Bankruptcy Detriments

When compared to the alternatives, bankruptcy, especially in Texas, does not have many detriments.

Certainly, there is a stigma attached to a bankruptcy proceeding, but often it is "larger than life." Quite often, a properly executed Chapter 7 can be effectively over for the debtor in three months. It may stay open longer but generally the events following the discharge do not involve the person who filed.

Bankruptcies affect credit and credit reporting agencies retain notices that individuals have filed bankrutpcy for as much as 10 years. However, the issue here is not necessarily the notice, but the effect of the notice. And the effect of the notice is largely determined by the amount of outstanding, post-bankruptcy debt. For instance, if a consumer who is carrying debt that he cannot reasonably pay chooses not file and wishes to borrow money to purchase a car or a house, he must disclose all of that debt to the lender and the lender must then take into account that he will be competing with others to be paid.

However, if that same consumer removes all of the debt through a Chapter 7 and approaches the same lender, it is true that the lender will know that he filed a bankruptcy. But the lender also knows that the consumer cannot obtain another Chapter 7 discharge for 8 years and that there is no outstanding unsecured debt.

Other bankruptcy detriments include the loss of assets due to non-disclosure (otherwise the debtor is fully aware of what may be lost), filing too early, filing too late, failing to recognize a window for obtaining a Chapter 7 discharge and missing the opportunity, failure to properly complete bankrutpcy paperwork, loss of discharge, failure to take tax issues into account where there is non-exempt property, failure to time the bankruptcy so as to discharge taxes, last minute filing, failure to provide time enough to plan and thereby preserve assets and preseve discharge, receiving an inheritance during a Chapter 13 or within 180 days following the filing of a Chapter 7, failure to understand the impact of bankruptcy on particular elements of certain businesses, such as real estate sales, retail sales, professionals, insurance sales and the impact that bankruptcy can have on divorce--as well how bankruptcy can save a marriage by instantly relieving financial pressure.

Charles Chesnutt