Feb 12, 2009 6:40 am US/Eastern
When Should You File For Bankruptcy?
BOSTON (WBZ) ―
Going bankrupt is something that most of us can't imagine. But it's a harsh reality today with filings in Massachusetts up 40 percent from last year.
Many people are too proud or too ashamed to take this step, but sometimes it's the smartest move you can make.
That's what Chef Manope found out. He owned his own restaurant in Sudbury and a home in Wayland.
But when the economy fell apart, so did his life.
"It is very hard. I never thought I would find myself in this position," said Manope.
He tried to keep the restaurant going, borrowing on his good credit. It was money down the drain.
"I started to get a lot of phone calls from creditors. I couldn't get any money from anywhere."
He filed for bankruptcy protection.
Bankruptcy laws are there to help everyone who finds themselves in Manope's position, said Boston bankruptcy attorney Richard Ravosa.
"It gives someone a second chance, a fresh start."
Ravosa says shame often stops people from using this option.
"The stigma is, I couldn't make it on my own," he said. "I'm a failure."
There are serious consequences to bankruptcy, says Frank Morrissey, who teaches bankruptcy law at Boston University.
"Bankruptcy is noted on your credit report for up to 10 years, and many people who file for bankruptcy relief have a hard time getting credit following bankruptcy," Morrissey said.
Those are good reasons to try to stay away from bankruptcy court. But as more people reach their breaking point, they're learning it may make sense to pursue what was once a real embarrassment.
"It's not the end of the world like many people think it is," says Ravosa.
REASONS TO FILE:
Retirement Funds Protected
One good reason to file for bankruptcy is because it stops creditors from getting at your retirement funds.
You don't have to lose your future to pay for the present.
Medical Bills Forgiven
You won't have to forgo medical care because of the cost.
Keep Your Property
And in many cases, bankruptcy can help you keep your property, including your home and your car.
Manope's home had already been listed for auction in the classified ads but filing for bankruptcy stopped the foreclosure.
The cost of bankruptcy is paid by all of us in higher credit card fees and mortgage interest rates, but it's there for a reason.
"The person who is pointing the finger and saying 'look at you, you're filing,' that person may need to file bankruptcy in their life," Ravosa said.
Manope is now a chef in someone else's restaurant, and he has also started his own Thai food catering business. He now understands why it's called bankruptcy relief.
"There is no more stress, and everyone says, you are looking happy and I say, 'Yes, I am happy.'"
WHAT YOU STILL MUST PAY
Debts you still have to pay, even if you do file for bankruptcy, are state and federal taxes and student loans.
E-mail Manope to learn more about his catering business
Get specifics on
how to file for bankruptcy.
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