Should I consider bankruptcy?
This is a loaded question for most of my clients. The initial discussion of bankruptcy relief can lead to negative self-judgment regarding the handling of finances or often brings up feelings of failure. I’ve had a number of clients say they feel like they are giving up, taking the easy way out instead of fulfilling their moral obligation to pay their debts.
I try to meet these objections with logic and alternative viewpoints, but it’s hard to overcome preconceived ideas of bankruptcy. One thing I stress to each client is that bankruptcy is not a personal failure, it is not shameful and it is not illegal.
Congress enacted the Bankruptcy Code in 1978, but bankruptcy law traces its roots far deeper in American culture than 1978. The initial bankruptcy law was enacted in 1800 and allowed only for involuntary bankruptcy filed against a debtor by his creditors. That law was repealed in 1803 and thus began an evolution of legislation through the 1800’s, all of which was replaced by the Bankruptcy Reform Act of 1978, then again in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act signed by President Bush.
The purpose of the history lesson is to illustrate that the legal concept of bankruptcy has been well thought out and developed gradually over the last 210 years. Bankruptcy is not a fly by night scheme dreamed up to bail us out of the current financial crisis. In enacting the bankruptcy code congress has acknowledged that there are a wide variety of circumstances where bankruptcy can assist an individual or business discharge debts and become solvent again. Being solvent means that the consumer or business can rebuild finances, pay employees, purchase goods and services, all of which help the overall national economy.
In filing for bankruptcy you are not cheating your creditors, you are not taking advantage of some obscure loophole, you are utilizing the legal tools available to survive. Whether your particular financial issues, stem from the loss of a job, a medical crisis or family emergency, if you meet the criteria of the 2005 amendment to the bankruptcy code, under the law, you are entitled to a fresh start. There is no reason not to use the lifeline available to you.
