Are you thinking of filing for bankruptcy? If you are, it might give you some comfort that you are not alone.
In 2022, there were 413,616 personal bankruptcy filings in the United States. Business bankruptcy filings on the other hand totaled 21,655 in 2022.
With the ongoing economic slowdown, staggering inflation, and the increasing number of factors that seem to be dampening the current economic environment, personal and business bankruptcy filings significantly increased in 2023 and are expected to continue on this concerning trend in 2024.
So if you are not sure if bankruptcy is good or bad? If you are not sure if this is the right option for you, then you might like to read on.
People often say that bankruptcy is bad because they don’t know how the process works. There are many different reasons why people have to file for bankruptcy, most of which are out of their control.
Most of the time, people who end up in dire financial need end up in such situations because of bad luck and situations that are way beyond their control and not because they didn’t plan ahead.
Below, we’ll talk about some of the reasons people file for bankruptcy and how it can sometimes be a good thing if it’s right for you and your family.
Things that can’t be planned for can lead to bankruptcy.
If you can pay off your debts but choose to file for bankruptcy instead, you may have made a bad choice. In the same way, someone who files for bankruptcy with bad intentions or to trick creditors is acting badly and taking advantage of the system.
This is a bad kind of bankruptcy. And karma can be a bitch.
But what about the family whose main income source loses his or her job?
What about the family whose medical bills are very high because of an unplanned car accident?
What about the ex-wife who lives in a community property state and finds out that her ex-husband charged thousands of dollars on her credit card without her knowledge?
In these situations, filing for bankruptcy can be a huge relief and a chance to start over. If you’ve never been in trouble, it’s easy to say that bankruptcy is bad.
However, talk is cheap, and people have families to take care of.
Why does bankruptcy have a bad name?
Many people don’t like filing for bankruptcy because it hurts your credit and gets rid of debts that you’ll probably never be able to pay back.
Chapter 7 bankruptcy won’t help your credit score, and it will be public knowledge for 10 years after you file. But most people who file for bankruptcy have already hurt their credit by not paying bills on time.
Whether your bankruptcy filing is “bad” depends on whether you are trying to cheat the system or if you have a moral obligation to pay debts that you want to get rid of through bankruptcy.
By going bankrupt, you can get rid of many different kinds of debt. For example, maybe your biggest debts are a credit card balance of $70,000 and a personal loan of $15,000 that you owe to your sibling.
If you file for bankruptcy, both your credit card debt and your sibling’s debt will be wiped out. Most people wouldn’t think it’s “bad” to file for bankruptcy to get rid of credit card debt with 25% interest.
On the other hand, some people would say that giving your sibling $15,000 back might not be the best thing to do. Even if you are in this group, you should know that there is nothing stopping you from paying back the debt on your own after you file for bankruptcy.
You could file for bankruptcy, get rid of your credit card debt, and then send your sibling a check for what you owe him once you have a chance to get back on your feet. There is nothing wrong with this from a bankruptcy law point of view. Because of this, whether or not bankruptcy can be seen as bad really depends on the situation.
When is it a good idea to go bankrupt?
What you do will determine the answer.
Bankruptcy is neither good nor bad in and of itself, but it is an important safety net for honest people who get into a lot of debt and can’t pay it back.
A small number of people who file for bankruptcy try to use it to hide assets and trick creditors. These stories pale in comparison to those of honest people who have gone through hard times and then gone bankrupt because they can’t see a way out.
Everyone deserves a second chance, especially honest people.
If you’re having financial and debt trouble and can’t find a way to solve it, you should talk to a financial expert or even an experienced bankruptcy lawyer.
Maybe they may be able to offer you a solution to get you back on your feet again.
Disclaimer: The information provided in this article is for educational and informational purposes only and should not be construed as financial, legal, or professional advice. While efforts are made to ensure accuracy, the content may not reflect the most current legal or financial developments. No representations or warranties are made about the completeness, reliability, or accuracy of this information. Results may vary. Using any information provided is solely at your own risk. Consult with a financial advisor or attorney for specific advice tailored to your situation.
