If I File For Bankruptcy, Who Will Find Out?
The “b-word” is enough to send some people scurrying under the table in distress simply because of its enormous shame factor. Suffice it to say, for many people, the idea of making their personal or consumer bankruptcy public knowledge to their friends, family, faith communities, office, and city is enough to make them want to disappear into the African bush for a long, anonymous safari. Chances are, if a person is declaring bankruptcy, they don’t have the kind of funds necessary for a safari, anyway – so to avoid unnecessary flight, we will clear up some misconceptions about the publicity of bankruptcy.
The amount of publicity you receive for your bankruptcy will largely depend on what kind of public profile you already have. Obviously companies like General Motors and celebrities like Elton John were unsuccessful at staying under the radar. Thankfully, most people aren’t General Motors or Elton John.
Isn’t bankruptcy a matter of public record?
When an individual files for personal or commercial bankruptcy, the documents are available to the public through the local bankruptcy court’s clerk’s office, or online for viewing 24/7. Of course, that doesn’t mean everybody is going to look up your bankruptcy – unless you send them hunting for it.
A certain number of people will have to know about your bankruptcy because the reason you’re in trouble involves not paying certain people back. Those people will know. But other than your direct creditors, the circle of people aware of your situation may be surprisingly small.
What about everybody else?
Family and friends? Unless you owe money to them, or unless they have co-signed loans for you, family and friends should not receive any official notification about your bankruptcy. Bankruptcy is not like a wedding or graduation announcement that gets sent out to a group of people. Of course, you can inform them yourself about your insolvency, but there is no reason they have to know if it does not affect them.
My employer? Your employer will find out about your bankruptcy only if you have a wage garnishment, which involves a portion of your paycheck being withheld to pay your creditors. But in this case, by law your employer cannot fire you, so your job will be safe – and your employer doesn’t have to spread the news around the office.
My creditors? Your creditors are really the largest group that is aware of your bankruptcy. Once you file bankruptcy, the creditors you have listed will receive notification. This is when an automatic stay goes into effect – your declaration, or bankrupt status, protects you from harassment from your creditors. So even though they are aware of your bankruptcy, by law, your creditors should not bother you. If they do, you have legal rights to ask them to stop – and they by law must comply.
Credit bureaus? Yes, unfortunately – when your creditors find out about your bankruptcy, they’ll notify your credit bureau, who will list this on your credit report. The bankruptcy could stay on your credit report for up to a decade.
My community? Again, unless certain individuals or businesses in your community are your creditors, the community has no need to know about your bankruptcy.
Media? Frankly, newspapers have enough to print without listing the enormous amounts of bankruptcies, although some local, small-town newspapers do list bankruptcy information. Corporate bankruptcies are more commonly published in journals or business magazines, but consider the crowd who will be reading those. Suffice it to say, if you live in Cleveland or Denver or New York City, you’re not going to see your little personal bankruptcy in your morning news.
The government? The president will not show up on your doorstep to chastise you, nor will your governor or mayor or anybody else who is not a creditor or court personnel. Remember, only those involved in your bankruptcy will be notified. The government will only catch wind if they are a creditor.
All in all, there is little reason to be too anxious about your bankruptcy going viral unless you are a high-profile person or company. And even then, bankruptcy is part of life – many, many individuals and businesses go through it only to rebound successfully and experience financial success. Remember that a large part of the publicity for your bankruptcy will simply be you yourself telling people in your life – and that’s a decision you get to make.