 13 takes longer because until you make your last payment, you are technically “in bankruptcy” and you do not get a “discharge”. But don’t let this discourage you because in Chapter 13, your debt payments can be significantly lower than what you are paying now, you are paying 0% interest on credit cards and most debts, and you have A DEFINITE DATE by which you will be debt-free. It is best to have a long-term perspective when filing a Chapter 13 case. Most people don’t even have a plan. They go through life just hoping that somehow, someday, “things will get better”. But without a plan, you will never get there. Chapter 13 is a reorganization plan that allows you to consolidate and reduce your debt. It can be a useful tool in setting financial goals that you can stick to.

If you need bankruptcy relief but are afraid that bankruptcy may do you more harm than good, call my office so that we can discuss your situation if bankruptcy might be right for you.

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NOTE: Due to the pandemic, consultations via phone or video are available. Please call the office at 866-477-7772 to schedule your appointment with me. Questions? Email me at [email protected].

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772.

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