Updated: Apr 8, 2020
So we left off talking about insurance, and basically how insurance is just a way for companies to profit off their gamble that something crazy won't generally happen...at least not within the limits that would actually require them to make any payouts.
But what if we had our own insurance plan, against the government and the companies. An insurance policy for the average person...a consumer's just in case. Well fortunately we do...and of course this policy is vilified by the corporations and the government...and its called BANKRUPTCY.
When was the first time that you heard that bankruptcy is a bad thing? You probably don't even recall when. You probably read it somewhere, or someone told you it would be bad for your credit or maybe you saw it on tv. But I bet you were never in a situation where you truly understood bankruptcy its benefits or its repercussions. You were just told that it was bad, that you should pay all your bills on time, and that you will be successful beyond measure for doing so....but what if you bucked that annoying uninformed message that seemingly came out of thin air, and dug a bit deeper into why so many places would be telling you that bankruptcy is bad.
Ask yourself...why would I get this message that it is bad, and where would the idea come from. Look at the source....
Raise your hand if you think the idea likely came from a government entity, the media, an outlet sponsored by a corporation or company...or someone who would not benefit from you filing as they just simply would not be paid and would cease to reap the benefit of those beautiful late fees, penalties and interest rates from your "debt" to them.
So in short, you have gone through life being told by those who have an interest in having you in "debt" to them forever that bankruptcy....(ie. the legal discharge of the debt) is bad news.
Ok, so now that you understand the special interest portion of why people tell you bankruptcy is bad....why don't we look at the pros and possible cons of the practice.
1) chapter 7 completely eliminates any consumer debt that you owe (and some federal tax debt) - bet you didn't know that one.
2) You are able to get rid of pay day loans, private installment loans, title loans, utility and hospital bills.
3) chapter 7 is relatively cheap and seamless
4) Chapter 13 could allow you to get on a payment plan, or help kick you out of default on your student loans.
5) Under chapter 13 you can keep you house and car. And under chapter 7 for the most part, most people can keep their cars, and sometimes you can keep your house as well.
6) You can discharge a lot of debt that most people wouldn't even think was allowable to discharge in the first place.
7) You can file chapter 7 bankruptcy once every 8 years. But you can file chapter 13s sooner than that.
8) Filing bankruptcy can lead you to building up your credit quicker, than continuing to pay interest on impossible debt.
1) It does show on your credit report (But sometimes you can actually get it removed early)
2) It "Could" lower your credit score, by a little or a lot....but this may not matter as much as you think.
3) It could, but doesn't have to impact your credit negatively for a long period of time. YES YOU CAN STILL GET CREDIT, BUY A CAR OR HOUSE BEFORE THE BANKRUPTCY DROPS OFF OF YOUR REPORT!
4) It doesn't take care of student loans or child support monies that you owe.
So no, i'm not telling you to run out and file for bankruptcy today, or even that its the best path for you. However, what i'm saying is before you get on the "Bankruptcy is bad train"... have an experienced bankruptcy attorney help you to evaluate your finances. It could mean the difference between a healthy credit score, or spinning on the hamster wheel of predatory debt.