Is There a Stigma Associated with Filing for Bankruptcy?

Interviewer: I think for people that aren't aware of the process and maybe aren't having financial problems, they may view people filing for bankruptcy as taking the easy way out of a problem. There is a big stigma associated with filing bankruptcy. Would you agree, and why do you think people feel so ashamed about having to file?

Most People Try to Take Care of Their Own Problems and Are Embarrassed about Having to File Bankruptcy

Vance: People are embarrassed. We've grown up and we're aged, and you incur debt and you have the mindset that you have to pay your bills. You have to pay for what you get.

While the Information Is Available to the Public, Your Filing Will Not Be Published and Will Not Necessarily Be Widely Known

Bankruptcy is not necessarily public. First of all, it's kept pretty private because when you file bankruptcy it's not really published anywhere in any newspaper or anywhere on the internet.

However, it is public information. Anybody can go down to the bankruptcy court and ask for your file, but naturally nobody knows that you filed bankruptcy.

Interviewer: When you file bankruptcy, will work and your family and friends automatically find out about it? How private or how public is your bankruptcy filing?

A Chapter 7 Bankruptcy Filing Is Considered the Most Private

Vance: A Chapter 7 filing is probably the most private, and Chapter 7 is probably the most common bankruptcy. If you don't qualify for a seven, or your situation requires that you file a Chapter 13, the Chapter 13 trustee in our area that administers the cases does require that, with Chapter 13 you do make payments back to your creditors.

With a Chapter 13 Filing, Your Paycheck May Be Garnished; Therefore, Your Employer Would be Aware of the Bankruptcy Filing

You pay them a specified amount back. It can be 1% of what you owe or it can be 100% of what you owe. But, the Chapter 13 trustee requires that if you are W-2 employee, meaning that you do work for somebody else and do receive a paycheck from somebody, that that paycheck is garnished for the Chapter 13 payment. Just like a child support garnishment.

Paycheck Garnishment Is Not an Uncommon Situation

Interviewer: How have you seen employers react to that? And how have you seen people react to learning that they have to do that?

Vance: As I said, it's like a child support garnishment. Over half the marriages in this country end in divorce, so if you're working for a company where there's more than 20 workers, there's a good chance that half those workers are paying child support.

There's another good chance that somebody has already filed a Chapter 13 bankruptcy and is already being garnished. So it's not as if the employers have not seen this before.