Filing bankruptcy in San Diego: The pros and the cons
Filing bankruptcy in San Diego is a big step, but not as big a step as some imagine.
One client described his hesitation. He had come in for a consultation and was, in my opinion, clearly a candidate for a Ch. 7 bankruptcy. He left my office smiling and then proceeded to fall of the planet. No response to my emails, my phone calls for nine months. Then he turned up on my doorstep with a check in one hand and all the documents and data I would need to prepare his case in the other. I was a bit taken aback, but of course pleased to see him, and told him so. When I asked him half-jokingly what had taken him so long, his reply spoke volumes: “I just couldn’t see myself as the kind of person who files bankruptcy.“ He had had to get over the fear of stigma and of other consequences commonly feared but which almost never materialize. He’s okay now. His case is closed and he has moved on to the next chapter of his life with a fresh start. That is exactly what is supposed to happen.
So what are the cons of bankruptcy?
Let’s unpack a few of the real and some of the imagined ones. For most people the sentence usually beings with “If I file bankruptcy…” and ends with: “My credit score will sink like a rock.” In the vast majority of cases, my client’s credit score has already been torpedoed by late pays, nonpayment, judgements, liens and perhaps a foreclosure (or a short sale being reported the same way.) So, the client’s credit score is already a disaster and can’t really get much worse. Indeed, sometimes filing bankruptcy can improve the worst credit scores “I’ll lose my job.” Your employer is not entitled to even ask you whether you have filed bankruptcy. A prospective employer, though, is allowed to ask on a job application. In at least one profession – that of certified financial planners – one can lose her certification by filing. I guess that idea is if the financial planner hasn’t taken her own advice, she shouldn’t be offering to anyone else. (?) Other than that, I have never known of a client being fired for filing bankruptcy. The converse is true, though: a client was set to lose her security clearance because she was so deep in debt. In her case, filing bankruptcy actually saved her job. “My credit will be terrible if I file for bankruptcy “ Sometimes the credit score is already down due to late payments or repo’s or lawsuits There are times those credit scores go up .Others have good scores and need to file bankruptcy in spite of that . Their credit scores will go down ,but they will be able to get credit. Bank’s know they have little risk after a bankruptcy the economic stress is deflated and you can not file bankruptcy again for 8 years .“ I will not be able to get a mortgage or refinance my home “ Usually after about three years after the bankruptcy I start to hear from clients who are refinancing homes and getting mortgages. it will take some work but this can be done. http://youtu.be/6t32cKD7FYI
What are the pros of filing bankruptcy?
Immediately (almost), those nasty phone calls from creditors stop. Wage garnishments (other than for child, spousal or family support) stop. Bank levies stop. Repossessions and foreclosures are stopped – or at least stalled, depending on whether the client is in a Ch. 13 or a Ch. 7. Even the IRS and state and local taxing agencies have to leave the filer alone. At least for awhile. More about taxes in bankruptcy elsewhere. Within two years of the bankruptcy discharge (the last event of the successful case) , all other factors being equal, the filer can qualify for either an FHA or VA loan. The bankruptcy process works exactly the way it is supposed to: it puts the filer back to normal, back to where the that person can take the risks and enjoy the rewards all other Americans can enjoy. Your bad credit can finally start its recovery. Late payments, repossessions, foreclosures and short sales no longer hurt your credit score. Without bankruptcy, these “derogatory marks” on one’s credit report just keep getting worse and worse. Bankruptcy is like the emergency room and the surgical suite all rolled into one: the pain is relieved and bleeding stopped in the E.R. (by the automatic stay) and the cancer of overwhelming debt is removed in the O.R. – by the discharge at the end of the case. The patient – er, the client – can then get on with the process of recovery. Credit score recovery time to back to, say, the mid-to-high 700’s, is about two years after the end of the bankruptcy case. No one wants to file bankruptcy. Every experience leading up to the need for bankruptcy causes us to dig in our heels and resist. We are made to feel ashamed that we can’t help ourselves. Creditors (and sometimes self-righteous family or friends!) will say hurtful and embarrassing things to us, making us feel like it’s all our own fault. Getting past those restrictive emotions is hard for everyone. The majority of people I meet with are still struggling with feelings of shame, embarrassment, humiliation. Still others have worked through those negative emotions and realize it’s just a simple business decision. They’ve realized that in order to become well financially, they need a radical treatment. Who knew that bankruptcy is such a powerful remedy? When you’re ready to end your bill problems once and for all, contact me call 619-235-9645 to set up a free, no-obligation meeting to talk about how I can help you.
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