Stigmas are very difficult to overcome, and many people believe that bankruptcy has a certain stigma attached to it. It is this perceived stigma that stops many people from taking advantage of bankruptcy and the protection it provides. Bankruptcy, however, is a right provided by the U.S. Constitution. Hundreds of thousands of people realize the benefits bankruptcy brings every year. While there are some stigmas that go along with bankruptcy, they may not be as bad as you think, and a stigma is certainly no reason to put off filing bankruptcy and starting over with a clean slate.
The Social Stigma
The social stigma of filing bankruptcy is often the most concerning for people. Money is an uncomfortable topic for many, and it is very difficult to admit to your friends and loved ones that you have fallen into financial hardship. If it is this social stigma that has kept you from filing, you should know there is little chance people will find out unless you tell them.
Bankruptcy cases go through the court and so, they are a matter of public record. However, very few people go searching through these records just to determine if someone has filed bankruptcy. While your creditors will know that you have filed bankruptcy, no one else will.
If you do feel comfortable enough telling someone you have filed bankruptcy, you may be surprised to learn just how understanding they are and how common it is. Some studies have shown that approximately one in 10 people will file bankruptcy at some point in their life. Someone you know may have already filed bankruptcy and so knows how difficult it is, but that it can also provide a fresh start.
The COVID-19 pandemic has placed millions of people into financial hardship and so, bankruptcies will only become more common in the coming months and years. If you are thinking about filing for bankruptcy, it is important to know you are not alone.
The Emotional Stigma
Although the U.S. Constitution provides the right for people to file bankruptcy, many still feel guilty when they do. Most people want to pay their bills and hate being in debt. They may view bankruptcy as a last resort, and confirmation of the fact that they are financially irresponsible. This is a very difficult stigma for people to wrestle with as they consider bankruptcy.
Guilt is never a pleasant emotion to deal with. That being said, circumstances are not always in your control and while bankruptcy should be used as a last resort, people often end up filing through no fault of their own.
No one could have foretold the pandemic that is currently sweeping the globe. It is placing even the most financially responsible people under a great deal of strain. What’s more, many people file as a result of medical debt or other unforeseen circumstances. Do not feel guilty about filing, and remind yourself you will get back on your feet in the near future.
The Financial Stigma
The financial stigma of bankruptcy is the only one that will have a real impact on you. Once you have filed for bankruptcy, your credit score will drop. How many points your score drops by will depend on what your credit score was prior to filing bankruptcy. The credit scores of people that file for bankruptcy usually tend to hover around the 550 level, regardless of their previous score. However, being prudent and responsible will help you increase your score over time.
The drop in your credit score may make things financially difficult for you at first. For example, you may have difficulty obtaining a loan or a credit card. However, this is not always the case either. It is not uncommon for creditors to offer credit cards to people who have just filed for bankruptcy. This is because they know the borrower cannot file bankruptcy for at least another eight years, so there is little chance they will end up writing off the debt. Also, because of the hit to the borrower’s credit score, a creditor can offer those credit cards at much higher interest rates.
It is true that filing bankruptcy will come with a bit of a financial blow, so this stigma is very real. However, like so many other stigmas, this one is likely not as bad as you are thinking, either.
Considering the Benefits
While there are stigmas associated with bankruptcy, whether real or perceived, it is better to focus on the benefits if you are having financial difficulties. The bankruptcy system was put into place by the federal government to ensure the financial system did not collapse. It provides a way out for borrowers so they do not have debt hanging over them for the rest of their lives.
Using the system as it was intended holds many benefits. Mainly, it allows you to discharge your debt and start again financially. Immediately after you file bankruptcy, an automatic stay is placed on all forms of debt collection and creditors and debt collectors can no longer contact you or continue pursuing the debt. That means you realize the benefits of filing for bankruptcy immediately.
Bankruptcy is also a relatively quick process. A Chapter 7 bankruptcy will take approximately four to six months. Chapter 13 bankruptcies will typically take three to five years before the case is officially over, however, much of that time is spent repaying debt.
Our Florida Bankruptcy Lawyers Can Help with Your Case
The pandemic has pushed millions of people in Florida into financial hardship. If you have been affected and are thinking about filing, call our Fort Lauderdale bankruptcy lawyers today. At Loan Lawyers, we know the benefits of filing and will help you through the process so you realize all of them. Call us today at (954) 807-1361 or contact us online to schedule a free consultation with one of our skilled attorneys and to learn more.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.