George Kamel - What Nobody Understands About Bankruptcy (Until It's Too Late)

Starting point is 00:00:05 The number of people filing for bankruptcy in the U.S. has skyrocketed over the past year, making it almost as trendy as turning movie theaters into war zones during the Minecraft movie. What have we done to the children? What's going on? And this bankruptcy trend is far more alarming, because a lot of those people probably didn't understand exactly what this financial eject button meant for their future. So today, we're going to break down bankruptcy from top to bottom. And by the end of the video, you'll understand exactly what it is, what it is, when it is. isn't and when it makes sense as an absolute hell-marry last resort if you're struggling with debt. All right. So lots of people these days are under the impression that bankruptcy is a

Starting point is 00:00:44 magic wand you can wave to dump all your debt and start over with a clean slate. Case in point, I recently took a call on the Ramsey show from a guy who tried to file bankruptcy over 12 grand in debt. You heard that right. Roll the tape. I talked to try to file bankruptcy. That cost over two grand, so I didn't do it. They estimated me at about $12,000. in debt, and that's including her car. I don't have one. You tried to file bankruptcy over 12 grand? Yeah. Clearly, my man Alan fell for the myth that bankruptcy is a big old helping hand

Starting point is 00:01:19 in a time of need, when in reality, bankruptcy is more like gas station sushi, that desperate and pulsive decision that ends up being a real pain in the assets. You didn't know, you didn't know, but it's a family-friendly show, and assets is actually the right financial term there. So, double win. Mr. Smoddy Band. Yet in March of 2025, total individual bankruptcy filings rose to nearly 50,000,

Starting point is 00:01:47 which is a 13% increase from the previous year. That's frightening. So why are so many more people filing for bankruptcy? Well, my guess is that a lot of them are like Allen. They're stressed about their debt situation, they've heard about bankruptcy as a shortcut to wipe their debts out, and they dive headfirst without fully understanding how destructive it can be.

Starting point is 00:02:04 So to make sure you don't wind up in the same boat, let's break down what bankruptcy is and is not. Essentially, bankruptcy is when you legally say, I can't pay my debts, and the court steps in to decide what happens next. Now, there are lots of different types of bankruptcy, but the most common one is Chapter 7. It makes up 57% of all bankruptcy filings, and it's the one most people are referring to when they talk about bankruptcy. So here's how it works. Once you file for Chapter 7 bankruptcy, you're assigned a bankruptcy trustee who will take a long, hard look at your liabilities, which is what you owe, and your assets, which is what you own. They're basically a financial

Starting point is 00:02:38 financial chaperone from the court system. And a very invasive chaperone at that, because there is zero privacy and bankruptcy. So your trustee will want to see everything, financially speaking. Nobody really wants to see that. If the trustee determines you really can't pay back what you owe, the court might wipe out some of your debts.

Starting point is 00:02:58 But first, they look at every single thing you own and make you sell a bunch of stuff to pay back your creditors. That's called liquidation, which is a fancy word for Goodbye Xbox, Hello Pond Shop. And if you've got secured debt with collateral, like a mortgage or an auto loan, you don't just get to keep the house in the car because you're nice and smile a lot. If you want to keep the item, you have to keep the payments. And that means if you want to continue driving your car, you've got to keep paying for it even after filing bankruptcy.

Starting point is 00:03:24 Once you've sold everything that isn't bolted to the floor, the court will usually erase any remaining unsecured debt that isn't tied to an actual piece of collateral. But there are some exceptions. Because while Chapter 7 bankruptcy can clear certain types of debt, like credit card debt, medical bills, and personal loans, it is powerless against some other debt categories. Specifically, bankruptcy will not wipe out student loans, IRS debt, child support and alimony, and court fees. It also won't wipe out your deep-seated fear of money. That's chromatophobia, and it will take a good bit of therapy to solve that one. Now, like I mentioned earlier,

