Although the pertinent law might not appear to serve the greater good, bankruptcy proceedings might lead to such results. When someone struggles with crushing debt, contributing to society effectively may be difficult. Conversely, creditors won’t benefit from chasing someone who might not be able to pay. The Bankruptcy Code provides a possible solution, but many debtors feel uncomfortable or embarrassed about filing for financial protection.
Bankruptcy and stigmas
While millions of people struggle with financial difficulties, the majority never file for bankruptcy. So, segments of the public might not understand why someone goes through bankruptcy or what purpose bankruptcy serves. They may think someone ended up in a terrible financial situation due to wasteful or irresponsible spending. However, the truth could be quite different.
People often find themselves in bankruptcy court due to many things outside their control.
Someone who loses their job and then develops a severe medical affliction might suffer severe financial problems. Yet, the debtor might never even consider bankruptcy, believing that a loss of face or other social issues may occur.
Upsides to bankruptcy
Bankruptcy may lead to some negative consequences. Bankruptcy filings remain on someone’s credit score for years, which could turn up on an employment background check and certainly a loan inquiry. However, there are numerous potential upsides to bankruptcy. Collection actions cease, and the debtor gets a chance at restarting his or her financial life.
For some, bankruptcy might be the only viable way to deal with unpayable debt. Continuing to make minimum monthly payments on high-interest credit card balances may prove fiscally disastrous.
Chapter 7 liquidation bankruptcy might put an end to many debt woes. Those who do not pass the Chapter 7 means test could explore options to file under Chapter 13 and set up a payment plan.
