Bankruptcy carries a negative stigma, and you may have heard many people tell you that bankruptcy is bad. Why is the general consensus that filing for bankruptcy is bad? Filing for bankruptcy shows that the applicant has trouble with personal finances, but there is much more to the story. A large part of why people think filing for bankruptcies is bad is that they do not understand the process. Every bankruptcy case is unique, and consumers are forced into bankruptcy for many different reasons, some of which are beyond their control.
Not all bankruptcies are caused by people taking out credit cards to purchase luxury items they do not need. Instead, many bankruptcies are due to unforeseen and uncontrollable circumstances. We are currently in a recession due to the coronavirus pandemic, and many people have been laid off from their jobs or had their hours cut due to no fault of their own. A lack of financial planning or control over one’s impersonal finances cannot shield someone from the financial consequences of being laid off or having to take a lot of time off because of illness.
Many bankruptcies are caused by mounting medical bills. When a person becomes ill, they may get fired from their job because they need to take time off for treatment. As a result, they lose their health insurance, making it impossible to pay their medical bills. Coping with a serious illness can easily result in medical bills over $1 million. An unforeseen car accident, a cancer diagnosis, or a COVID-19 diagnosis with ongoing, long-term symptoms can result in a financial collapse that requires filing for bankruptcy.
Filing for bankruptcy is viewed as a bad decision in many circles because it hurts your credit score. It is true that filing for bankruptcy will have a negative effect on your credit score and will appear as a public record for 10 years after you file for bankruptcy. However, most consumers who file for bankruptcy already struggle with a negative credit score because of their late payments or missed payments.
Whether or not bankruptcy is bad depends on whether you intend to defraud the system or file for bankruptcy in good faith. If you have significant credit card debt, filing for bankruptcy to discharge credit cards at 29% interest would typically not be considered bad by most people. Likewise, if you have medical bills that you cannot pay or student loans that you cannot pay, filing for bankruptcy can help you have a fresh financial start to pay the debts that will not be discharged at the end of the bankruptcy.
If you are wondering whether filing for bankruptcy would be a wrong decision in your case, the best thing you can do is talk to an attorney. Bankruptcy itself is not inherently good or bad, and it can be an important protection for honest applicants who find themselves in trouble with debt. Contact the skilled bankruptcy attorneys Bankruptcy Law Center today to schedule your initial consultation.
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