How Bad is Bankruptcy


How Does Bankruptcy Change My Job, Family, and Self-Respect

Bankruptcy will not change much with your personal or professional life.  It is not likely that anyone will even know you filed bankruptcy.  Nobody can put you in jail for not paying your debts.

Bankruptcy is the American way.  We are taught from birth to buy, buy, buy.  We are encouraged and rewarded to work hard to earn money to buy things we do not need.  Some of the highest paying jobs are those of account executives that come up with new ways to play on our emotions to get us to buy more.  Anyone who has ever seen the show MadMen knows the game.  When we cannot buy things quickly enough, we are praised for having good enough credit to buy more, right now.  When we cannot pay, there is easy credit available.  So we are taught to build expenses and payments to credit card companies until we just cannot afford one more cent.  But wait!  What happens if we are faced with an illness or an accident, or we cannot afford to pay for some reason?  We magically transform from good consumers, to evil deadbeats.  In the minds of the rich creditors, we become miserable untouchables who should just get another job and pay our bills.  However, there is much more to life than making rich creditors happy.  The real stuff of life is taking care of our family, saving for retirement, or tuition, or just a night out.  If we live our lives for the rich creditors, we fail to live our lives at all.  That is not what life is all about.  That is why there is bankruptcy.  To help us live life, free from the manipulation of rich creditors.  Bankruptcy is for all of us.  We are all in this together.

These are the most important questions about bankruptcy filing.  Whether you file chapter 13 or chapter 7 bankruptcy, the fundamentals of debt relief are pretty straightforward.  File the forms, follow the rules, be honest, and you should get a bankruptcy discharge.  However, there are issues that go way beyond the mechanics of debt relief.  These issues deal with your personal life, your family, your job, and your self-respect.  Society is predisposed to make you feel bad about bankruptcy.  Bankruptcy is a glorious federal program that is designed to help people, just like the kid, loving, forgiving society we purport to be.  Lawmakers have tried to gut the law several times.  However, the basis still remains that people deserve a second chance.  Sometimes we make bad decisions.  Sometimes we have bad luck.  Regardless of how we got here, we are all in this together, and we will help each other when we need it.  That is what bankruptcy is all about.  It is not about shame, but community, and understanding, and forgiveness.  It keeps families together, reduces suicide and homelessness.  Bankruptcy helps us all.

Can I Get Security Clearance with Bankruptcy?  Will I Lose My Security Clearance if I File Bankruptcy?

A security clearance should not be a problem, even with bankruptcy.  In fact, it might actually help your credibility to handle debt in a mature manner, through a government program.  You will no longer have a large amount of debt that might persuade you to do something dishonest in order to satisfy it.  Military counselors say that someone with a lot of debt is more likely to be compromised or blackmailed.  Truly, a bankruptcy could help you with security clearance.

Increasingly, jobs are requiring some kind of security clearance.  This could be happening because lawyers try to convince juries that if the employer had required some sort of security clearance, the event they are suing about would not have happened.  Therefore, the jury should give lots of money to the plaintiff.  Regardless of the reason, getting or keeping a security clearance should not be a problem with bankruptcy.  Traditionally users of security clearance are CIA, FBI, other government agencies, and essentially every other company that has a contract with the government.  The government is very sensitive about terrorist issues, and this may be an opportunity to curtail the concern, or just keep an eye on everyone.

Will I Lose My Job if I File Bankruptcy?


No employer can discriminate against you in any way for filing bankruptcy.  They cannot decrease your pay, demote you, or even change your job title.  However, if you were on your way to getting fired anyway, filing bankruptcy will not protect your job.  Regardless, employers rarely know about filing chapter 7 bankruptcy.  There is nobody from the court that contacts your employer, and no notice is sent to them.  You are required to provide your pay stubs, and the name and address of your employer, but there is no reason to involve them.  In practice, your employer will not likely every know, or care, that you filed bankruptcy.  Bankruptcy is  way to save your good name with your employer.

You know who will contact your employer and tell your employer that you are behind on payments?  Any creditor that wants to garnish your wages.  Any creditor that sues you, obtains a judgment, and wants to garnish your wages, will send a copy of the judgment to your employer.  Once your employer gets the notice to garnish, your reputation is already shot.  However, if you file bankruptcy to stop the garnishment, you will have to provide a copy of your bankruptcy filing to your employer to stop the garnishment.  This is not that big of a deal.  Your employer already knew you were having financial problems.  Now they know that you dealt with them in a reasonable and mature way.  Bankruptcy is better than garnishment.

Another way your employer could find out about your bankruptcy is if you file a chapter 13 bankruptcy.  If you have a job with regular income, the chapter 13 trustee might want to take the payments right from your paycheck.  In this case, there may be no way around letting your employer know that you are using the bankruptcy system.  The bankruptcy trustee likes deducting the payments fright from your check because you do not have a chance to spend the money, or not send it to the bankruptcy trustee.

Is it Harder to Get a Job After Filing Bankruptcy?  Can I still get a job with a bankruptcy on my record?