Starting point is 00:03:58 there are several types of bankruptcy beyond Chapter 7, but the only other one that's worth going over is Chapter 13. And all you really need to know about Chapter 13 bankruptcy is that it's basically useless. And that's because it's not much more than a repayment plan organized by the government. It doesn't actually wipe out any of your debt. It just lays out a program for you to repay everything, which you can do all by yourself. And beyond Chapter 7 and Chapter 13, it gets super niche and only applies to special groups like business owners and people who owe money to other countries. There's even a type of bankruptcy specifically designed for family farmers and fishermen, which happens to be my second and third backup career options if this whole YouTube thing doesn't work out. Leave a comment

Starting point is 00:04:36 if you can guess number one. Do you know what I'm thinking? Seriously? But if there's one thing all types of bankruptcy have in common, it's that for most people, it's like eating a metric ton of pasta before running a 5K. Wrong tool for the job.

Starting point is 00:04:48 Specifically, bankruptcy sucks as a financial parachute for five main reasons. Let's go over them. Reason number one, it becomes public record. Bankruptcy is as public as Elon and Ashley's tax convos, which means anyone, including potential employers, landlords, and nosy friends can see that you filed.

Starting point is 00:05:05 And it's not exactly the kind of of transparency you want when applying for a new job or trying to rent an apartment. Because, spoiler alert, landlords aren't a big fan of the old Chapter 7. Reason number two, bankruptcy sucks? It's expensive. Like our friend Alan discovered, bankruptcy ain't cheap. For starters, you'll have to pay a filing fee, which comes out to $338 for Chapter 7 and $313 for Chapter 13. That feels on the nose. But that's just the beginning. Because unless you moonlight as a bankruptcy attorney, you'll probably need to hire one. And that can cost somewhere in the ballpark of $4,000 or more if you've gotten an especially complicated case.

Starting point is 00:05:40 Which means you're not only broke now, you're also paying thousands for the privilege of telling the world about it and dealing with the legal system. And you can accomplish all of that for free with a Facebook post and a misdemeanor. But I didn't encourage it. I'm a man of the people and a man of the law. You just told me to do it. Reason number three, bankruptcy sucks. It decimates your credit score. Now, look, you probably know my feelings about credit scores.

Starting point is 00:06:01 I think they're a terrible indicator of how well you're doing financially, and I think you'd be better off without one. But a low or bad score can be a real problem, and that's often where a bankruptcy leaves you. And you're not going to get out of it anytime soon because the Chapter 13 sticks around for seven years, and Chapter 7 bankruptcies stay on your credit report for 10 years. And 10 years is a long time. I mean, think about this. Ten years ago, we were all watching viral vine videos and listening to Uptown Funk. It's a different time we live in.

Starting point is 00:06:28 But for real, you don't want to walk around with the financial equivalent of the scarlet letter for an entire decade. Reason number four, bankruptcy sucks. It makes home ownership hard to come by. Bankruptcy makes you radioactive to mortgage lenders. Think of it like trying to date again after cheating on your last four partners. Lenders are skeptical, as they should be. And while it's not impossible to buy a home after going through bankruptcy, it could take a few years before anyone will even think about letting you take out a mortgage.

Starting point is 00:06:58 And how soon you can qualify, again depends on the type of. of bankruptcy you filed and the type of mortgage you're looking at. And finally, reason number five bankruptcy sucks. It doesn't actually fix everything. Most people don't realize that bankruptcy doesn't wipe out all of your debt. Like we talked about earlier, stuff like student loans, alimony, child support, and most government debts aren't going anywhere. In other types of debt, like credit card debt, medical bills, won't get discharged until you've sold a bunch of your assets. So after all the paperwork, the court appearances, the credit damage, the emotional trauma, you're likely still on the hook for the stuff that got you into trouble in the first place. And most of all,

