Three Bad Reasons to Not File for Bankruptcy


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Bankruptcy is a word that scares most Americans to death. The average person associates bankruptcy with mental images of losing it all -- home, furniture, cars, job prospects, even reputation and personal dignity. But the truth is that, in some situations, avoiding bankruptcy can actually do you more financial harm than embracing it. For certain individuals, bankruptcy can pyrovide a fresh start, protect assets, and finally silence the constant calls from creditors. If you suspect filing for bankruptcy might be a viable recourse, but you're hesitating because of any of these reasons, think twice.

Bad Reasons To Avoid Filing

When it comes to doing just about anything, there are good reasons, and there are bad reasons. With bankruptcy, as most things, the bad reasons can be chalked up to misinformation and misconceptions. Some common misconceptions about the pitfalls of filing include:

  • Filing for bankruptcy will destroy my credit forever. No, it won't. Quite the opposite -- bankruptcy can actually be a good way to get to work on restoring and improving your credit. For example, if you're in a financial place where you're considering filing, it's extremely likely that you're badly behind on your bills. As the numbers accumulate and you continue to fall behind, your credit is only going to get worse. When you declare bankruptcy, you have the opportunity to begin again with a clean slate. Each bill you pay on time post-filing helps your credit rating, and most people who choose to file manage to rack up a decent score again, over the course of just a few years.
  • If I file for bankruptcy, they're going to take everything away from me. No, they aren't. As a matter of fact, filing for bankruptcy may be your only protection against having possessions taken from you. Depending on whether you opt for Chapter 7 or Chapter 13, and what sorts of payments you're able to make in the future, there's a decent chance you'll be able to hold onto your car and your home.
  • My spouse is going to be automatically dragged down if I decide to file. No, they won't. You have the option of filing separately or jointly. Depending on your unique situation, one may be preferable to the other, but either way, you have the power to choose. If you file separately under Chapter 7, one drawback is that creditors are allowed to pursue your spouse, if not you personally. If you file separately under Chapter 13, creditors cannot pursue the non-filing spouse.

Bankruptcy is not right for everybody. But, by the same token, bankruptcy is absolutely right for some people. If you're on the fence about the issue, you should contact an experienced bankruptcy attorney in your state to discuss your options. It could be the first step to nursing your wounded finances back to health


About the Author


Paul Maselli is a Princeton, NJ bankruptcy attorney.  He is a frequent author on a wide range of topics related to consumer bankruptcy issues.