Though I rarely recommend bankruptcy (usually because the person does not qualify or the debt is $25K or less), sometimes this is the only route. The laws were rewritten in 2005, and confusion still abounds.

1. Even the rich file bankruptcy. I’ve certainly seen this happen – and it can happen quickly. Even for people who are not spending wildly and have conservative business practices, an unexpected catastrophe can occur. If one or more of big customers suddenly can’t pay the money owed the business – a business can itself not be able to pay its obligations. If someone’s net worth is tied up in their company, or if they’ve personally guaranteed business loans, a business could potentially lose everything.
2. No type of bankruptcy will eliminate certain kinds of obligations. Some of these obligations are like child support, alimony and most student loans.
3. The trustee may not want your house included in bankruptcy if you’re underwater. The trustee handling the sale of your assets (if any) may decide not to liquidate the home, in which case the debtor gets to keep it.Including your home in a bankruptcy may not be necessary at all. Most states have what thy call a homestead exemption, which in most circumstances allows you to keep your primary residence if your equity in it is below a certain threshold. All states are different: $30,000 for a married couple filing Chapter 7 in Illinois, and $75,000 for the same in California.
4. This could actually improve your credit score down the road. Yes, you could actually improve your credit score by filing for bankruptcy. Keep in mind that a bankruptcy stays on your credit report for 10 years. It’s not automatic, though – in order to increase your score, you need to have a perfect payment history after a BK. However, even with a credit score in the low 700s (which I’ve seen on old bankruptcies) , credit card companies are unlikely to issue you a card until the BK comes completely off your report. A higher credit score will still be enough to qualify you for a mortgage or auto loan, though, even with a bankruptcy on your report.
5. Debt-settlement firms are not an option! You probably know how strongly we feel about debt settlement firms and their dirty ways. You can read more about them in this articles titled “Debt Settlement Companies – Is This a Way to Go?.
6. Better save up before you file. Bankruptcy lawyers can charge up to $2000 to file the paperwork and deal with the bankruptcy trustees. In a strange twist of irony, most bankruptcy lawyers will accept a payment plan for their services. Therefore, you may find yourself going into debt filing a bankruptcy to get out of your existing debts. Like everything else, it’s better if you don’t have to charge your service on a credit card, but pay in cash.
7. Bankruptcy doesn’t have to be the end of the world. The most stressful time with a bankruptcy is the time leading up to it. Feelings of guilt, worthlessness and being hard on oneself are common. The light at the end of the tunnel is coming though – most people feel tremendous relief after the final paperwork is completed.

Did we surprise you with any of this information? Hopefully you will never need to be “surprised”. If you do need to consult this list, we hope you’ve gotten a little education here. In addiction, if you have any more tidbits or can speak from personal experience, let us know by leaving a comment.

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