Yo Bankruptcy, Here’s Looking At You

Sometimes you’re in the red, and not sure how to pay your debts off. For some people, declaring bankruptcy is a great way to get out.

US Culture treats bankruptcy like the worst possible adulting fail, and I beg to differ. For one, it’s an option that clears you of (most kinds of) debt and frees up your income to do other things (savings, student loan payments), which is a win in some instances. Also, one might observe that you can become a wealthy presidential nominee having declared bankruptcy 4+ times.

What is bankruptcy?
It’s formally saying “my income is too low to accommodate these bills, so take everything I have now and let me start over.”

What kinds of bankruptcy are there? [here’s eligibility info]

  • Chapter 7 – discharges debts and liquidates any assets towards repayment
  • Chapter 13 – reorganizes debts into repayment

On the plus side:

  • + Your credit card debt, medical bills, income taxes (with all kinds of rules), store cards, and personal bank loan debts are “discharged” (eradicated)
  • + Your credit is neutralized
  • + In 8 years the bankruptcy is off your credit record and you can do whatever

On the downside:

  • – student loans, child support, debt due to DUI & recent luxury purchases are not dischargeable, so they stay with you and therefore
    don’t buy a rolex on your credit card a month before filing bankruptcy.
  • – For the first 1-5 years after filing, you are definitely not getting a mortgage or car loan
  • – The record of Ch 7 bankruptcy is on your credit report for 10 years, Ch 13 for 7
  • – If you wanna be professionally certified in certain jobs you’re now blocked
  • – If you have an asset (property, retirement investments) you may lose them

If you’re thinking about bankruptcy:

Contact a local credit counselling nonprofit, who can explain the specifics and legal details better than I.

Listen: There’s no shame in bankruptcy, and it might be a strategic move for some people. For others, it’s going to get in the way of near-term goals (jobs, purchases) or liquidate assets you want to keep.