Bankruptcy Is Not a Bad Word

As an attorney, I have handled both divorce and bankruptcy cases.  There is often a similarity between these two types of clients at the initial meeting in my office.  They are ashamed.  They know they are making the right choice, and that it will significatly improve their quality of life.  So why are they ashamed?  There has always been a social stigma of divorce and bankruptcy.  While both stigmas have significantly decreased over the past few decades, they have not altogether disappeared.  The stigma of divorce has steadily decreased as the rate of divorce as steadily increased.  However, bankruptcy is a different story.  Due to the economy, the rate of bankruptcies, both personal and business, have skyrocketed in the past few years.  This has not given society time to change their attitude toward the idea of bankruptcy.

Picture these scenarios: 

1.  A woman has worked at the same job for 30 years, has no unsecured debt, and has lived in the same house for 20 years.  She gets laid off, loses her health insurance, then gets ill.  Her hospital bills are $28,000 and she is only making a small amount of disability income.  She has been endlessly job searching to no avail.  She is now facing foreclosure on her home.

2.  A young couple, after researching and educating themselves, decides to buy investment properties and rent them out for a profit.  They attain loans to buy 5 different properties.  They have very little unsecured debt. The rental properties are full and profitable for 2 or 3 years.  Suddenly, the economy takes a turn.  Renters can't pay rent and are evicted.  The properties sit vacant and the young couple runs up credit cards to pay the expenses of the properties hoping that they will find new tenants.  Eventually, the mortgages go into default.  The couple is now facing extensive debt.

The stigma, I believe, comes from people having the view that those who file bankruptcy have been financially irresponsible and negligent.  My hope is that you can see from the scenarios above that this is not the case.  These two scenarios are based off of two clients I've had.  Both were upstanding citizens, college educated, morally and emotionally stable, and all around "normal" people.  They just had a run of bad luck.  This is the case with the large majority of bankruptcy clients. 

My hope is that those of you who read this will help to lessen this social stigma next time you hear somebody talking ignoranly about bankruptcy.  Know the facts.  Bankruptcy exists for a reason.  Here is a great article with more information: 

http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/WhyGoingBrokeIsaFactOfLifeInAmerica.aspx

Hope everyone is having a great start to the 2010 holiday season!