On The Road To Solvency: Is Bankruptcy A Step Or A Stumble?

Approximately one in every three hundred people in the United States filed bankruptcy last year.  That adds up to more than a million people.  Recent reports show that thousands more are bankrupt but are hesitant to file, hoping that their financial circumstances will improve and avert the necessity to declare bankruptcy.  However intimidating the prospect is, it is a fact that a properly filed bankruptcy can actually improve most people’s situation in the long run. According to a recent survey conducted by the Consumer Bankruptcy Project, forty percent of all people who filed bankruptcy had experienced serious financial trouble for over two years.  A little recognized fact about bankruptcy is, however, that those who delay their bankruptcy filing stand a higher chance of losing all their assets than those who file as soon as their situation becomes unmanageable.  Postponing bankruptcy by liquidating assets yourself – i.e. selling your home or cashing in pension funds – can, if there still is insufficient income, only result more loss.  In contrast, a timely bankruptcy filing will protect those assets that are considered exempt from the filing and allow you to retain them. Experts attribute the general reluctance to file bankruptcy to the widespread fear of the stigma attached to it, as well as the popular conviction that filing bankruptcy ruins one’s credit.  Both arguments couldn’t be further from the truth.  Especially nowadays in the current economy, a successfully filed bankruptcy is a clear indication of someone on a path to financial control and recovery.  Furthermore, a credit report rife with missed payments poses a far greater challenge for the consumer than one of a consumer rebuilding his credit after bankruptcy.  The fact is, many people find themselves financially stronger after bankruptcy.