Don’t Be Afraid of Bankruptcy | BDR
To overcome bankruptcy-phobia, which is a legitimate yet unfounded fear, contact a Philadelphia bankruptcy lawyer.
Dealing with Bankruptcy-Phobia
A phobia is a legitimate yet irrational fear. Claustrophobia is one example. Other examples include acrophobia (fear of heights), arachibutyrophobia (fear of peanut butter), and hippopotomonstrosesquippedaliophobia (fear of long words). Bankruptcy-phobia is another example. Largely for the reasons outlined below, many people are legitimately afraid of bankruptcy. This fear is as genuine as anything else. However, also for the reasons outlined below, this fear is completely irrational.
A bankruptcy lawyer is not a psychologist. But an attorney does help people like you deal with fear and anxiety related to the legal process. These feelings are very common. So, overcoming them is a common problem. It’s usually a bad idea to let fear control your actions and responses. Filing bankruptcy dispels this fear, especially if you have a good lawyer in your corner.
It’s My Fault I’m Bankrupt
Credit card companies promote the myth that reckless overspending prompts bankruptcy filings. In other words, people who file bankruptcy failed to control their own urges. Some celebrity bankruptcies reinforce this myth. For example, before he filed bankruptcy in 1996, the late, great actor Burt Reynolds spent $100,000 on toupees. That’s pretty frivolous.
However, most people file bankruptcy because of high medical bills, job loss, divorce or separation, and other financial setbacks they could not control.
Typically, these events have a snowball effect. Sam might lose his job and use credit cards to pay bills. He might also pick up an extra item or two when he’s at the store. But his overspending did not cause his bankruptcy, or even contribute significantly to it. Sam filed because he lost his job. End of story.
On a related note, some people believe that filing bankruptcy is an admission of failure. This phobia probably comes from Monopoly. Players who file bankruptcy lose the game and have no hope of returning. Credit card companies who try to dissuade people from filing Chapter 7 perpetuate this myth.
I’ll Lose My Property if I File Bankruptcy
This phobia might be based on Monopoly as well. Players who file bankruptcy lose all their property, not to mention any plastic houses and hotels they bought. Monopoly players lose everything because Monopoly’s rules do not include property exemptions.
Specific exemptions (protections) vary in different states. But the categories are usually the same. Generally, bankruptcy protects assets like:
- House,
- Personal property,
- Car,
- Retirement account,
- Cash, and
- Government benefits.
Most states also have a wildcard exemption. Debtors can use this exemption to protect otherwise nonexempt property, such as a boat or fifth wheel.
On a related note, bankruptcy also includes the Automatic Stay. Section 362 of the Bankruptcy Code prohibits adverse creditor action, like repossession and foreclosure. In most states, banks can seize your house and car after just one missed payment. Again in most states, they do not need court orders to take this action. So, bankruptcy is usually your first and only line of defense.
Bankruptcy Destroys My Credit Score
No it doesn’t. Granted, bankruptcy lowers your score. But bankruptcy does not lower your score from good to bad. It moves your score from bad to worse. By the time they file bankruptcy, late payments and other negative information have probably dragged your score down several hundred points. Another few points makes little difference.
Additionally, bankruptcy looks better on your credit history report than charge-offs and repossessions. These entries indicate that the overwhelmed debtor just gave up. If you filed bankruptcy, at least you faced your problem and did something.
The bankruptcy bump is definitely not permanent. In fact, many people recover from bankruptcy in just a few months.
Obtaining and using a credit card is an excellent way to raise your credit score. Most former debtors get plenty of offers. Creditors know they cannot obtain another discharge for several years. Use the card every month, pay off the balance every month, and watch your score rise. After all, your credit score measures your ability to responsibly use credit and not your ability to pay cash for everything.
There is no reason to be afraid of bankruptcy. For a free consultation with a bankruptcy lawyer, contact Bankruptcy Done Right. Convenient payment plans are available.
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