Who cares whether bankruptcy filings are up or down?
Bankruptcy professionals, certainly.
Economists, probably.
But if it’s you and your checkbook, you take little comfort that lots of others are filing. Nor, when everyone else seems to be making it OK while you flounder, are you reassured.
My colleague Wendell Sherk is right about bankruptcy following economic expansion. Some expansion always falls flat. Bankruptcy is the remedy.
And for the society, bankruptcy is a powerful remedy. It allows risk taking without life-altering consequences. It allows those who’ve made bad decisions or simply had bad luck to start over.
Bankruptcy evens the odds in the eternal tension between borrowers and lenders, debtors and creditors.
Bankruptcy keeps people in the above-ground economy, allowing a legal and effective protection for future earnings.
Look backward or forward
But bankruptcy statistics are the sum of individual decisions.
Parents who have to decide whether being bound to past commitments is the best choice for their family. Whether putting off providing for retirement, or even a cash reserve for emergencies is wise. Elders who are saddled with credit cards they can never repay. The underemployed balancing old debts and new needs.
It takes some courage to admit to yourself, and then to others, that you can’t do what you’d rather do: pay everyone what you promised.
But, in the real world, you are your harshest critic.
Few others sit in judgment of those who file bankruptcy. If they notice at all, it’s with a sense of “there but for the grace of God...”
Better off with bankruptcy
A university study several decades ago concluded that one in seven American families would be better off if they filed bankruptcy. It tried to explain why far fewer than that were doing what was in their best interest, but instead struggled on with their debts.
The number who would be better off if they filed bankruptcy cannot be lower now.
In the end, it’s about what makes you more self sufficient going forward.
Image courtesy of Pixabay.
