Bankruptcy as A Learning Experience
November 3, 2022
The idea of filing for bankruptcy is difficult for many people to swallow. Among other things, the shame of letting themselves get into financial hardship can keep people from taking that action. While the process can be difficult to commence, the reality is there are times when it is necessary to simply regroup and start over.
If you are experiencing financial hardship, you may find that the stress of dealing with your situation makes each day a little harder to get through. When you file for bankruptcy under Chapter 7 qualifying debt will be discharged and you will begin again with a clean slate. While it takes a little time to rebuild your credit following a bankruptcy filing if you are filing for bankruptcy your credit was already suffering.
THE BENEFITS START UPON FILING
There are certain things a filer can expect once you file for Chapter 7 bankruptcy. One of the first is an automatic stay. This means as soon as the filing process has begun, creditors are forbidden from trying to collect on unsecured debts. Secured debts, like car loans or mortgages, typically aren’t included in bankruptcies, and while most won’t be forced to sell their homes, they are still vulnerable to possible foreclosure. Some debts, such as tax debts, judgments, and child support obligations remain intact as well.
As is the case with many difficult things in life, in addition to resulting in a fresh start filing for bankruptcy is also a learning opportunity. It is possible for those who have gone through it to take the lessons they learned and apply them to the future. If you feel like your debt is swallowing you, consulting with a bankruptcy attorney may help you figure out if filing bankruptcy is the right choice for you.
BANKRUPTCY CAN IMPROVE YOUR HEALTH AND MAYBE SAVE YOUR LIFE
Those facing serious financial pressures don’t often understand the unhealthy consequences of their situation. Heavy debt load causes stress and depression which is a leading cause of stroke and heart attacks. Clients have told me that they had a fear of answering the phone or even opening mail.
A heavy debt load causes undesirable choices: pay the rent or mortgage or pay the car note or skip needed medicine. Then there is the fear of Wage or Bank Garnishments that cause instant chaos.
Heavy debt loads also cause problems in other areas of life. The pressure can hurt job performance, create a disincentive to finding employment, and cause problems in the marriage: even Divorce.
SO WHAT DOES BANKRUPTCY DO?
After decades of helping thousands of client work through the bankruptcy system either by filing a Chapter 7 or a Chapter 13 we can report very positive and healthy outcomes:
- Can sleep better at night
- Rebuilds credit; yes credit scores rises after a bankruptcy
- Relieves stress and depression
- Studies find bankruptcy relief adds 1.2 years to one’s life span
- Increases the amount of money each in a month in their pocket
- Decreases foreclosures rates by over 19%
- Can work better and can concentrate on their jobs; thus better employment security and better possibilities for promotions
- After the bankruptcy, many clients are able to buy a house
- After the bankruptcy, many clients are buying decent affordable cars
These positive results were recently confirmed by a study based on data of over 500,000 Chapter 13 cases. Chapter 13 cases that were confirmed show increased annual earnings of over $5,500 or about $105 per week.
The paper concludes bankruptcy removes a disincentive to work by removing the fear of Wage Garnishments. The paper also showed that people live longer after a successful bankruptcy.
The lawyers and staff at Robert J. Adams & Associates are proud to have helped thousands regain their lives by filing a bankruptcy. If you’re going through financial pressures, give us a call and see what we can do for you.
Certain data was based on “The Effects of BAPSCPA (the current bankruptcy law) on Credit Card Industry Profits and Prices.
THE SHORT AND LONG-TERM BENEFITS OF BANKRUPTCY
There are many uncertainties in life. Even when things seem to be going well, it doesn’t take much for it all to change, particularly where finances are concerned. The inability to pay bills could lead to a great sense of anxiety and make it difficult to face each day. Though it may not seem like it, you do have options available to address the issue. Depending on your circumstances bankruptcy may be a route to relief not only in the long term, but the short term as well.
THE LONG-TERM EFFECT OF BANKRUPTCY
Bankruptcy is a process made available by the federal government to help people who find themselves experiencing financial difficulty, move on with life. Your specific situation will determine which chapter you file under. While Chapter 7 results in the discharge of all qualifying debt, Chapter 13 involves the creation of a repayment plan. In either situation, the outcome of a successful bankruptcy is that you will be set on a path for a positive financial future.
THE SHORT-TERM BENEFITS OF BANKRUPTCY
It is important to recognize that there are benefits to filing for bankruptcy that kick in virtually immediately, as well. Upon filing, an automatic stay takes effect. This stay does several things.
First, it stops the harassing phone calls you may be receiving from creditors seeking to recoup money owed. This alone can have a huge impact on the quality of your life.
Second, it stops entities from trying to take things from you. For example, wage garnishments will be stopped.
Last, it can keep you from having to move. Whether you are facing eviction or foreclosure, the automatic stay will halt those proceedings.
You don’t have face this process on your own. A bankruptcy lawyer can help you determine the best approach and guide you through the process.
INTERESTING STATS ON WHO FILES BANKRUPTCY – IT’S NOT JUST THE POOR
A five-year study of the 2005 Bankruptcy Reform Act conducted by The Institute For Financial Literacy paints a picture of who files bankruptcy, and why.
- Women file bankruptcy more than men, by about 52 to 48 percent, but the gap narrows with an increasing percentage of men filing each year.
- The older you are the more likely you will file bankruptcy. Almost 56 percent of filers were between the ages of 35 and 54. More people older than 54 file bankruptcy than people younger than 35.
- Almost 72 percent are Caucasian; over 11 percent are African American and Hispanics make up the third-highest filing ethnicity with almost 9 percent.
- While over 36 percent of bankruptcy filers attained a High School diploma or GED, the number with College degrees and Graduate Level degrees steadily increased over the years. In fact, college-level attendees and higher make up over 57 percent of filers, while less than 6 percent of filers did not attain a High School diploma or GED.
- People earning less than $20,000 annually make up the bulk of filers, at 38 percent, but that number is declining. The next higher group, at 21 percent, is the $20,000-30,000 income level, also a declining number. Likewise, the third-highest filing group earned $30,000-$40,000 and also shows a decreasing percent of overall filers. Remarkably, the highest income category of those making over $60,000 almost doubled to 9 percent over the five years studied.
- Almost 70 percent were employed and less than 17 percent were unemployed, with the rest out of the job market as being retired, homemakers or students.
- Over 64 percent were married and less than 15 percent of unmarried filers were divorced.
Just what causes people to file bankruptcy? Frequently it’s due to job loss, medical bills or divorce. This study asked debtors to identify factors that affected their situation and most people chose being overextended on credit, a loss of income, unexpected expenses, job loss, illness and divorce, in that declining order.
Who files bankruptcy? Look like any average American from just about any demographic group.
SAME-SEX MARRIAGE AND BANKRUPTCY
Same-gender couples now have the same rights, privileges and responsibilities as all other married couples in the Bankruptcy courts. Illinois, fortunately, allows the same-sex or same-gender marriage.
WHAT DOES THIS MEAN?
Legally married same-gender couples can file a joint Chapter 7 or Chapter 13 case. If you are legally married but live in a state that does not allow or recognize same-sex marriage, you can still file a joint case. For example, the individuals are married in Illinois but now live in Alabama-the couple can file a joint bankruptcy case.
Other than what is mentioned above all matters of pre-Marriage planning, Marriage and Divorce involving Bankruptcy are the same as discussed in our other blogs, as follows:
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