By Megan Sayles
AFRO Business Writer
msayles@afro.com
The idea of bankruptcy is scary for most people. Many may associate it with utter financial ruin, irreparable damage to credit scores and denied loans in the future. Some consider the act of filing bankruptcy shameful and fear possible judgment from friends, family and colleagues.
But, bankruptcy is not an evil word. In fact, it’s designed to relieve people from the pressures of insurmountable debt. The AFRO recently connected with attorney Ebele Ebonwu, an associate in Gordon Feinblatt’s Financial Service Group, to discuss what to do in the face of bankruptcy.
Q: How can people avoid bankruptcy?
A: Live beneath your means, take credit counseling and make good financial decisions. You should ensure you know the state of your credit at all times. I know some people cannot avoid borrowing, but make sure you aren’t borrowing at every turn.
Bankruptcy can take a toll on your life. You can lose your hard-earned property and home, depending on the type of bankruptcy you’re filing for. You have to mind your finances and pay particular attention to how you’re borrowing because creditors will come after you to the extent that they are secured.
Q: What are the primary influences that drive people toward bankruptcy?
A: I think a lot of people don’t have a good understanding of savings. All kinds of people are in bankruptcy, and there are even millionaires in bankruptcy. I don’t think a lot of people are taught how to manage their finances and put money away for themselves at a young age. They don’t know how to live below their means and how to avoid relying on credit society. If people start to learn those skills earlier in life, they will be in a better position.
There are other factors that can throw you into bankruptcy too. It’s not just about money habits. Unfortunately, we’re in a country where a lack of quality healthcare can upend your life. You could be in an accident while you’re two paychecks away from bankruptcy. A loss of a job can also send you into bankruptcy. It’s good to prepare for the possibility of these catastrophic events.
Q: If you’ve already filed for bankruptcy, what are some immediate steps you can take to manage the situation?
A: I find that some people file bankruptcy when they owe very minimal amounts of money. Don’t do that. There are ways you can reorganize your finances. You may be able to talk to your lenders and make workarounds or sign other agreements to manage your debts better.
If you decide to file for bankruptcy, you should get a good attorney. Bankruptcy is technically supposed to make your life better. It should lift the burden off your shoulders, and, in some cases, it helps you save your home. Picking an attorney who is going to understand this and can bring you to the lighter side of debt relief is really important. You should look for someone who’s primarily practiced bankruptcy law for a long time. You don’t want someone who does it part time and doesn’t have a genuine interest in it.
The responses above have been edited for length and clarity.
Megan Sayles is a Report for America corps member.
