Bankruptcy can sound intimidating, especially for family members unfamiliar with filing for bankruptcy. The misconceptions about bankruptcy and its cultural stigma make it a difficult topic to discuss, even with close family and friends. However, having open discussions with curious family members will help shed light on the truth of bankruptcy and how it may benefit your family in certain situations. Below, we discuss some common questions friends and family may ask you about filing for bankruptcy and offer guidance on how to respond.
Will We Lose Our House or Car?
It’s easy to see why a family member may ask this question, as some people associate filing for bankruptcy with having to sell off everything they have to pay back debts. However, you hardly have to sell everything you own to settle your debts. In many cases, you may be able to keep your home, depending on the type of chapter you file. With Chapter 7 bankruptcy, your assets are sold to help pay creditors. However, various kinds of property and personal possessions can be exempt, including your primary residence. If you file for Chapter 13 bankruptcy, your debts are consolidated, and you repay some of your debt through a multi-year repayment plan, which could include your home. The requirements regarding what assets may be sold during bankruptcy are complex and unique to each case, so it’s important to work with a bankruptcy attorney to discuss your case.
How Will Bankruptcy Affect Our Credit Score?
Bankruptcy will affect your credit score significantly, but how much it will be affected depends on your credit score before you filed. If you had good credit, your score could dip down 200 points after filing for bankruptcy. However, if you struggled to make payments before filing and your credit score was already declining, filing for bankruptcy may not affect your credit as much. If you are married and filing for bankruptcy jointly, the case will also affect your spouse’s credit score. Filing for Chapter 13 bankruptcy may help minimize how your spouse’s credit score may be impacted after filing for bankruptcy.
Will We Be Able to Have a Credit Card Again?
Naturally, a family member may be concerned about the long-term effects of filing for bankruptcy, such as the ability to use credit cards in the future. Depending on the lender, you can qualify for a credit card shortly after filing for bankruptcy. However, your interest rate may increase significantly, and you may only qualify for a low credit limit. This will be a factor as long as the bankruptcy case remains on your credit report, which can be up to ten years, depending on the chapter you file.
Will Our Friends Find Out We Filed for Bankruptcy?
While bankruptcy is a public record, it’s unlikely that your case would be shared with people you may know unless you specifically tell them. Unless someone is searching your specific information in a database like PACER, it’s unlikely that they will see the bankruptcy filing. However, a bankruptcy filing will appear if a potential employer or other entity runs a credit check.
Does Bankruptcy Mean You’re Not Good with Money?
A friend or family member may not ask this question to you outright, but you may see behavioral changes that indicate that they believe this. There are some situations where debt becomes out of control and hard to manage, even when you do your best to manage your finances. Medical debt is one of the most common reasons to file for bankruptcy, which is out of many people’s control. In some situations, taking responsibility for your long-term financial situation may mean the best choice is to file for bankruptcy.
Can Collectors Keep Calling After Filing for Bankruptcy?
If your family has been facing non-stop calls from collection agencies, filing for bankruptcy can make it stop. It’s illegal for collection agencies to contact you to ask for payment under the Fair Debt Collection Practices Act once you’ve filed for bankruptcy. If a collector calls you after you’ve filed, you can inform them about the bankruptcy case and give them the information needed to file a claim. They should not contact you after this call.
Badgley Law Group: Helping You Handle Bankruptcy With Care
Filing for bankruptcy can help you lead a healthy financial life in the future by giving you a fresh start. At Badgley Law Group, we help you get your life back on track and navigate the process of filing bankruptcy with your best interests in mind. Contact our legal team at 407-781-0420 or contact us online for a free initial consultation.