Consumer Bankruptcy Should Not be Stigmatized

Many Americans are dealing with overwhelming debt and experience significant anxiety, depression, and grief over their financial situations. While consumer bankruptcy can be an option for many consumers who are struggling to make ends meet while repaying debt, there are far too many people who worry about the stigma of personal bankruptcy. Indeed, concerns about bankruptcy stigma can sometimes prevent people from filing for Chapter 7 or Chapter 13 bankruptcy, which can result in further financial devastation. A recent article in Business Insider discusses the ways in which the stigma surrounding consumer bankruptcy can have a harmful effect on debtors, and emphasizes that we need to destigmatize the bankruptcy process.

Our Oak Park bankruptcy lawyers want to discuss some of the reasons that bankruptcy should not have any stigma attached, and that struggling debtors should feel comfortable discussing the benefits of the bankruptcy process with a lawyer.

Length of Time Bankruptcy Will Affect Your Credit is Probably Not as Long as You Think

You might be aware that a bankruptcy filing will remain on your credit report for a number of years after the filing. With a Chapter 7 bankruptcy case, the bankruptcy will stay on your credit report for 10 years after the date of filing, while a Chapter 13 bankruptcy case will remain on your credit report for seven years after the date of filing. Yet just because you have a bankruptcy on your credit report does not mean that you will be ineligible for any kind of loans or credit.

Once your bankruptcy is finalized and you receive a discharge, you can begin rebuilding your credit immediately. You can do so by applying for a secured credit card, becoming an authorized user on the credit card account of a friend or family member, and seeking approval for loans with higher interest rates.

Once you begin reestablishing your credit, you may also be eligible to obtain a mortgage sooner than you think. If you went through a Chapter 7 bankruptcy case, you will only need to wait four years to be eligible for a conventional home loan, and you may only need to wait for three years to obtain a USDA loan. The waiting time for a VA or FHA loan is even shorter; you can qualify for a mortgage if you wait just two years from the date of your bankruptcy discharge. With a Chapter 13 bankruptcy, a conventional mortgage requires you to wait two years from the date of your discharge (or four years from the date you filed for bankruptcy). You can apply for an FHA or VA loan as soon as you have received a dismissal or discharge in your Chapter 13 bankruptcy case.

Nearly All Consumers Deal With Debt

Beyond the fact that you may have certain assumptions about bankruptcy that are based on misconceptions or misinformation, it is also important to eradicate the stigma associated with consumer bankruptcy since nearly all consumers deal with debt in their adult lifetimes.

A majority of bankruptcy cases involve at least some medical debt, and many others involve student loan debt or debt accrued as a result of a layoff or the pandemic. In short, you should never feel like you are alone in struggling with debt, or that you did something wrong that led to your financial situation. Filing for bankruptcy may be able to help you get back on track.

Contact an Oak Park Consumer Bankruptcy Lawyer

Do you have questions about consumer bankruptcy? Our Oak Park bankruptcy attorneys can speak with you today. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

I Do Not Want to Lose My Property: Does This Mean I Should Avoid Bankruptcy?

Should I File for Bankruptcy After Retirement?

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