If I file for bankruptcy, will everyone know about it?

Can My Son’s Bankruptcy Harm Me Financially?

Having a family member go through bankruptcy can certainly be a disruptive event for everyone; however, unless your name and social security number are on debts that your son accrued before the bankruptcy, you will not be financially harmed. 

Still, there are some possible problems you might want to consider.  For example, once your son’s bankruptcy is discharged, it will be difficult for him to get credit, qualify for a mortgage or possibly even rent an apartment, so it is highly likely that you, as a concerned parent, will want to accept a request to co-sign.  In this situation, there are definitely some factors to take into consideration that could potentially harm you financially.

When a co-signer is on a loan, the lender will typically file a lawsuit against that person first to recoup money, especially considering that the co-signer is much more likely to have greater financial resources and job stability (which is why they were needed to co-sign in the first place).  This means that should your son’s financial history repeat itself, you will likely be stuck with lawsuits that could be devastating for your credit rating and court judgments that are your responsibility to pay.

Knowing this, if you still decide to co-sign, do so with caution and moderation in mind.  This means that if your son is purchasing a car and you are co-signing for it, be sure that it’s in a lower price range (under $8,000) and over a long enough period of time. This way, should you be forced to take over payments, they will be low and not affect your monthly budget so much.

 

The best way to enter into a co-signing agreement with a family member who has recently gone through a bankruptcy is to consider it a loan you will likely have to repay.  If you think of it that way, you’ll be able to make a much more financially sound decision concerning whether or not you should co-sign in the first place. 

If my husband/wife files for bankruptcy, will I have to file too?

5 Myths About Bankruptcy You Should Know

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Despite the plethora of information available online, there are still bankruptcy myths circulating that are just that—myths.  With something as important as bankruptcy, it’s important to understand the facts and learn how to distinguish them from fiction.  

1.       Everyone will know I’ve filed.

While it is true that bankruptcy is a public record and is searchable as such, unless you are a high-profile individual, it is unlikely that anyone in your circles will know that you’ve filed for bankruptcy.  The number of people who file each month in any given city or area often makes it impossible for the media to focus on printing names; although in some smaller communities, the newspapers still do this.

2.       If I file Chapter 7, I don’t have to pay back any of my debts.

This is certainly a nice thought but it’s a myth, nonetheless.  Certain debts such as alimony, child support, student loans and fines for criminal acts must still be paid, even after filing for Chapter 7.

3.       If I file bankruptcy, I’ll lose my house, car, possessions, etc.

It is important to know that each state provides exemptions to bankruptcy filers, allowing them to keep a considerable amount of their property—up to a particular value.  A bankruptcy attorney will be able to explain in detail what you may or may not lose in the process of filing. 

4.       I can kiss credit goodbye if I file. 

Although for 2-4 years, you might only qualify for subprime loans, there are still many lenders who are more than happy to provide credit to people who have filed for bankruptcy—even Chapter 7 bankruptcy. 

5.       If my husband/wife files, that means I have to file, too. 

This situation is highly dependent on whether both spouses are liable for the debt.  If both names are on most debt, then yes, it would make more sense for both spouses to file.  However, if only one spouse’s name is on a considerable amount of debt, that spouse can file, leaving the other spouse’s credit unscathed.  

5 Steps To Recovering From A Bankruptcy

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Once your bankruptcy is completed, you have a unique opportunity that not many people get—the opportunity for a fresh financial start.  The best way to use this opportunity to your advantage is to make the right financial choices from this point forward.

1. Create a budget and stick with it.

Making a livable budget is the first (and most important step) to getting back on track financially after a Chapter 7 or Chapter 13 bankruptcy.  Showing your potential lenders that you have learned your lesson and are able to make smart financial choices is best done through living within your means and knowing where your money is going at all times.

2. Learn to live on cash (or your debit card) again.

After a bankruptcy, cash is your friend.  Not only does cash allow you to stick to your budget better (since it’s a tangible reminder of how much you have to spend each month), it also helps you get out of the credit habit.  This doesn’t mean that you should avoid credit entirely, though—in fact, you’ll need to re-establish some credit in order to get your credit score back on track after the hit it takes from bankruptcy. 

3. Pay your bills on time, every month.

Keep in mind that even the small bills will show up on your credit report and affect your score. 

4. Keep a close eye on your credit report.

The only way to ensure that your credit is getting back on track is to watch it closely.  A good way to do this is to sign up for a credit monitoring service. 

5. Get a credit card and use it wisely. 

The only way to re-establish your credit is to obtain credit and use it wisely.  While it might be difficult to obtain credit initially after your bankruptcy has been discharged, many cards offer low credit lines to people with poor credit with the opportunity to raise those credit lines after demonstrating over a period of a few months that it will be used wisely.