GlobalGrind’s financial coach, Lynn Richardson, shares the truth about bankruptcy in this two-part series:
Last week, I shared 2 myths and facts about bankruptcy and the verdict is this: Bankruptcy doesn’t have to be a death sentence, so you should get the facts straight so you can make an intelligent decision for your financial future. In most cases, people who file bankruptcy and recover are far better off than those who carry around bad debt, collections, and judgments year after year. Here are a few more myths and facts about bankruptcy to help you make a decision that could potentially help you preserve wealth:
MYTH 3: If I file bankruptcy, I will never be able to get a debit card or conduct electronic banking transactions and will have to cash my checks at high-cost check cashing centers.
FACT 3: In most cases, your bank will not close your account solely because of a bankruptcy filing. Some banks do, however, run a credit report as a pre-screening factor for opening a new checking account and if you have filed a bankruptcy, your request to open a new account could be denied. Luckily, your credit history is not a determining factor in obtaining a pre-paid debit card. Additionally, as you rebuild and reestablish your credit, you can use your pre-paid debit card to manage your direct deposits and other financial transactions while sticking to your budget and minimizing check-cashing and other high cost fees as you rebuild your financial life and your credit.
MYTH 4: If I file bankruptcy, I will not be able to get a good job.
FACT 4: Unless you are trying to become the President of the free world, in most cases, a bankruptcy filing will not impact your ability to get a job and it certainly will not prohibit you from buying a home or car in the future. The deal is this: you must be honest. If you are asked about your financial status on a job application, be honest and explain your situation. Most employers want to know that you will be honest even the midst of what could be an embarrassing situation. If your bankruptcy was due to job loss, medical bills, or the loss of an income in your household, you should explain your situation with as much detail as possible and if your bankruptcy was due to your own financial mismanagement, explain how you plan to prevent the reoccurrence in the future.
MYTH 5: If I file bankruptcy, I will lose my house, car, and/or retirement fund.
FACT 5: In most cases, if you file bankruptcy, you can RETAIN your primary residence and your automobile — if you can afford them — and your retirement fund is exempt from creditor claims in a bankruptcy. Additionally, if you are in danger of losing your home to foreclosure, a Chapter 13 Bankruptcy will actually stop the foreclosure proceedings in most states. However, you must be able to make the payments to catch up on your arrears (past due mortgage payments) usually within 30 days of filing the bankruptcy.