Filing for Bankruptcy is Not Shameful

A lot of people who must file for bankruptcy feel ashamed. Some of the people I’ve coached around financial freedom feel that their need to file for bankruptcy proves that they are “bad with money” or “unworthy.” Nothing could be further from the truth.

No, bankruptcy is not an easy decision and you should never enter it on a whim. But many successful people have filed bankruptcy and not just celebrities such as Donald Trump, Walt Disney, and Burt Reynolds. People well-known in the self-improvement and financial freedom industry are not immune from these problems. Alexis Neely and Dan Kennedy are just a couple of examples. Both have become millionaires and mentor others on money and business.

Unfortunately, personal debt relief especially Chapter 7 has received a lot of negative press. Don’t rely just on articles and books when making your decision; it is important to get the proper credit counseling and legal advice before you file a case. Most people in financial trouble opt for Chapter 7 or Chapter 13. There are some key differences between these types of bankruptcies. If you are an entrepreneur overwhelmed by financial obligations, you can eliminate or reduce your business debts under Chapter 7 or Chapter 11.

Chapter 7 cases, whether personal or business, permanently eliminate many of your debts. Chapter 11 and Chapter 13 allow a restructuring of debt so you pay less than the amount of money you actually owe. A business bankruptcy should not damage your personal credit rating. However, a personal case will harm your credit score for 7 to 10 years. Also, you’re still responsible for child support, alimony, most student loan debts, and recent personal tax bills.

Filing bankruptcy is not easy these days because some dishonest people deliberately charged up bills they could not pay and then turned to the legal system for relief. If you were irresponsible and bought items you could not afford hoping some day you could repay the debts, this does not make you a bad person. Yes, it is a good idea to break bad habits so you never have to file bankruptcy again. However, you do not deserve to suffer from the emotional and financial stress of trying to handle obligations you truly cannot afford. Everyone needs shelter, food, water, clothing, and some type of transportation. If you are skimping on these necessities to pay your credit card companies, you are not doing yourself any favors by avoiding bankruptcy just so you do not feel like a failure.

Credit Score Resources