The social stigma of bankruptcy has always been a major component in today’s society, and usually, the term bankruptcy produces negative connotations. People tend to associate the term with unfortunate aspects revolving around the inability to pay one’s debt. This stigma, however, is at odds with the true meaning and purpose of bankruptcy in the legal world. In fact, bankruptcy is aimed at a more positive goal and mindset – A Fresh Start.
A Fresh Start provides an intuitive meaning one can easily understand as it allows individuals and businesses the opportunity to wipe the slate clean of their liabilities. Whether a debtor is behind on their mortgage, rent, car payments, credit card bills, medical bills, or many other debts, a bankruptcy petition affords a debtor an opportunity to start over without the hindrance that many debts can impose.
As with most aspects of law, there are always exceptions. This is true in the legal world of bankruptcy as certain debts (non-dischargeable debts) are not able to be wiped away, so to speak. Non-dischargeable debts can come in several forms, but mainly take the shape of certain taxes, child support payments, and the mother of all, student loans. That being said, the grand majority of your everyday consumer debts are likely dischargeable and therefore able to be cleaned from the slate.
The methods of which a Fresh Start can be achieved depends on the path (ie. Chapter) of the Bankruptcy Code in which a petition is filed. Regardless of the manner, however, all roads lead to the same destination and the Debtor, upon completion of the requirements set forth by the Code, will be provided a clean slate. As it turns out, the Bankruptcy Code also affords debtors with multiple protections from creditor action that further assist debtors along the way, which will be explained further in a later post.
So, to view bankruptcy with a negative light is doing it a disservice. Rather than focusing on the negative connotations, view bankruptcy with a forward-thinking mentality as a means of obtaining a grip on your finances with aims of becoming debt free.