Asaph Abrams Attorney at law

San Diego Bankruptcy

bankruptcy attorney san diego

What is the downside to bankruptcy?

Bankruptcy will be listed on your credit report for 7 or 10 years.  Yet, when you’ve defaulted on your debts, your credit has already suffered.  Within relatively short time, a diminished credit score will increase because of the bankruptcy.  Bankruptcy washes away debt so you may rebuild credit over time and better provide to your family.

Bankruptcy is technically public record, but it’s not readily or practically available.  A nosy neighbor cannot Google you to discover your filing. 

Landlords routinely ask if you’ve filed for bankruptcy.  But as a part-time property manager myself, I know that a tenant who’s clear of debt is better able to pay rent than one who’s paying hundreds of dollars each month on credit card debt.  And fear of a stigma can have adverse consequences.  Delay can lead to loss.

Often individuals come to me when they’re already suffering garnishment of a quarter of their paycheck.  While creditors must abide by due process, the culmination of the collection process, the snatching of your earnings, still catches debtors off guard and unprepared.  When bankruptcy is warranted, putting it off can cause needless suffering and loss. 

In Hamlet, old Polonius admonished his boy, Laertes to neither borrow nor lend.  But insofar as one must borrow at some points in life, consider this: after filing for bankruptcy, you are a better loan candidate.  You can better pay off new debt, since you’re not saddled by the old, stale obligations you discharged in bankruptcy.

Also know that eligibility for bankruptcy is very income-centric.  If you have suffered job loss or diminished income, you are a better candidate for filing a chapter 7 bankruptcy petition and not having to enter into a lengthy payment plan with a chapter 13 bankruptcy.  Even if you do a chapter 13 bankruptcy, the lower your income, the lower your payments will be.  After discharge, when you do regain your footing, then increased earnings will be yours to keep to build a new future.  They won’t have to be directed to old obligations you’d rather leave behind.  Earnings can also increase indirectly by virtue of marriage, since a spouse’s income is counted as your income for purposes of the bankruptcy income test.  If you file  for bankruptcy protection after economic recovery or after marriage, then you may have lost an opportunity for more substantial debt relief.

It is illegal for employers to terminate you due to filing for bankruptcy.  Certain government employers even require you to file prior to beginning a new job, so that you won’t be burdened by debt. 

And if you cut up that plastic and pay cash, that can be a pretty good thing.  Going green is today’s thing, isn’t it?

How long does a bankruptcy stay on your credit report?

A chapter 7 bankruptcy is reported for 10 years.  A chapter 13 bankruptcy will be there for 7 years.  But your report will reflect the discharge of debt: your accounts will show zero balances.  The bankruptcy will have washed away those scary 4-and 5- (and 6- and 7-) digit debts.  By doing so, bankruptcy improves your credit.

Will bankruptcy ruin my credit?

Nope.  And here’s why.  We see debtors try to pay back debt.  But if they can only afford minimum payments on a fat principal, they get nowhere fast.  It’s like old Sisyphus rolling the boulder uphill: no progress whatsoever.  The credit or FICO score has become a source of societal vanity.  In the end, remember it’s an artificial, trademarked application. That almighty score would have people sacrifice their welfare and that of their families, just so they can claim a high grade.

If you’re reading this and bankruptcy is on the table, your credit is either already bad or it may be heading there in a hurry.  If the score’s still good, then you may be paying big bucks for an illusion, with a downward spiral bound to come.  The score won’t remain high because escalating interest eventually breaks the strongest of backs.  We see it again and again.  And again.  Bankruptcy lifts that weight off your shoulders: your balances are zeroed.  After bankruptcy, a low credit score will improve and it doesn’t take long.  Credit repair is an industry unto itself.  But it is a Home Depot kind of deal: you can do it yourself.  Generally, one starts with low credit limits and good doses of caution.  You rebuild your credit from there.  Maintaining secured loans you had before bankruptcy also improves credit.  For example, you can reaffirm (re-commit) to your pre-bankruptcy car loan after you file for bankruptcy.

General Bankruptcy Questions

San Diego bankruptcy attorney
San Diego bankruptcy attorney

To discuss your particular situation, please call (858) 344-0500 to schedule your free consultation.