5 Lies That People Believe About Bankruptcy
By Tracy L. Hirsch
When it comes to filing for bankruptcy, my motto at Hirsch Law is “No Stigma, No Shame.” Here’s why I believe that’s true.
If you’re afraid to file for bankruptcy due to preconceived notions or due to fear, shame, or guilt, I’m here to reassure you that bankruptcy isn’t a four-letter word.
However, I understand that there is a certain stigma surrounding individuals who file for bankruptcy. Many assume that if they choose bankruptcy, they will be viewed as lazy, dishonest, and irresponsible.
In reality, that stigma is still somewhat present, but not as heavily as you’d think. More often than not, my clients’ own fears make them feel hesitant to file for bankruptcy (fear of what people will think of them, fear that bankruptcy will haunt them for the rest of their lives, and so on).
To alleviate any fear, I’m going to bust the cultural myths that are attached to finances, and specifically to declaring bankruptcy.
It’s important to know that bankruptcy won’t ruin your future. In fact, it has the potential to give you the future you’ve always dreamed of — one that’s free of debt. Let’s dive into the facts!
Lie #1: Your financial status determines whether or not you’re “successful.” This is false. The truth of the matter is that your success or worth as a human being is not related to how much money you have. Having low income and/or having debt shouldn’t define you. Debt is something that you have, not who you are.
Taking care of that debt through bankruptcy can help make your life easier (since you don’t have the stress of creditors coming after you), but your value as a person stays the same whether or not you have debt, and whether or not you file for bankruptcy.
Remember: Your value as a person has nothing to do with your financial status.
Lie #2: All people who file for bankruptcy are dishonest. This is false. People are often afraid that they’ll be seen as opportunistic if they file for bankruptcy.
They may think that it will look like they’re trying to cheat their creditors out of money that is owed to them. Here’s the truth: In many cases, people file for bankruptcy because they are truly in a difficult situation.
For example, someone may end up needing emergency surgery for a rare disease or type of cancer, and then need to see a specialist that’s outside of their insurance network. As a result, they might end up with $100,000 in medical bills.
Even if the hospital and specialists agree to set up a payment plan, they might require $3,000 a month. That isn’t feasible for most people, and the only way out could be to file for bankruptcy.
Lie #3: All people who file for bankruptcy are irresponsible when it comes to using credit cards. This is false. In fact, I have clients who file for bankruptcy who don’t have any credit card debt at all!
Making generalizations or assumptions (that all people who have debt must have maxed out a bunch of credit cards) is harmful because there are many reasons that people file for bankruptcy.
As seen in the example above, someone may have debt solely due to medical bills, and not due to unwarranted shopping sprees. Furthermore, some people use their credit cards to avoid being sent to collection agencies.
For example, someone may put medical bills, prescription medications costs, and car repair bills on their credit cards to avoid going to collections.
While that can be a way to pay off those bills over time (without shorting the people who provided those products and services), it can end up being overwhelming if the APR on those credit cards is too high.
When it gets to the point that even paying the minimum monthly payment is unaffordable, that’s when people consider bankruptcy as a way to pay back the debt without the high interest rates attached.
In a nutshell, not all bankruptcy filings are due to financial irresponsibility relating to credit cards.
Lie #4: Bankruptcy will permanently destroy your credit. This is false. While a bankruptcy does stay on your credit report for 7 years after filing a Chapter 13 (and 10 years after filing a Chapter 7), it’s actually possible to rebuild your credit within the first year or two after being discharged from bankruptcy.
I have clients who have purchased a home and/or car after filing for bankruptcy, and they were relieved to have a fresh start financially! As long as you pay your monthly bills on time and in full, your credit scores will steadily increase after you successfully complete a bankruptcy plan.
Lie #5: Bankruptcy will haunt you by negatively affecting your future job prospects. This is false. It is illegal for an employer to fire you or refuse to hire you based on whether or not you have filed for bankruptcy in the past.
Did you know that there are doctors and surgeons who are well-established in their field who have filed for bankruptcy in the past? No one is immune to falling on hard times. The only way that bankruptcy will keep you from achieving your career goals is if you let it!
Whether you’re a doctor, a bank teller, a plumber, or a teacher, these things hold true: You are valued no matter what your financial history looks like, and that includes a past bankruptcy.
If you’ve been considering bankruptcy, I hope that you feel relieved in knowing that there’s no need to feel ashamed for falling on hard times and needing help. If you still have questions or need reassurance, I offer free consultations to discuss your options.
I can be reached directly on my cell phone at (502) 435-2593. It’s not too late to get a fresh start — call or text me to see if bankruptcy can provide that for you!
All the best,
Tracy L. Hirsch
Louisville Bankruptcy Attorney
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