Although bankruptcy can offer financial protection, the social stigma attached to this option has made it unattractive to some people. Often times, people worry that it will cause their credit ratings to plummet, affect their ability to purchase assets in the future, and prevent them from providing comfortable living situations for their families.
Because of the social stigma, people feel that, by opting for bankruptcy, they are “giving up.” As a result, they experience feelings of failure, guilt, and shame. However, bankruptcy is not surrendering your freedom and well-being; in fact, it is acknowledging a dilemma and resolving it in an efficient and safe way. Contrary to the social stigma, bankruptcy can be a responsible legal option when debt rises at unmanageable rates.
Luckily, bankruptcy has become so socially acceptable that some people opt for bankruptcy protection. Following the 2008 economic collapse, people of every social status noticed that they had accumulated large amounts of debt, largely because of circumstances that were impossible to predict and completely out of their control.
As a result of The Great Recession, consumers became more aware of predatory lending practices, which eventually led them to an even worse financial demise. What is often forgotten is that bankruptcy exists so that it can allow for people to financially stabilize themselves to ease the stress of worrying about creditors day in and day out.
Two of the most common types of bankruptcy are Chapter 7 and Chapter 13. With Chapter 7, people suffering severe debts will sell various assets in order to pay off selected creditors. However, some Chapter 7 bankruptcies are labeled as “no asset” bankruptcies, meaning that no assets are sold in the process. The result of this type of bankruptcy is often liberation of some debt and the principal balance of some unsecured debt, such as credit card balances and medical expenses. For people who have experienced long-term unemployment, medical issues that have prevented them from working, and people with few assets, Chapter 7 bankruptcy might be the most useful and productive way of stabilizing.
On the other hand, Chapter 13 bankruptcy reorganizes an individual’s debt into a more manageable payment plan, which is often organized as a three to five-year plan. This type of bankruptcy has the ability reduce interest rates as well as late fees. Chapter 13 may be useful for majority of people since it is the easiest to qualify for and allows for persons to keep their hard-earned assets, such as their homes and cars.
Anyone Can Find Themselves in Dire Financial Straights
People of all social classes and a variety of professions have sought bankruptcy protection. In fact, an article written by a financial planner emphasized the author’s personal experience with filing for bankruptcy despite the fact that he advised people on their financial matters on a daily business. People of all stages and ranks have suffered through hard times and used bankruptcy protection as their way out. It is important that individuals experiencing large amounts of debt and considering bankruptcy contact an attorney to discuss their particular situation. By doing so, people seeking help are able to decide if bankruptcy is the best option for them.