BANKRUPTCY - How will it affect my future???

If I file Bankruptcy now will it ruin my chance to open a business in a few years?

I have heard this type of question many times over the years and my brief answer is that you should be able to start a business with no problem if your bankruptcy actually helps you clear up your financial problems.

Bankruptcy is our way of trying to help people get out of a bad situation. It has two purposes. First, to treat classes of creditors equally (I will explain that in a minute) and, second, to give the debtor a fresh start. Those two words are key to bankruptcy law. We don't believe in putting people who owe money in debtor's prison. We don't want them heavily burdened in a way that is insurmountable. We don't want them to give up. We DO want them to try. We encourage people to risk. So if they make a mistake and overextend themselves, as long as they weren't trying to defraud someone, we will help. If a person gets hit with huge unpayable medical bills or someother emergency, we will help. You can have a fresh start (once every eight years - that time frame changes now and then, right now it's every eight years).

The bankruptcy process allows the creditors to be treated equally. Outside of bankruptcy, it is often the first creditor who sues and goes after the debtor who finds some money. He gets whatever the debtor has and everybody else gets nothing, because there is nothing left. So, we try to obtain some fairness for creditors who find themselves in this predicament.

Now are there some negatives to filing a bankruptcy? Yes, but on balance the positives will generally outweigh the negatives. Usually, someone considering bankruptcy doesn't have a stellar credit rating anyway. Most creditors look at a bankruptcy as someone trying to clean up their record. That's a positive. Creditors also know that someone who files a bankruptcy case can't just turn around and file again in a year. There are time limits that prohibit repeated filings. This tells a creditor (a potential lender) that they will be able to try to collect the debt from you if you fail to pay as required.

The inability to pay a debt doesn't make you a bad person. Some of our best and brightest leaders have had difficulty with money and debt. Thomas Jefferson, a personal hero, was the third President of the United States, the principal author of the Declaration of independence, a horticulturist, architect, archeaologist, paleontologist, author, inventor, founder of the University of Virginia. President Jefferson was in debt to the tune of $107,000 when he died (that would be millions of dollars in today's funds). He spent much of his life trying to hold creditors at bay and resolve his legal debts. He could have used this procedure. You might be another Thomas Jefferson, it doesn't mean you are a bad person. Bankruptcy is a powerful tool, like an insurance policy, that can help you get your financial house in order.

So in a nutshell, I am a true believer in the concept of bankruptcy.