This is a common questions I get. As in, "So, I get rid of all this debt. What is the catch?" Surely, it's not the fee paid to yours truly, since that amount pales in comparison to the debt you're about to shed. So, here's my discussion of the "downside" to bankruptcy ... and why it's really not as bad as you'd think.

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. Anyway, bankruptcy has become commonplace.

Landlords routinely ask if you’ve filed 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.

Fear of a bankruptcy stigma can have adverse consequences. As Thoreau and FDR put it, “there’s nothing to fear in bankruptcy but fear itself.” Not entirely true, because you need an attorney to address concerns, and I’m not sure if I quoted correctly, but delay can limit your options with regard to bankruptcy.

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. 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 a future marriage, since a spouse’s income is counted as your income for purposes of the bankruptcy income test. If you file 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 for filing bankruptcy. Certain government employers even require you to file your bankruptcy petition 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?