We Don't Want to File for Bankruptcy!

Nobody wants to file for bankruptcy, and most of us were raised and taught that repaying debts and paying bills is what a good, honest person does. Sometimes though, good, honest people get into a situation where it may become impossible to do so without sacrificing retirement funds, selling off a home, or otherwise taking on some form of severe hardship just to maintain financial obligations.

Unfortunately for many people who go out of their way to avoid having to file bankruptcy, many end up only postponing the inevitable and losing assets, such as retirement assets, that otherwise would have been protected if they had been realistic and filed earlier. Alternatively, others may borrow money from friends or family to avoid bankruptcy, and wind up in an even worse situation.

What's Driving Bankruptcy Filings?

Credit. The United States Economy is driven by credit, and when properly utilized, credit allows many businesses to thrive by selling products that otherwise would be out of reach for many people. Additionally, it allows banks to generate revenues by lending the money out. Credit is a critical part of the US economy.

There is a risk, however, in lending anyone money. Economic pressures such as drops in real estate values and increasing unemployment rates and job loss can often put an honest debtor into a situation where staying on top of financial obligations becomes impossible. Banks know this, and so does the US Court, which is why bankruptcy laws were enacted in the first place.

Credit, Bankruptcy and the Economy

Once someone can no longer keep up on monthly payments on credit, the system fails to work. Every business and bank knows that some percentage of the credit extended will not be repaid. It's just a fact of doing business using credit.

Bankruptcy laws allow those eligible to get a "fresh start", so that they can once again contribute to the economic system of credit. Filing for bankruptcy will effectively eliminate that debt which can no longer be repaid, usually due to some combination of over-extension of credit and reduction in income. This means that debtors can begin to rebuild their financial situation and begin contributing to the economy again once they get back on their feet, instead of just dragging on, missing payments and living under an ongoing, stressful financial burden.

Is Bankruptcy Right for Everyone?

Of course not. Bankruptcy is not a blanket solution for everyone who's come under financial duress. While the financial solutions provided by are certainly powerful, there are consequences to filing that must be considered and weighed against other options such as debt negotiation or settlement.

Talk to a Bankruptcy Lawyer licensed to practice in your state to find out what bankruptcy can offer you, and what other options you have to get out from under unmanageable debt and get back on your feet.

Malcolm Ruthven is a Bankruptcy Attorney Licensed to practice in California, and a member of the National Association of Consumer Bankruptcy Attorneys. Click here to contact Malcolm regarding bankruptcy and other debt management solutions.