04 May Who Will Know About My Bankruptcy?
Many years ago, a colleague was in a meeting with an elderly woman, who needed to file bankruptcy. He meticulously and thoroughly discussed the process of filing bankruptcy with her, and thought he had covered everything. Then, as she was walking out the door, she stopped and said, “Okay, but I don’t want my creditors to know I’m filing bankruptcy.”
While most people understand that creditors are the ones that have to know about your bankruptcy, many of my prospective clients are worried about who else will find out about their bankruptcy filing. Some are concerned about family or friends, others worry about damage to professional reputation as a result of filing bankruptcy.
Bankruptcy petitions are public record. If someone is determined enough, the information can be found. However, my experience is that such is rarely the case. For the most part, the only people who are going to try to find out about your bankruptcy are those to whom you owe money. There is no requirement that the court or the trustee notify your employer of your bankruptcy, and at least in recent years, very few outlets publishing information about bankruptcy filers.
There may be, however, circumstances that will require you to notify family members or friends of your bankruptcy filing. If you have borrowed from friends or family and that debt is still outstanding, they will be notified like any other creditor. I suggest to my clients that they simply discuss the matter with those folks before filing. And don’t think that I am suggesting that you pay back family members before you file bankruptcy. Any such payments could be recovered by a trustee, which would let the cat out of the bag anyway, and make your friends or family mad at you, too. Consult with your attorney before trying any such pre-bankruptcy planning of your own.
If a family member or friend has co-signed a loan with you, even if you intend to continue to pay the loan, that co-signer is entitled to receive notice of your bankruptcy filing. If you are obligated to pay alimony or child support, the recipient of those payments is also entitled to notice of your bankruptcy filing.
If you are in a Chapter 13, you can have your Chapter 13 plan payment made by payroll deduction, which would give your employer (or at least the payroll department) notice of your filing. Some Chapter 13 trustees and/or courts require payroll deduction, at least when the debtor’s employer is large and sophisticated enough to handle it. Frankly, I think it is advisable in many, if not most cases. Statistically, the likelihood of successfully completing a Chapter 13 increases tremendously when the payments are made by payroll deduction. The benefit generally outweighs the embarrassment many feel about filing.
Finally, there is the chance that friends, neighbors or co-workers will just stumble upon information about your bankruptcy filing. I have had clients run into friends at a hearing in bankruptcy court. That is usually not much of a problem, since most of the people there are in exactly the same position. Recently, I met two clients at court for back-to-back hearings. Upon arrival, it turned out that they not only knew each other, they were stepmother and stepdaughter. Each had filed without the other’s knowledge, on the same day, with the same attorney. As it turns out, they have been a source of support for each other, which brings me to my final point. Over the years I have heard from many clients who have opened up about their financial difficulties to family and friends. They tell me that they received unlooked-for support and help. You may think you are in financial trouble alone, and you may even think no one you know has ever filed bankruptcy, but it’s not true. Bankruptcy is not a subject most people are comfortable talking about, but there are fine, upstanding, well-respected people in every community who, through bad luck or bad timing, have been forced to seek bankruptcy protection. You may well be able to keep your bankruptcy secret, but, in my opinion, you don’t really need to. Bankruptcy may be a necessary evil, but it’s not a dirty word.
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