The 'Stigma' of Bankruptcy

Nobody wants to file bankruptcy. I have seen several thousand bankruptcy cases in my years of practice, and not one was happy to be in my office. For most, it was a humbling or humiliating experience.

Except in rare circumstances, it really doesn't matter to the court how you got to the point of filing bankruptcy. The laws are pretty mechanical, and if you fit the statutory requirements, you can file bankruptcy and receive a discharge of debts. That doesn't stop my clients from trying to explain to me the reasons they got where they are. People seem to subscribe to the notion that filing bankruptcy makes you a bad person, and nobody wants to be thought of as a bad person.

Bankruptcy used to carry such a social stigma. In today's culture, however, the "bad actor" stigma has largely faded from use. Your filing is very unlikely to be published in the local paper. There is no sign placed on your lawn that declares you a bankrupt. Given the large number of filings, it is highly likely you know someone who has filed a bankruptcy. If you don't know who it is, this proves my point: the stigma has largely been removed.

I look at my clients a different way. All my clients are people who have lost control of their financial situation. This may be the result of job loss, injury or health crisis, divorce, a gambling problem, an adjustable rate mortgage gone wild, or just youthful stupidity. The other thing that binds my clients is that all are trying to take back control of their finances. Sometimes the mountain of debt becomes paralyzing, leaving you unable to act to save yourself. Calling an attorney or credit counselor is a first step toward recovery, and it takes strength to make that call and admission of a problem you can no longer fix alone.

In a down economy like ours, it is easy to look at someone's financial troubles and think "There but for the grace of God go I." In truth, most of us are one car accident or bad diagnosis away from those who are filing bankruptcy today. Luckily, I think our society is beginning to understand that, and treat those unfortunate debtors accordingly.

Photo from flickr by Nick Farnhill used under Creative Commons license