Bankruptcy: Always a Bad Thing?
By: mgordon | Posted: 12th July 2009
The very word "bankrupt" has the potential to bring silence to a room like very few others in the English language. In a world where we are all, to a greater or lesser extent, touched by materialism if not directly materialistic ourselves, the spectre of bankruptcy is one that can make even some of the most feckless among us sit up and take notice of what is going on. Whatever our own individual and personal views on the subject may be, there is a stigma connected with the concept and the reality of bankruptcy that makes many people stop short of actually going to the extent where they declare themselves, or allow themselves to be declared, bankrupt.
There is, however, a reasoned and growing school of thought that is of the opinion that bankruptcy is not nearly as bad as the reputation suggests. Much though we may fear the response of others when we are in danger of going bankrupt, and much though it limits our financial freedom compared with a position of solvency, bankruptcy today is seen by a wider group of people than ever as being something that can clear the boards for a future in which we will avoid the financial risks that went wrong before and took us into a situation where we had to consider bankruptcy in the first place. To clarify, nobody wants to go bankrupt if they are in a position of relative strength. From a position of weakness, however, it can be the surest way back to a positive future.
One thing that bankruptcy allows the debtor is the chance to make some payment towards their debts, at a level agreed by the bankruptcy hearing - in America this will be held in the state court - at a certain percentage level of total debt. As a commitment, this demonstrates that the individual has acknowledged responsibility for their debt and a willingness to pay it off. For the creditor, although this may not be the ultimate result they would have coveted, it at least allows them to realize some part of the money owed, which would not be forthcoming if the debtor simply decided to avoid all collection activity - a common practice among bad debtors.
Most of all, bankruptcy will prevent the debtor taking out any more credit for a non-specific period. Although there are certain timeframes quoted for how long this period may be, the fact is that different credit agencies act on different data. This credit-free period forces the individual to concentrate on getting their affairs in order and, should they apply for credit in the future, it will hopefully be in more manageable amounts and with a more responsible attitude. Bankruptcy is not a desirable situation, but as far as an individual is concerned it can act as a wake-up call and a positive reminder of how they need to conduct their future finances. In this respect, it is certainly not always a bad thing for someone to go bankrupt - although it is better to simply conduct financial affairs correctly to start with.
Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.
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Tags: money, extent, english language, school of thought, reputation, financial freedom, debts, silence, creditor, bankruptcy, debtor, willingness, solvency, materialism, stigma, personal views, relative strength, bankrupt