Bankruptcy – the Short and Sweet Definition
According to the federal laws of these United States, bankruptcy is simply this:
“…a legal process designed to help individuals and businesses either eliminate their debts or repay them…”
Take note of the word “help” because that’s exactly what bankruptcy is meant to do. Bankruptcy is a legal process that will help you deal with a financial situation that’s out of control; it isn’t a moral judgment on your character and it isn’t an indicator of your fiscal responsibility – or lack thereof. Declaring bankruptcy is not the end of the world, in fact –bankruptcy should be viewed as a “fresh start,” a “clean slate,” and a chance to start your financial life over.
Bankruptcy – “It’s Not Your Father’s Oldsmobile Anymore”
For our grandparent’s – and even our parent’s – generation, the idea of bankruptcy carried a sense of shame or disgrace, and often labeled a person as “irresponsible. But today’s financial reality is light years away from the fiscal picture our parents and grandparents faced. Just like Alice in “Alice in Wonderland,” America went down a financial rabbit hole in 2006, and when we hit bottom – up was down and down meant up and pretty much nothing made economic sense anymore. Suddenly – thanks to forces entirely beyond their control – perfectly nice, middle-class, average American families were “magically” losing homes and retirement pensions and college educations and life savings – even though they had done absolutely everything “right.”
Bankruptcy doesn’t carry the stigma it used to. Thanks to the fact that so many people and businesses and corporations have now “gone under,” bankruptcy is actually a kind of “norm,” rather than the rare occurrence it used to be. By now virtually everyone knows someone in their personal circle that has had to declare bankruptcy, because for many – “going under” was the only way to keep from drowning. So – if you’re feeling that taking the step of declaring bankruptcy is somehow a sign of personal failure – stop. Immediately. For a lot of people, declaring bankruptcy is the soundest financial move they can make.
Thinking of Filing Bankruptcy? You’re in Good Company!
If the above positive aspects of bankruptcy don’t move you, then consider the fact that a number of famous and/or admirable individuals and major companies have declared bankruptcy before you, and then gone on to success and acclaim. The list of exemplary people and institutions that have sought out survival through bankruptcy includes four American presidents (including Abraham Lincoln and Thomas Jefferson, who both did it multiple times), two car company magnates – Ford and General Motors (meaning Henry Ford and William Durant respectively), innumerable celebrities large and small – including Mark Twain, Walt Disney, Francis Ford Coppola, Larry King, et al, plus – an absolutely stellar roster of major businesses and corporations that include three major airlines, an oil company, and the largest banking corporation in the world. Finally, of course, no list like this is complete without mentioning that Donald Trump has successfully filed bankruptcy not once or twice – but four times! The inventory of successful businesses and people who have declared bankruptcy is utterly legion. Surely, you deserve the same kind of break today?
Can You or Should You Consider Bankruptcy?
Some people believe that they “don’t qualify for bankruptcy” if they have little or no assets, or very limited incomes, and some people believe they may not qualify for bankruptcy if they have certain kinds of debt, but the truth of the matter is there is no “One Size Fits All” answer, and you need a qualified assessment of your particular situation. Chances are good that declaring bankruptcy is a reasonable option for you. It doesn’t matter what the numbers are – whether you’re a few thousand, hundreds of thousands, millions, or even billions of dollars in debt – bankruptcy is an “equal opportunity” option – it’s there for people who need it. If you’re in so much debt that you’re unable to pay your bills – then you are financially underwater, whether you’re drowning in a couple of inches of water or in the middle of an ocean. In either case – you’re still drowning, and bankruptcy can either keep you from going down the drain – or be the lifeboat you need.
Here are some good indications that bankruptcy may be an answer for you to consider:
- Mounting interest payments that you cannot dig out of
- Out-of-control credit card bills
- Medical bills
- Mortgage problems, foreclosure
- Unable to work
- Taking money out of your retirement
- When there is nothing left to lose
Here are some indications that bankruptcy might not be the best option:
- Federal taxes (but not always or all)
- Child support
- Student loans (but not always or all)
- Debts because of – doing bad, bad things
Even looking at the above lists, however, it truly is important to know that there are exceptions to almost every rule of thumb, and the bottom line is that you need to talk to someone who knows in order to find out if your situation warrants a bankruptcy.
Bankruptcy for Individuals – Chapter 7? Chapter 13? Yes? No? And What’s the Difference?
The Bankruptcy Code has two options for individuals seeking relief from financial debt via a bankruptcy: Chapter 7 and Chapter 13. Perhaps the biggest thing you should know first is this: declaring bankruptcy does not mean you are going to lose everything! No one is going to come and take away all of your possessions, or even a majority of your possessions. The logistics of what you keep and what is discharged are reasonable and the terms are sensible and fair, in both a Chapter 7 as well as a Chapter 13.
A Chapter 7 and a Chapter 13 are similar in that an individual must pass a “means” test in order to be eligible for either one. In other words – what you make, what you own, and what you owe need to fall within certain parameters. Then – in the simplest terms – for a Chapter 7, you give up some of your “stuff,” most or all of your debt is wiped out, and you don’t have to pay it back. For a Chapter 13, you get to keep most of your “stuff,” what you owe on it is “reorganized” so that it’s generally less than what is owed, and you repay it over a certain period of time.
This is the most basic overview, and – again – the reasons for one or the other need to be evaluated so that you can determine which route you qualify for, and which one you should take. Most people discover that the terms of either are far easier than they think.
It’s Time to Think of Bankruptcy as a Fresh Start
If you’re online reading this – I know two things about you without even meeting you: first, you’re either falling – or you’ve already fallen far enough behind to consider bankruptcy, and second – you’re stressed. Probably unbelievably stressed.
If you’ve resisted the idea of bankruptcy for some reason – it’s time to shift your paradigm and consider this instead: what would a fresh financial start mean to you and your family? Today? What if you knew that in a matter of weeks you could be free of the financial chaos that’s currently choking you? How would a clean financial slate affect your emotional and physical health, your productivity, and your quality of life?
For most people – bankruptcy should be viewed as a “fresh start,” a “clean slate,” a chance for you to start your financial life over. Yes, when you’re in this kind of financial trouble it is serious, but it certainly isn’t the end of your world, and you shouldn’t feel fearful or guilty because you need to file bankruptcy. A bankruptcy can help you provide future financial security for your family, and the financial freedom to pursue the pursuit of happiness!