5 Things Nobody Tells You About Bankruptcy

There are those things seemingly everyone knows about bankruptcy, from what it can do for your debt to what it will do to your credit score. The thing about bankruptcy is that it’s a complicated process, and simplification doesn’t even begin to cover what you need to know. If you’re really considering bankruptcy, here are five things you may not know already.

 

1. People Can Look It Up

The minute you file, your bankruptcy becomes public domain. As a legal proceeding, it becomes public record after filing, which means that it is fully publicly accessible. It’s something that lenders, banks, and potential employers can see without even having to do a credit check, and it will contain a lot of information about your proceedings. If you’re concerned about that, bankruptcy may need to be a truly last resort.

 

2. You Have To Take Classes

There are two mandatory classes you have to take while filing bankruptcy, and they don’t come free. The first, pre-petition class happens before you complete your filing in order to ensure that you’ve exhausted every other option available to you. The second is your post-petition class which is supposed to counsel you on how to manage your money and look after any future debts. Mostly, these can be taken online at your convenience, but they will set you back between $20 and $40 for each class.

 

3. It's Not A Guarantee

Simply filing for bankruptcy does not mean you will get it. A judge may decide that you earn enough or have enough assets to reorganize your debt, rather than eliminate it. Debt elimination is Chapter 7, and if a judge decides that you don’t meet the necessary criteria for Chapter 7 filings, they will dismiss that case. If that happens, it's up to you to start again with a Chapter 13 filing, which would serve the purpose of reorganizing but still at least partially repaying your debts.

 

4. It Doesn’t Cover Everything

Those insane student loan bills that keep coming in - odds are that bankruptcy won’t touch those. Bankruptcy doesn’t dismiss all debts, and student loan debt is way up there on the list of things that won’t go away just because you filed. Federal student loans have some very specific criteria surrounding whether or not they can be dismissed due to bankruptcy. You have to prove three things:

  • Loan repayment unto itself prevents you from maintaining a minimum standard of living

  • This hardship will continue for a significant portion of the repayment period

  • You have made a good-faith effort to repay your loans prior to filing

You must meet all three criteria, and even then the process for dismissal goes beyond just your filings. If nothing else, you’ll want close guidance from your attorney on that.

 

5. It Does Get Better

There’s no doubt bankruptcy will be difficult. Even after the worst is over, having it hover over your credit report for up to a decade can make necessary things like finding a place to live feel impossible. Bankruptcy is impermanent, though, and it if it’s what you must do, just know that it will pass. It might not be better right away, but bankruptcy does get better, little bits at a time.