Many people in debt think “I’ll just file bankruptcy and start over, it’s easy”, the truth is that bankruptcy is a life-changing event that causes lifelong damage, and most bankruptcy lawyers won’t tell you that, they just want the dollars from you to file the paper work.

The word bankruptcy is a scary word to me. If you are thinking about filing for bankruptcy or maybe in the middle of it right now, you know it is a scary event. But did you know that it could effect your job? Yes it can, many employers frown on bankruptcy of their employees, thinking “if they can’t manage their own finances how will they handle those of the company?” Also, many employers consider financially distressed employees as a greater risk for embezzlement or theft. When searching for a new job if a credit report is run and a bankruptcy shows up, that could eliminate your changes for employment in some companies.

Bankruptcy can destroy your marriage, how can a spouse have full and complete trust in the relationship if money is so badly handled that it comes to bankruptcy? What effect will it have on the kids when you try to enroll them in certain events, if you think no one will know, think again, it is public record.

Bottom line bankruptcy steals your peace of mind, your comfort level in looking at yourself as well as society as a whole.

A client of mine came in ready to file bankruptcy. Her debts were overwhelming to say the lease, her husband had left her for another girl. The house and the debt except for $14,000 was in his name. She was 46 years old, her dads friend, a lawyer told her to file bankruptcy. This poor lady was broke down and worn out and felt she had no where else to turn except to go bankrupt. The truth is, she was not bankrupt. You see, her soon-to-be ex-husband will end up with all the debt in his name, he may be bankrupt, but this lady was not.

Why Avoid Bankruptcy? Bankruptcy is not something I recommend any more than I would recommend divorce. Are there times when good people see no way out and file bankruptcy? Yes, but my job is to help you avoid that if given the opportunity. Few people who have been through bankruptcy would report that it is a painless cleaning of the slate, that you go off and start fresh when it is over. Many people go that route because they just plain don’t want to work hard enough to work it out…just like many people enter divorce, they just don’t want to “work hard” to fix things.

Do not be fooled. Although I personally have not gone through a bankruptcy, I do have many friends who have and it is not a fun ride. Bankruptcy is listed in the top 5 of negative life-altering events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. Although I don’t believe that bankruptcy is as bad as losing a loved one, it is certainly life-altering and leaves deep wounds both to the psyche and the credit report.

There are two types of bankruptcy. Chapter 7 which is total bankruptcy, stays on your credit report for10 years, and Chapter 13, which is more like a payment plan and stays on your credit report for 7 years. Bankruptcy, however, is for life. Loan applications and many job applications ask if you have ever filed for bankruptcy. EVER, not in the last 7 or 10 years but EVER. Could you lie to get a loan because your bankruptcy was so long ago? Yes, but technically if you do, you have committed criminal fraud, and I don’t know about you, but I have a higher power to be accountable to.

The good news is most bankruptcy cases can be avoided with proper help, such as a certified financial counseling, or even reading the book by Dave Ramsey “The Total Money Makeover: A Proven Plan for Financial Fitness“. Now to be honest, your money makeover will take some hard work and time, it may involve extensive amputation of stuff, it will be painful, but bankruptcy is much more painful.

Also one last consideration, the reason most people are even contemplating bankruptcy is usually do to poor money management habits, many people who file for bankruptcy to “start over” end up in debt again within two to five short years, why? Because the debt wasn’t the real problem, managing money was.

If you take the a good step backward to get on solid ground instead of looking for a quick fix that bankruptcy “seems” to offer, you will win more quickly and in the long run be far better off financially.