Paying for gender transition: Bankruptcy as a last resort

I’ve heard people in transition say, “Well, I’ll get it all done and then just declare bankruptcy.”

You never “just” declare bankruptcy. Even bankruptcy comes at a price, and often a very high one. In some cases, bankruptcy can be a good option, but I would advise on saving it for a last resort. The results are long-lasting and far-reaching.

Bankruptcy is a perfectly legal procedure and is your right. Many of us wouldn’t even have to consider bankruptcy if our insurance companies covered transition costs.

However, planning on bankruptcy is not a wise financial plan (if you can even call it a plan). If you decide to plan on bankruptcy, you need to have a very specific plan in place, and you’ll need to do that on your own.


I am not a lawyer or accountant, and laws vary significantly by state. You will need to find out how bankruptcy law is applied where you live. The following information is very general and vague, since much will depend on your situation and where you live.

Bankruptcy can be either voluntary (your choice) or involuntary (brought on by creditors). It can also be brought on if you have transferred money to hide it from creditors or are adjudged to have favored certain creditors prior to bankruptcy.

The US has one of the most lenient bankruptcy systems in the world, unlike, say, debtors prisons and fun things like that. In fact, an Act passed in 1978 made these laws even more lenient. While this was done to help businesses not be punished for unintentional business failure, it also had the effect of drastically increasing the number of personal bankruptcies. The increased availability of unsecured credit and the conspicuous consumption of the 1980’s caused personal bankruptcy filings to quadruple since 1981. One out of every 10 adults has filed bankruptcy in the 1990’s.

In fact, the enormous increase in bankruptcies led to proposed legislation in 1998 to curb bankruptcy abuse. If it passes, there will be significant restrictions placed on bankruptcies, including special rules depending on your income level.


A bankruptcy stays on your credit report for 10 years, making it difficult to:

  • acquire credit
  • buy a home
  • get life insurance
  • get a job (in some cases)

Bankruptcy is done in federal court, and the filing fee is around $160, not including any attorney’s fees. There are two kinds of personal bankruptcy:

Chapter 13

  • This is also known as reorganization, and allows debtors to keep property like a mortgaged house or car. It often lets you repay on a default for three to five years instead of forfeiting property. However, if you can’t come up with an acceptable plan to catch up on your debt, you can kiss that house or car goodbye.

Chapter 7

  • This is straight bankruptcy or liquidation, where they sell off all assets not exempt in your state. You might be able to keep work tools and basic furniture. The court may sell your property through what is known as receivership or turn it over to creditors. You can only file Chapter 7 every six years.

Both types of bankruptcies might do the following:

  • get rid of unsecured debt (stuff like credit cards which require no collateral)
  • stop foreclosures
  • stop repossessions
  • stop garnishments
  • stop utility shutoffs
  • stop debt collection

It will probably not erase obligations like:

  • child support
  • alimony
  • fines
  • taxes
  • some student loans

Bankruptcy resources

Again, I urge you to look into other options before bankruptcy. Here’s a few places for more info on what you might expect in your own case.

Federal Trade Commission ( (

  • Founded in 1974 as Consumer Credit Counseling Service, is a national non-profit organization with local offices around the nation. I used them and find them to be excellent. Phone: 800-388-2227.

American Bankruptcy Institute (

  • The American Bankruptcy Institute has a good page of basic terms, and an overview of Chapter 7 and Chapter 13 bankruptcies. I also recommend looking at their page on consumer options, which has a great basic Q & A. Phone: 703-739-0800

Next: Your four options