For many people, filing bankruptcy can cause feelings of defeat, loss and shame. That's why so many people struggling with debt, including our own customers, looked for alternate relief solutions so they could avoid filing bankruptcy. Watch and listen to their stories:
Having lost her job due to the pandemic, Teah was faced with mounting credit card debt and the prospect of yet another bankruptcy. But having gone through bankruptcy court before, a "humiliating" experience that made her feel "foolish" and "worthless," Teah wanted to avoid it at all costs. So she found an alternative to get relief from her financial hardship.
“I had considered bankruptcy but I'd already filed bankruptcy back in 2010-2011 and I didn't want to do it again. And I think bankruptcy was just an out to start all over and repeat the same thing, so I figured if I buckled down and did my due diligence to pay off my bills that I created with a little bit of help, that it would change my spending behaviors. And I think that's what it's doing. Yeah, I owe for a few years but in the end I'll feel better about it rather than just bankruptcy and forgiving everything.”
“If I filed bankruptcy, to me that's like life beating me. By paying these people off. I can at least hold my head up high.”
“I don't know what else to do and I don't want to file bankruptcy. That would be, worst case scenario, but I was trying to avoid that.”
“I wanted to see my options. I understand by filing bankruptcy, okay you go free of debt or whatever but your credit goes bad, and that's not me. I'm trying to avoid all that with you guys helping me clear it up and I can still have a little bit of credit going.”
“Well we did not want to do bankruptcy. We had done that in the past and it was very destructive to your credit.”
“I didn't want to go bankrupt. You declare bankruptcy and then it takes so long for you to get things to be built back up again and I'm almost 32 so to declare bankruptcy and then have to rebuild that credit at 32 to even potentially buy a house was just disheartening per se.”
Bankruptcy is generally considered to be the debt relief option of last resort. There are several types of bankruptcy: Chapter 7 (straight bankruptcy or liquidation), Chapter 13 (reorganization of debts), and Chapter 11 (debt reorganization normally used by a business or partnership). While a successful bankruptcy can provide a fresh financial start – individuals or businesses should carefully consider bankruptcy before proceeding because of its long-term financial implications.
While bankruptcy is an option that has been able to provide a fresh start for many individuals, families, and businesses – it is a serious decision that should be carefully considered with the assistance of a financial advisor or attorney who can help determine if bankruptcy is the proper course of action.
Prior to 2005, those filing bankruptcy could choose the type of bankruptcy they preferred – and most elected to file Chapter 7 straight bankruptcy (liquidation) over Chapter 13 (structured repayment). However, rules enacted in 2005 now requires those filing Chapter 7 to pass a "means test" – to qualify, they must earn equal to or less than the average monthly income for a family of their size in their state.
In addition, before you can file for Chapter 7 or Chapter 13 bankruptcy, you are now required to complete credit counseling with an agency that has been approved by the United States Trustee's office.
While bankruptcy plays a vital role to help rescue individuals and businesses, it is important to recognize that it's not the only debt relief option.