Am I a Bad Person If I File for Bankruptcy?

Almost all of my clients hate to schedule their first appointment with me.

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It’s not because I’m a bad guy, or that I treat my clients poorly—just the opposite. My clients are shown respect and understanding, and both my staff and I give them a ready ear to hear their problems. So why don’t people want to meet with me?

 

It’s because almost all people who file for bankruptcy feel embarrassed. They feel that they are a failure. They feel ashamed that they cannot pay their bills, or that they are faced with a foreclosure, or a lawsuit. They feel completely alone, a pariah with a large letter “B” tattooed on their forehead that people will point to and turn away. They think they are a bad person for even thinking about filing for bankruptcy.

 

While these feelings are real, they are unwarranted.

 

Debt problems are nothing recent. The historical basis of bankruptcy can be found in the Bible. In fact, the seven-year forgiveness of debts in Deuteronomy 15 is why Chapter 7 received its name.

Bankruptcy is part of American history as well, going back to the Constitution. It even predates the Bill of Rights. The right of Congress to establish laws for bankruptcy appears in the 1789 Constitution in Article I, Section 8. The Bill of Rights wasn’t adopted until 1791. Why? Some of the Founding Fathers of this country, among them Patrick Henry and Thomas Jefferson, had severe debt trouble. Much of President Jefferson’s property, including his home, Monticello, was sold after his death to pay his debts. Even Abraham Lincoln had severe debt problems.

 

Many famous people have filed for bankruptcy, among them President Harry S Truman, Walt Disney, John Wayne, Donald Trump’s companies (6 times), Willie Nelson, and Chaka Khan. And, of course, the number of multi-billion dollar corporations that have filed is too large to mention.

 

So why the shame?

 

Part of it is that most people who file are good, honest, hard-working folks who genuinely want to repay their debts. In fact, most of my clients would have been better off financially had they seen me a year or two earlier. But they don’t, because they try to work things out without having to file for bankruptcy. The problem is that, in today’s financial market, creditors make it as hard as they can to do this. They hike interest rates up to 30%, charge huge fees, call and write with nasty threats, and are unwilling to work with people who just need a bit of time to get things back on track.

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By the time most of my clients meet with me, they have already paid back, in full, the amount of money they borrowed on their credit cards and have paid double or triple that amount in interest, fees and costs.

 

So why do they think they’re such bad people?

 

Creditors—banks, lenders and collection agencies—have a huge economic interest in making people feel bad about filing for bankruptcy. They run ads saying what a terrible thing it is. They whisper that it’s immoral. Their collectors make people feel like scum. And, since people want to do the right thing, these messages fall on fertile soil…and make people believe that they are bad for even considering bankruptcy, let alone actually filing.

 

They aren’t. You aren’t.