Governments cannot discriminate against you in the hiring process for filing bankruptcy.  Governments like it when you use a government program.  However, private employers have no such restriction.  Some employers will want to do a credit check before hiring a new applicant, especially if the job involves money.  If you are applying for a job in accounting, bookkeeping, payroll, accounts payable or receivable, you may be asked for permission to do a credit check.  If you do not give them permission to do a credit check, they cannot do a credit check.  However, if you do not give them permission, they might not hire you.  If you know about your bankruptcy, and you are asked for a credit check, they are probably going to see it.  Be up front with them.  Tell them that being responsible about debt makes you uniquely qualified for the position.  Tell them that you are less of a risk now that you do not have any debt to pay.  Tell them that bankruptcy helped you experience more things dealing with money than other applicants and that makes you better qualified for the position.  This stuff writes itself.

Get Your License Back!  Governments Cannot Discriminate Against You for Bankruptcy.

One of the best parts about eh government not being able to discriminate against your for using their program, is that if your license has been suspended or revoked because you have not paid a civil judgment from an accident, the government has to give your license back once you get a discharge.  All of the lobbying of the insurance companies did not work.  All you have to do to get your license back is discharge the civil debt in bankruptcy.  Of course, this will not work as well if your license was suspended or revoked for other reasons, or for reasons involving alcohol, but for normal civil judgments from car accidents, you are home free.

Governments cannot discriminate against you for other licenses or benefits, either.  You still get public benefits, public housing, mortgage programs, student loans, and state contracts.  Bankruptcy is a government program.  The government cannot discriminate against you for using their program.  Bankruptcy is how they want you to deal with it.

What Does Bankruptcy Do to Child Custody or Child Support?

Bankruptcy will not relieve you of child support or spousal support obligations of any kind.  However, bankruptcy will not affect your child custody.  Absent any other circumstances, bankruptcy will not change the court's opinion about your children.  If you are involved in a divorce, the bankruptcy may stop the proceedings for awhile, but not your custody determination.

Who Will Know That I Filed Bankruptcy?

Almost nobody.  Do you know 100 people?  1 in every hundred people file bankruptcy every year.  That means, mathematically, half of the population files every 50 years.  Are you 50?  Have you filed yet?  If it was not you, the person you are looking at did.  Are you 25?  Can you see three people?  One of you filed.  Bankruptcy is very common, but nobody knows about it because it does not benefit anyone to spread the word.  It is a public document.  If you looked hard enough, you could find it at the courthouse or online, but nobody cares.  People have to take care of their own business.  Bankruptcy is just part of life.  Nobody will send notice to your employer, your spouse, your neighbors, or your friends.  The only people who will actually know about your bankruptcy are the creditors you list on your bankruptcy petition.

You are free to change jobs, move, get a new home, or a new car, or pretty much any other thing that your heart desires, during bankruptcy or afterward.  Bankruptcy does not thwart your freedom.

How Do I Get an Apartment After Bankruptcy?

It's true, most landlords will want to do a credit check.  This is not always true, and there are ways to explain the bankruptcy where it will not matter anyway.  Even if you have to rent a place where your bankruptcy is an issue, it will usually not take much more than a bigger deposit to make the landlord comfortable.  Consider renting from someone that does not have a rental office.  Usually, private, individual renters do not do credit checks.  Credit checks cost money.  Even if the private landlord does a credit check, dealing directly with the owner makes it easier to make a personal connection than dealing with an employee of a big company.  If you are concerned with the bad bankruptcy credit report, create a list of good references, complete with names and numbers of people to call.  If you explain that you had some bad luck, but that you have always paid your rent first, or never jilted a landlord, that should be all the convincing it takes.

Can I Buy a House After Bankruptcy?

Yes!  There is a common misconception that you cannot buy a house after bankruptcy.  Nothing could be farther from the truth.  You can buy a house right after bankruptcy.  You will want to go to a private mortgage placement service like or find a private lender.  In a Chapter 13 bankruptcy, you can buy a home in one year, providing you made all of your payments on time.  In order to get government loans after a chapter 7 bankruptcy, you will have to wait two years.

Can I Buy a Car After Bankruptcy?

Most certainly.  You are likely a better credit risk after you file bankruptcy than before.  Your interest rate on a car will go down because you no longer have any debt.  Instead of paying your credit cards, you can pay for a sweet ride, and this makes you a better credit risk.  As recently as today I talked to a car lender who could get 9% on most cases right after filing.  Contact us for details.  Of course everything is contingent on income and ability to pay, but getting a car, even after surrendering yours in bankruptcy, should not be a problem.

Can I Still Pay Creditors I like after bankruptcy?

A lot of people have this question.  It is one thing to discharge credit card debts.  Those people make billions every month.  But what about debts to creditors you like?  If you owe money to a family member, or a local merchant you know, like your doctor or dentist, you might want to pay them.  There is nothing that says you cannot pay the people you like after bankruptcy.  The only difference is that you now get to do it on your terms.  You can determine how much to pay them and when.  There should be no problem with asking people to take money from you.  The only thing that bankruptcy prevents is anyone forcing you to give them money.  They cannot so much as call you to ask if you want to pay.  However, if you want to pay them, you can do as you will.