One of the reasons people hesitate to file for bankruptcy is out of fear. Fear that they won’t be able to buy a house or car after bankruptcy. This fear is exactly what the credit card industry wants. The more people they can keep out of bankruptcy and for a longer amount of time, the better for their bottom line. Unfortunately, what is good for the credit card industry isn’t often what is good for an individual who is struggling to pay bills every month. This is what is known as the fear of the “stigma” of bankruptcy.

Believe it or not I routinely get referrals from car dealerships and mortgage brokers who find it impossible to get a person financed because their credit score is too low even without bankruptcy.

The brokers and salespeople tell them to file bankruptcy first, then they can help them get a loan.

Maybe that surprises you, but I tell my clients that bankruptcy is the first step toward rebuilding credit. Once payments are delinquent, your credit rating takes a hit and getting loans for the things you need already becomes difficult if not impossible.

The first step to fixing this problem is to get out of debt. For those that don’t have rich family members willing to bail them out, or assets they could sell to pay their debts, bankruptcy is many times the best option to get out of debt.

Once the person is out of debt, they can begin the process of rebuilding their credit rating. In addition, many creditors who would not have considered loaning money to you prior to the bankruptcy are willing to do so after bankruptcy because they know you no longer owe any money, so they won’t have to get in line behind your “old” creditors to wait for payments.

There was a good article recently I ran across at MSN money that discussed this very issue. There were some helpful tips that I think go along with some of my prior posts regarding how to select a lawyer.

Here are the suggestions:

1) Don’t dawdle! Waiting until the last minute is never a good idea. Call an attorney when you see the writing on the wall and don’t wait until your back is against the wall with lawsuits and judgments.

2) Unless you know someone who has gone through a bankruptcy and has experienced it, don’t ask for referrals. A person is likely to recommend his general practice lawyer or divorce lawyer who may have little or no experience handling bankruptcy cases. If you know someone who has filed, by all means you should ask them how their attorney performed, but if the person hasn’t filed before they aren’t likely to lead you to a competent bankruptcy lawyer.

3) Ask for referrals from other legal professionals. If you know an attorney, it doesn’t hurt to ask the person whether they know any bankruptcy attorneys or have heard about particularly good attorneys. Our firm, for instance, gets referrals from bankruptcy trustees regularly. One trustee recently commented aloud in front of all the other attorneys “you guys really have your stuff together, I wish all the attorneys that practiced before me did it this way.”

4) Spend a day at bankruptcy court. If you can spend a day at 341 meetings (you can check for a location near you by going to www.usdoj.gov/ust and calling your nearest office and asking where the meetings are held and when) you can observe how all the attorneys interact with their clients and how their cases are resolved.

By Richard K. Gustafson

A lot of people ask me, “can I still get student loans if I file for bankruptcy?” The answer is YES! In fact, the bankruptcy code specifically provides that no governmental unit that operates a student grant or loan program and any person engaged in business that includes the making of loans guaranteed or insured under a student loan program may not deny a grant, loan, loan guarantee, or loan insurance to a person who has filed for bankruptcy or is involved currently in a bankruptcy case [11 USC Section 525(c)].

Thus, as long as you are applying for student aid through a federal government insured program and you otherwise qualify for aid, you can not be denied a grant or loan just because you have filed or are currently involved in a bankruptcy case.