People who face the reality of having to file bankruptcy often feel defeated. They can see their need to file as a failure. This Glass-Half-Empty view is certainly understandable.
Looking Back on Bankruptcy
Perhaps since their inception, bankruptcies have been accompanied by a stigma of irresponsibility and failure. In British common law, a bankruptcy was a quasi-criminal act. But debtors who are resistant to considering bankruptcy protection are often doomed to live in the descending spiral of debt, where monthly interest due often far outweighs minimum payments that they can scrap together.
Not to say they did not make financial mistakes; but it is nearly impossible to learn from those mistakes when you are not able to pay even the massive penalties and interest on that debt.
Benefits of Bankruptcy
Having seen hundreds of debtors through bankruptcy, I choose the Glass-Half-Full view. Bankruptcy gives debtors a financial fresh start. Debtors have the opportunity to stay out of debt altogether, to put money into savings, to invest. Under the newer rules, debtors can qualify for federal housing loans (VA and FHA for example) two years after a bankruptcy discharge. After a bankruptcy is discharged, credit reports no longer “look back” at pre-bankruptcy non-payments when calculating credit scores. So those score typically increase more quickly.
Debtors need to see bankruptcy as a Glass-Half-Full fresh start instead of the Glass-Half-Empty stigma of old.