If you were to ask the average American who has never been through the bankruptcy process what he or she thinks about the cause of bankruptcy, I would venture to guess that the responses would vary but have a similar theme: it’s a math problem—there’s not enough money for debts and obligations.
While it’s true that, on the surface, there is a “math” problem involved in most cases on bankruptcy, that kind of response doesn’t really get at the heart of the matter. The reasons individuals file for bankruptcy are as unique as the people filing, and they go much deeper than being just a matter of “math.”
Unfortunately, because of the lack of understanding around the diverse causes of bankruptcy, some people have attached a negative stigma to the entire subject of bankruptcy. This negative stigma can leave people feeling guilty about their bankruptcy or even guilty about learning more about the prospect of bankruptcy.
Today I’d like to take a look at a few common misconceptions regarding bankruptcy and why there is no place for guilt in the bankruptcy process. We’ll first look at why there is usually no reason to feel guilty, but we’ll also discuss why guilt can actually cause more problems than it needs to.
Myth: Bankruptcy is the result of irresponsible spending or poor money management.
Reality: While it wouldn’t be accurate to say that irresponsible spending is never the cause of bankruptcy, it’s simply not very often the case. Many people assume that credit card debt is always irresponsible debt. While, it’s true that credit card debt is a part of many bankruptcy cases, the reasons the debt was incurred are often very legitimate. Perhaps someone lost their job and just used a credit card to “get by” during a period of unemployment. They used the card to buy groceries, gas, or even pay for healthcare expenses. Many people truly believe that their situation is very temporary and will turn around quickly. If it doesn’t, they can find themselves having accumulated quite a bit of debt in a short period of time. When you add the interest charges, late fees, and other penalties that are often associated with credit cards, the debt snowballs and becomes unmanageable.
Myth: Bankruptcy is very uncommon and I must have really screwed up to find myself filing for bankruptcy.
Reality: Simply put, many people just plain don’t like to talk about their personal financial situation—especially if they feel it is less than ideal. If you feel you never hear of anyone else that you know who has filed for bankruptcy, your perception simply does not reflect the reality, and the statistics bear this out. Multiple millions of Americans file for bankruptcy every single year for a whole host of reasons.
Myth: Bankruptcy doesn’t happen to anyone who’s educated or wealthy—only poor and uneducated Americans need to rely on the bankruptcy laws.
Reality: Simply put, the statistics don’t support this assertion either. Poor, wealthy, uneducated, and educated alike all file for bankruptcy. Being wealthy, well-connected, or educated does not have a strong correlation to filing for bankruptcy. You should never consider yourself part of a certain “type” of people that file for bankruptcy. There’s no such thing as a typical “type.”
Finally, there’s one more reason guilt has no place in the bankruptcy process. Oftentimes, because people feel guilty about filing for bankruptcy, they put it off until it’s truly the last resort. In many cases, bankruptcy can be far more effective and beneficial earlier in the process than people realize, but because they feel guilty about it, they don’t seek help and wait until they feel they have no other options. The bankruptcy laws in the U.S. were written to protect you and your future, and when they are applicable, you should take full advantage for the sake of you and your family’s financial future.
If you’re considering filing for bankruptcy, remember that guilt has no place in the process. As stated previously, the causes of bankruptcy are extremely diverse and most times very legitimate. Please also realize that feeling guilty may prevent you from making a solid, objective decision about what’s best for your future.
At Burr Law Office, we specialize in helping people protect their financial future and well-being. If you are feeling guilty or embarrassed about your financial situation, don’t be. We truly understand that everyone has a unique situation, and in everything we do, our one goal is to help you position yourself for your best outcome.