This is part 3 of my 11 article series covering my bankruptcy experience.
I filed for Chapter 7 Bankruptcy in July of 2022, to this day I still think it was one of the best things I have ever done. In my opinion there is such a negative stance/feeling around any type of bankruptcy. Those negative thoughts/feelings/judgments really impede on people making a decision that could ultimately change their lives for the better.
In this article I am going to discuss the 4 things I wish I knew before filing for bankruptcy. Since I am over 1 year post discharge I thought it would be helpful to discuss what I wish I had known, and how that may have had me move my timeline up so that I filed sooner.
We first looked into filing bankruptcy together as a couple during the summer of 2019. We had a lot of hesitation on doing so. We owned a business and did not want that to be affected. We also let outside influences impact our decision to not file bankruptcy at that time. Other people's concerns were what really derailed us from the idea. Some of those objections were:
You’ll never get credit again
You will never be able to buy a house
All the neighbors will know
The court will come and clean out your house - even your underwear drawer!
We had gone back and forth between going bankrupt, we were always waiting for the next pay day, next commission check or tax refund. Those always came, but it was never enough to dig us out of the hole that we were in.
1. I research everything. I am a firm believer that research can help you make a better decision. I thoroughly researched all of the objections that people gave me in regards to going bankrupt. The biggest concern I heard was that I would never be able to get credit again or be able to buy a house.
It is quite the opposite actually, I received many offers for credit once my bankruptcy was discharged. Many of the offers were not optimal however. We opted into doing secured credit cards with both Capital One and Discover. Both cards refunded the security deposit and upgraded us after 6-7 months of on time payments and keeping our balances low. We liked these cards because they both had rewards and their annual fee was either non-existent or very low.
2. When it comes to purchasing a home after bankruptcy you do have options! You are not permanently black listed from it. In fact, upon doing research we discovered that after a chapter 7 bankruptcy you can purchase a home 2 years after discharge if you go FHA and 4 years after bankruptcy if you go conventional. For a chapter 13 bankruptcy it can be as soon as 1 year post discharge for FHA. In some instances, you may be able to purchase a home while your chapter 13 bankruptcy is in process.
3. Filing a bankruptcy is public record. In my experience nobody knew about it except the people that I told or were involved. It has been 1.5 years since my file date and nobody has mentioned to me that they knew or saw it. I have googled my first/last name as well as my spouse's name and it did not come up either. It may come up on a background check as well, but typically is not a problem unless you are looking for a job in the financial industry.
4. Each state has different bankruptcy exemptions, those are either at the state or federal level. Some states may let you opt into federal exemptions. Not all states allow this, but some states do. Exemptions protect your assets and belongings. An exemption is a dollar amount of an asset that is protected. For example, let's say your state has a homestead exemption of $600k that means that you should be able to protect up to 600k of equity in your home. The same applies to cars, household goods, bank/retirement accounts and more.
Whether or not you decide to file or not file for bankruptcy is a very personal decision, not one that you need to include other people in if you are worried they may judge you. Had we actually listened to ourselves, and not others we would be in a much better spot now than we are now. When it comes to getting out of debt, there is not a one size fits all solution. There are many solutions depending on where you are in the process. Take our Debt Relief Calculator to find out what options are out there and the pros and cons of each.