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Who will find out if I file bankruptcy?

Personal bankruptcy cases rarely come to light outside of legal circle.

Bankruptcy, while a public court action, rarely becomes known outside of the parties - the attorneys, the creditors and the debtors - who are directly involved.

It's true that when a bankruptcy is filed, it becomes a public record within the U.S. Bankruptcy Court and can be made available to anyone. But unlike many other legal actions, bankruptcies aren't usually published in newspapers.

"If you file bankruptcy, your creditors and the bankruptcy court will know, but your family, friends, and employers often do not have to find out," according to TotalBankrupcty.com. "Technically, your bankruptcy becomes a public record, so it is conceivable that other people could discover your filing. This process, however, usually involves a lot of paperwork, and most people do not take the trouble to rifle through bankruptcy records."

News of the bankruptcy will become known to those who have reason to check the debtor's credit history where the bankruptcy will be listed. Those cases involve any creditor to whom the debtor applies for a new loan or credit card. Also, for debtors who are job-hunting, some potential employers are starting to include a check of the applicant's credit history along with references, past employers and eductional institutions. However, employers are prohibited from discriminating against individuals who have filed bankruptcy, the website states.

A major fear by those filing bankruptcy is that family and friends will learn of their financial problems. While that may be true of those who have co-signed a loan with the debtor and are contacted by the court as a potential creditor, family and friends aren't notified of a bankruptcy unless there is a direct reason why they should be involved.

North Carolina attorney Adrian Lapas wrote on BankruptcyLawNetwork.com that there are cases in which it is important to notify family members of a planned or pending bankruptcy, including instances when an aging parent transfers or "deeds" a property to the individual.

"Obviously, with this asset transferred to you, it may affect your bankruptcy case and just as importantly, affect the property that your family member transferred to you," states Lapas. "Sometimes the parents will 'deed' the property to their children with the understanding that they can live in 'their' home for the rest of their lives. However, if one of the adult children files bankruptcy, this 'remainder' interest in real estate becomes an asset of the estate and could be sold to pay creditors."

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