by David Riel

Created on: October 31, 2009

Bankruptcy is a Solution, not a Sentence

The American economy is consumer driven, and largely funded by borrowing. Many Americans can't remember a time without easy credit, and instead are used to credit cards, home equity lines of credit and don't pay till next year sales events. Saving for consumer purchases is unnecessary when credit is so easily available and this buy now pay later attitude has put many American families in real financial peril. They owe more on their homes and cars than they're worth, their credit card balances have grown so they can't even make the interest payments, and they begin to consider bankruptcy protection.

It's a difficult decision. Especially since so much misinformation is disseminated by debt collectors, self-appointed experts, and even sanctimonious laypersons who may be completely uninformed about bankruptcy. The Bankruptcy Codes have been written to protect debtors, and at the same time provide equitable treatment of creditors, with the aim of protecting people who have taken on financial obligations. Despite the social stigma of bankruptcy, its purpose is legitimate: to enable debtors to deal with a debt load that has become unmanageable in a manner that treats their creditors fairly.

Myths versus Reality

Despite the prejudice that exists towards bankruptcy, and while acknowledging that it is not appropriate for every situation, it is nevertheless the fastest, and best, form of relief for individuals, families, and businesses who can no longer meet their financial obligations due to debt.

Bankruptcy puts all debt collection attempts on hold, and even wipes clean some classes of debt, while allowing you to make payment arrangements on the debt which remains. It gives you some breathing room to begin your financial recovery.

Don't be afraid of the common misconceptions about bankruptcy. You will not lose your ability to obtain credit forever. Your credit rating will suffer for a fixed number of years, but at the same time the fact that your bankruptcy has wiped out many of your debts will make you more attractive to some lenders.

Equally false is the myth that medical and doctor bills can't be discharged. Typically they can be, and although there are some debts which are not dischargeable, medical bills are not in this group.

Finally, the biggest fear of most people contemplating bankruptcy - that all their worldly goods can be seized by creditors and sold - is a complete myth. The reality is that federal and state bankruptcy laws provide generous exemptions; most people entering bankruptcy are not required to surrender anything.

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