Reasons not to file Bankruptcy

This article addresses individuals and organizations overwhelmed by debt. Banks and financial institutions invest significant resources in discouraging people from filing for bankruptcy. However, upon closer examination, these “reasons” are often biased toward the big money industry. Let’s debunk some common misconceptions.

It is an Admission of Failure

Using our American Bankruptcy laws recognizes that debts have overwhelmed your life. The burden of debt prevents you from having a decent quality of life and a secure financial future for yourself and your family. Rather than a failure, it is the bold beginning of a FRESH START. From here, you control your money, not banks and creditors.

I will never be able to establish credit after bankruptcy

Not true. Establishing or reestablishing your credit will be easier. Here’s why:

  1. With no debts, your credit score may well increase.
  2. If you take a short-term hit on your credit score, it will be rebuilt rapidly.

By consistently paying bills on time and responsibly managing new credit, your credit score can rise to the 700s in 12 to 24 months.

After bankruptcy, I won’t be able to buy a car or a house


Many of my clients finance a car purchase immediately after filing Chapter 7.

Numerous former clients have become homeowners within two to four years.

I will lose my property in a bankruptcy case

Illinois has exemptions that allow you to keep your personal property.

Individuals are seldom at risk of losing any personal property. The services of an experienced lawyer can advise you on whether any of your personal property is at risk. In those rare instances, your lawyer will show you how to handle your debts and keep your personal property.

Likewise, Illinois has homestead exemptions.

For homeowners, it is more of a challenge. Illinois has skimpy Homowner’s exemptions. Again, experienced lawyers know how to manage debts, and you keep your home.

I will lose my job if I file for bankruptcy

False. Federal laws prohibit discrimination by either a private or a government employer because of your bankruptcy. You can’t be fired or otherwise denied work because you have debts.

I will lose my Pension, IRA, or 401(k)

No. Under the Employee Retirement Income Security Act (ERISA), your retirement accounts are exempt from debt collectors. Bankruptcy will not jeopardize your retirement savings.

I Can’t File for Chapter 7 Bankruptcy If My Income Is Too High

There is a Means Test to determine eligibility for Chapter 7 bankruptcy, but only a tiny percentage of applicants have incomes that exceed the specified thresholds. Skilled legal professionals can assist “High Earners” overcome the Means Test. If Chapter 7 is not feasible, Chapter 13 bankruptcy remains an option, and many clients in this category still pay only a fraction of their unsecured debts.

Income taxes can’t be discharged in Bankruptcy

This statement needs to be corrected. Income tax debts over three years old will be discharged in bankruptcy, providing a potential solution for individuals burdened by tax liabilities.

You can deal with the IRS directly or include these taxes in Chapter 13 for taxes that can’t be discharged.

Not all debts are dischargeable in Chapter 7

This is true. The main exceptions are Child support, most student loans, and some IRS debts.

You will have to deal directly with these creditors. Or you can include back Child Support and the IRS in Chapter 13. Student Loan debts will not be collected while a person is in Bankruptcy.

Parking Tickets (and Red Light and Camera Tickets)

Parking Tickets are not discharged in Chapter 7.

They are dischargeable in Chapter 13.

Chicago Parking Tickets. Chicago has its Fresh Start program in conjunction with Chapter 7. Tickets older than three years can be waived. The city will offer a payment plan for younger tickets and remove all late payment penalties.


Lawyers who practice in the Bankruptcy Court are a phone call away.

Please take advantage of their expertise and experience, all offered for FREE!

If you are still determining if Bankruptcy is best for you, a lawyer can help you better understand.

The law firm of ROBERT J. ADAMS & Associates is here to help you.

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