Hi, my name is Eric Lanigan of Lanigan and Lanigan in Winter Park Florida. We’re often asked by clients before they file, “is it bad to file bankruptcy?”
The reality is that what keeps most people focused on doing the right thing financially, being honest about whether they should file bankruptcy is their own sense of morality. It’s also the social stigma because they’re worried about how they’ll be perceived by doing something other people will know about and judge them for. So if all type of social controls are off the table and the average person is open to do whatever they want, the financial world can get kind of crazy.
What People Fear About Filing Bankruptcy
One thing that many people fear about filing bankruptcy is that everyone around them will find out and judge them. They say things like, “if my parents ever knew that I did this I would just die.” People who are 40 years old and up say that the most. If you’re a younger person you believe that a.) I’ll live forever and b.) when I’m 30, this is all ancient history. Which in a way is also true. You’re wiping your financial slate clean.
And there is no social stigma because no one knows you filed bankruptcy unless you tell them or by some random chance they read it in the newspaper or have to run a credit check on you. It’s probably something that people can find out, but they would have to really look hard for.
No one’s saying, “oh, there’s Mary and Jim’s kid who just filed bankruptcy. Boy, that’s too bad.” No one has to face that so there’s no reason not to file bankruptcy.
Plus, after the nation’s financial crisis you’ve got all these people who have been through bankruptcy once and they realize it is OK. “I didn’t lose my job, my neighbors aren’t throwing rotten tomatoes at my house, nobody took anything from my house. There isn’t a sign stuck on the door, I didn’t have to discuss why I had to file bankruptcy.”
What People Learn From Bankruptcy
A lot of people know now that they can wipe out all their debt in bankruptcy and just get a fresh start. There are many people who have learned their lesson from bankruptcy. The idea that you learn live within your means. When you go through the online mandatory bankruptcy credit counseling before and at the end just before the bankruptcy is finalized, you’re asked questions that are meant to teach you how to better manage money. You learn to save for what you want to buy. You don’t take out easy credit and buy whatever you’d like with credit cards.
After having filed a bankruptcy people learn that accumulating things isn’t as important as saving for an emergency. Now that might be a job loss, medical bills, health or family catastrophes.
After Filing Bankruptcy
Many people have learned that saving is the right thing to do, budgeting and learning how spend carefully. Maybe they’re renting instead of buying a home and certainly there are not foreclosures at the level that there were in 2010, 2011, 2012. That could mean that people are not taking out mortgages or if they do buy a home, they’re putting more money down, paying on time and realizing that there is a limit to the equity lines.
After bankruptcy, you learn that when times are good financially, that you’d better be putting those acorns away and saving for a rainy day or bad financial times whichever you might face.
