There is no question that banks and credit card companies want to perpetuate the idea that filing for bankruptcy makes you a loser. Creditors have done all they can over the years to stack the deck against hard-working Americans who often find themselves in debt through no fault of their own. Credit card companies even have many members of Congress believing that people who can’t pay back the money they owe are deadbeats. In October of 2005, a new law was passed to make it even harder for Americans to get the second chance they need and deserve.
This blog post will explain why the first step in getting a fresh start from debt is to dispel some of the myths about bankruptcy – particularly the myth that involves shame.
Why filing for bankruptcy doesn’t make you a deadbeat
When America’s founding fathers were setting up our system of courts and laws, one of the first things they took into account is that America is all about getting a new start. Some of our earliest laws related to relief from the heavy burden of debt, which they recognized is often due to ill fortune as much as poor choices. Are there people who borrow money indiscriminately, with no intention of paying it back? Of course there are. But statistics show that the three leading causes people give for filing involved:
•· Medical bills
•· Loss of job
Notice that none of these causes relates to unethical decisions to take advantage of banks or live above their financial means.
Over the centuries since our bankruptcy laws were created, there have been tens of millions of people who have realized that they had no real chance of getting out of debt by trying pay back the burdensome interest rates, bank fees and penalties that are tacked onto the amount borrowed. We all understand the need for creditors to charge interest in order to stay in business. However, when a $1000 “loan” on a credit card will require more than $1500 to repay over many years, one has the right to wonder who is more unethical: the borrower who borrowed the money on good faith, or the lender who knows they will be collecting the interest and penalties for years.
Bankruptcy will not ruin your credit forever – and here’s why
Credit card companies, in particular, want people to buy into the myth that filing for bankruptcy means you will never again get a car loan, a mortgage or another credit card. Ask yourself how this can possibly be the case, after so many millions have filed to get a fresh start, yet everyone seems to be paying rent, driving a car, owning a home and carrying credit and bank cards. The truth is, creditors may require a higher interest rate on credit cards and loans for a year or two, but lenders are just as eager to get people back into the habit of borrowing. For every $1000 spent on one of their credit cards, most are making $180/year in interest (some higher), plus additional late fees and penalties – even if the card holder never adds another $1 to the amount borrowed. Most card holders will juggle minimum payments for many years before they realize they are caught in a game they can’t win. By that time, that original $1000 borrowed has gone back into the creditor’s pocket in the form of interest, late fees and penalties, with very little of the original amount reduced.
Talk to an experienced bankruptcy lawyer to learn more
If you are at a point in your life where you are beginning to realize that creditors own your paycheck, it may be time to consider your options. Your first step is to get past the idea that bankruptcy is for deadbeats. Large corporations and some of our most successful entrepreneurs and business owners have filed and it has given them the fresh start they need.
Start by learning more about the process. Talk to an experienced bankruptcy attorney to determine what options are best for you.