Bankruptcy and Bank On

Q:  If I file for bankruptcy, can Bank On help me?

A:  There are a number of our Bank On Hampton Roads participants that are either considering bankruptcy or recovering from bankruptcy when they begin so my message to you is that you are not alone.  Bank On Hampton Roads can be helpful for the overall assessment of your financial situation and help you determine if you have any alternatives to bankruptcy. The Bank On lesson entitled “Crisis Mode” helps you to navigate through situations where income is not sufficient to pay your creditors.  By having a plan in advance to prioritize payments and negotiate with creditors, you may be able to avoid a crisis situation altogether. 

Bankruptcy may provide temporary relief at a cost.  Bank On Hampton Roads will help you develop the capability to break the debt cycle and keep you from building more unnecessary debts.  With the help of your coach, you will examine the underlying causes of your debt, so you know and understand how you ended up in your current financial hardship and build a plan to prevent future problems.

There are a number of legal resources to help you determine if bankruptcy can help you including legal aid if you are eligible and the legal referral hotline (757) 623-0132 if you are not.  If the debts are owed to government as in the case of tax debts and student loans, they may not be eligible for inclusion in bankruptcy.  Another thing to consider is that not all bankruptcies will eliminate your debts.  Most offer a repayment plan that allows you to repay the debt over time. 

Beyond the cost of a lawyer and court costs, there will likely be some lasting costs to your credit.  A bankruptcy will appear on your credit report for a number of years and can make it more difficult to obtain housing, transportation or even buy insurance.  The cost of borrowing will likely increase because of the negative impact bankruptcy has on your credit score.  This negative effect will decrease over time and eventually the record of your bankruptcy will get dropped altogether from the credit report.

Posted by Gary Katz, Bank On Coach