Yes, there is a Stigma to Bankruptcy
But it’s not un-fixable. You do need to be aware of the Good AND the Bad so you can move forward wisely.
- Reduced debt
- No more collection calls
- Save certain assets
- Start fresh
- Less Moral Stigma about BK
- Effect on Credit Report
**With a little effort on your part, the effects of bankruptcy on your credit report can be as good as they are bad.
- Renewed hope
- Taking charge again
- Less fear of unknown
- Less anxiety
- Sense of control
- Health benefits
**Some will find their mental and physical health improves when the stress of their financial crisis is reduced by the protection of the bankruptcy court.
Bad facts a/k/a Stigma
- Reported to Credit Agencies
- No more credit/Limited credit
- High Interest if you do get credit
- Not eligible for some jobs
- Some landlords won’t accept you
- Higher cost of insurance
- Violates security clearance?
- Errors on Credit Report after BK
The page of things you considered before filing bankruptcy. (Or wish you had!)
Most likely, you’ve already discovered that your pre-filing considerations were just painless descriptions. Now you are living them as day to day reality and your understanding is very different. For a few, the practical, real life consequences of bankruptcy can be fairly easy to manage, but for many others they can be quite harsh.
What you discover is this: the stigma of bankruptcy is very real. For the lives we live today the stigma of bankruptcy is not a moral condemnation – it is a financial judgment, and it is punitive. Yes, you may still meet those who will judge your character, especially if you had a reputation as a spendthrift, but these days the stigma attached to bankruptcy is more about economics.
People ask why the system punishes “bankrupts,” without even knowing the cause of their bankruptcy. The answer is uncertainty…
In our day to day financial transactions one of the hardest things to manage is uncertainty. Uncertainty upsets the big markets, and it burdens individual dealings, too. People ask why the system punishes “bankrupts,” without even knowing the particular causes of bankruptcy from one person to the next. The biggest reasons are prevention, uncertainty, and technology. Prevention is easy to understand. If there is no penalty and no judgment associated with bankruptcy, then everyone might as well file and take advantage of their creditors. Such a system would be completely dysfunctional. It is an unfortunate fact of life, but it is true: human beings learn from mistakes and the painful consequences of mistakes. Therefore, bankruptcy is supposed to cause some pain and regret. This holds true, unfortunately, even for hardworking, careful people whose bankruptcy is due to events that are completely out of their control.
If uncertainty is the problem, then Clarity is the solution.
Clarity builds confidence and confidence leads to trust
Beyond this, the punitive aspects of bankruptcy are commercial. Uncertainty equals risk, and risk means danger. The more certain they are of your financial strength, the more businesses can count on financial dealings with you to be rewarding (for them and you). In a commercial context, risk measures the danger and fear of losing money. If you are a bigger risk, the companies you deal with will most likely charge you more when giving you credit, making long term contracts such as rent agreements and car insurance, and in a variety of other circumstances where uncertainty about the future affects thinking about bottom line. Technology adds to uncertainty because it tends to eliminate personal contact and reduce transactions to a series of equations.
Remember, bankruptcy, whether its Chapter 7 or Chapter 13, involves a lot of trade offs. You didn’t want to do it, but you decided that it made sense. Your post bankruptcy life will depend on you understanding the new economic landscape and learning to work in it. Start with a table that places some big concerns against some of the benefits. Keep in mind, the stigma of bankruptcy is real. It has changed, and for a few it is not especially important, but for most it is a big concern.
What do you suggest?
I get it! Afterwards, bankruptcy will effect my borrowing, and is likely to change my apartment search, my auto insurance, employment prospects and lots of other little things. What should I do about it?