Starting point is 00:07:33 it doesn't fix the behavior that got you here. So the bottom line, bankruptcy is not a financial reset. It's a financial face plant. You don't start fresh. You start from the basement. But I've got good news. Odds are you don't need to file bankruptcy to clean up a big financial mess. What do you need to do instead? You need a proven financial strategy I call literally anything else. Seriously, you need to explore every alternative that isn't illegal or unethical before filing for bankruptcy. And I'm going to give you five of the most effective ones in just one second. But before we go over the alternatives to bankruptcy, I want to give you an alternative to letting your savings collect dust at a brick-and-mortar bank. And that is by opening a high-yield

Starting point is 00:08:09 savings account with online bank Laurel Road, a sponsor of today's video. You see, the money you put into traditional savings accounts will typically grow at the speed that paint dries. But Laurel Road offers competitive top tier interest rates that will let your money grow way faster. Plus, there's no minimum balance to open an account, your deposits are FDIC insured, and best of all, Laurel Road will never charge you any monthly maintenance fees. So open an account today by going to Laurelroad.com slash George or click the link in the description below. Okay, here's how to get your head above water without filing for bankruptcy.

Starting point is 00:08:40 Number one, negotiate with your creditors. Listen, creditors would rather get some money than no money. So they're usually open to working something out, especially with medical bills or miss payments on things like your mortgage. So get on the phone, ask about forbearance, interest rate reductions, and low in modifications. Number two, work with a financial. financial coach. A good coach can help you see the full picture, make sense of your options,

Starting point is 00:09:03 give you some hope, and create a step-by-step plan to move forward without resorting to bankruptcy. They will bring clarity to the chaos, and sometimes that's exactly what you need when your brain is screaming, I give up. Whether it's prioritizing bills, figuring out how to talk to creditors, or building a realistic plan to catch up, a coach helps you make progress faster than trying to DIY your way out of this. And if you don't know where to start, you can schedule a free call with a financial coach that I recommend using the link in the description below. Moving on to number three, lower your expenses. Look, if you're drowning in debt, this is the time to take a sludge hammer to your spending, which is likely what got you

Starting point is 00:09:36 into this mess in the first place. If a line item in your budget doesn't feed you, shelter you, light your house, or get you to work, it needs to go. And listen, this isn't forever. It's just a season. Once you get back to some solid ground, some good financial foundation, you can slowly start adding some of the wants back to your budget. Number four, sell everything you can. Pretty much everyone has a bunch of stuff collecting dust that someone else would gladly overpay for on eBay or Facebook Marketplace. So get to selling. Everything you don't absolutely need for survival must go. Don't let a bankruptcy trustee decide what you keep and what gets sold when you can handle that yourself. And finally, number five, increase your income. Now this one

Starting point is 00:10:14 might seem obvious, but if you're staring down the barrel of a bankruptcy, you need more money and fast. And that might mean changing jobs, picking up a side hustle, working extra hours, or selling plasma like a college kid before spring break. Yes, you will be tired, but you'll always also earn yourself some extra breathing room. And at the end of the day, just remember that bankruptcy should be a last resort if all else fails, not a first reaction when you find yourself backed into a financial corner. You have other options. It's not just A or B.

Starting point is 00:10:40 Every one of these steps gives you the power to fight your way out instead of giving up. So stop thinking bankruptcy and start thinking battle plan. Because like I told Alan on the Ramsey show, bankruptcy is not your answer. You are the solution to this problem. And whether you've thought about bankruptcy or you just want to do better with money, you want a clear path to wealth with zero debt, be sure to check out my book, Breaking Free from Broke. It's also available as an audiobook read by yours truly.

Starting point is 00:11:03 You can check it out with the link in the description below. Now, the tips we just went over will help you stop drowning in your debt. But what if you got rid of it for good? Now, you may not think it's possible right now, but I promise it is, and I made this video breaking down the best way to pay off your debt once and for all, no bankruptcy trustees needed. It's a plan that millions of people, including me,

Starting point is 00:11:22 have used to become debt-free. So keep watching to check it out, or click the link in the description below. That's all for today. Thanks for watching. We'll see you next time.

George Kamel - What Nobody Understands About Bankruptcy (Until It's Too Late)

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