When you file a Chapter 13 bankruptcy it will affect your personal life and your credit report. You may feel ashamed that your financial situation has taken a turn for the worse and want to keep it private. But there are certain people who should know about your Chapter 13 Bankruptcy

This blog post will discuss privacy and disclosure issues involving a Chapter 13 Bankruptcy payment plan. It will discuss who should know about your Chapter 13 bankruptcy and who doesn’t need to know. It will also touch on the effect of your bankruptcy in future interactions with banks, creditors, and other financial institutions.

Filing a Chapter 13 bankruptcy is a big decision. It is a commitment to live within a set budget, repay your creditors according to your bankruptcy payment plan, and not take on any additional debt for the three to five years it covers. While there are many good reasons to file for bankruptcy, some people are ashamed to admit they cannot keep up with their payments. They would rather keep the information private while they go through the payment plan process. That is a good idea in general. However, there are some people who simply should know about your Chapter 13 bankruptcy.

Who to Discuss Bankruptcy With Before You File

The decision to file a Chapter 13 bankruptcy usually doesn’t happen overnight. Before beginning the bankruptcy process it is a good idea to discuss the matter carefully with an experienced bankruptcy attorney, and with your spouse and other immediate family members.

You don’t have to worry about privacy when you discuss the possibility of bankruptcy with a lawyer. Even if you decide not to file, your secrets are safe, protected by attorney-client confidentiality. Your lawyer is not allowed to discuss your financial situation, or your case without your consent, except if ordered to do so by the court.

It is important to talk to your spouse and family before you decide to file to be sure they are committed to helping you keep your payment plan. A successful Chapter 13 bankruptcy depends on you making your monthly payments. You need to know everyone is able to live with the budget you set out.

Who Finds Out About a Chapter 13 Bankruptcy When It Is Filed

You may want to keep your Chapter 13 bankruptcy private, but there are some people who will find out automatically when it is filed. Part of the bankruptcy trustee’s job is to send out notices to all your creditors including:

• Mortgage holders
• Credit card companies
• Banks where you have a loan
• Auto dealerships where you pay leases
• Landlords for residential leases
• Commercial creditors if you have signed on as surety

Not all of these creditors’ accounts will be addressed or resolved through the Chapter 13 bankruptcy payment plan, but their payment schedule may be affected and the Bankruptcy Code says they are entitled to formal notice.

A bankruptcy filing is also technically a public document. If someone wanted to, he or she could comb through the U.S. Bankruptcy Court files to find out that you have filed for bankruptcy and see the related court filings. In reality, this very rarely happens. Generally, the only people who will find out about your bankruptcy are the creditors affected, the court staff, and the people you tell directly.

Who Should You Tell About Your Chapter 13 Bankruptcy

There are a few people who should know about your Chapter 13 bankruptcy that will not receive automatic notice. These are people who could be affected by your decision to file or the creditors’ inability to collect their debts from you in full.

Separated & Divorced Spouses

If you are considering, or have gone through a divorce, your ex-spouse is probably the last person you want to know your financial situation. However, when you file any form of bankruptcy, your separated or divorced spouse is at the top of the list of people who need to know. This is because if any of the debts covered by your Chapter 13 bankruptcy payment plan were “marital debts”, your creditors could try to pursue collections from your ex-spouse to make up amounts owed but not paid. Most Judgments of Divorce include orders that say each spouse will “indemnify” or “hold harmless” the other spouse for debts taken on in the divorce. That means if you don’t tell your spouse and he or she ends up getting sued, you may have to pay for his or her attorney fees as well.

Business & Investment Partners

If you own a business or have invested in a company, your partners may need to know about your Chapter 13 bankruptcy. Any bankruptcy has a significant negative effect on your credit score. Increasingly, business loan officers are looking at each partner’s personal credit history in deciding whether to offer money to companies looking to grow. If you don’t tell your business partners about your bankruptcy, it could come up later when you find a business loan has been denied.

Employers & HR Departments

You may or may not want to inform your employer about your Chapter 13 bankruptcy. On the one hand, your bankruptcy trustee may use an income withholding order to make sure your creditors get paid every month. This order is sent to your employer, instructing them to pay a certain amount to directly the trustee, rather than to you. It may be a good idea to tell your HR department to expect the order and what to do when they receive it.

However, if you are looking for a new job, you probably don’t want to disclose your bankruptcy before you are hired. The U.S. Bankruptcy Code says your employer can’t fire you because you filed for bankruptcy. But when it comes to hiring, the same law only applies to public employers (like government offices or agencies). If you are applying to private companies, you may not want to tell them you have filed a Chapter 13 bankruptcy until after you have been hired.

Filing for bankruptcy is a difficult and very personal decision. Whether a Chapter 13 bankruptcy is right for you depends on your long-term goals and your present financial circumstances. But there are some people who should know about your bankruptcy. If you are questioning whether to tell someone, talk to your bankruptcy attorney to decide whether it is something they need to know.

At John A. Steinberger & Associates, P.C., we are a full-service bankruptcy law firm in Southeast MI. We help debtors and families in Southfield, throughout Metro Detroit, and in the surrounding communities see their Chapter 13 bankruptcy through from start to finish. If you think a Chapter 13 bankruptcy might be the best financial decision for you, call us toll-free at (866) 690-2140 or contact us online to schedule a free initial consultation.