Should filing bankruptcy be an embarassment?

Nevada is again leading the nation in the numbers of filing of bankruptcy. Now, even the formerly middle class is filing for bankruptcy. As a consumer law attorney, I had increasingly seen dentists, doctors, schoolteachers and even lawyers filing for bankruptcy. It does not carry the stigma it once did. However, it is still a devastating experience for many people, especially those who never imagined going bust. For starter, it is an emotional matter as folks thinks that they are losers and could not catch up with their bills, or could not manage the money and balance their budget. For the most part is true. I see from their credit reports that most of the expenditures were avoidable initially but mushroomed due to higher interest and lack of the will to pay and reduce the principal. Along the way, the debtor lost their job, and piled up medical bill. Now, the total fiasco is complete, and filing bankruptcy is the only option.

We are seeing an increasing phenomenon where people who have never failed in their life, not in elementary school or junior high or high school or college, are failing in a fundamental way to manage their money properly and file for bankruptcy. It is like a colossal failure to manage their financial affairs. Of course, it has a lot to do with the current and unending home foreclosure crisis.

Nevada’s foreclosure laws also play a significant role in driving up the rate. The state’s foreclosure process occurs without court or government supervision and takes only weeks. No state has a faster foreclosure process. A bankruptcy filing is the only realistic option for most Nevadans seeking to delay a public auction of their homes.

It is nothing to be ashamed of bankruptcy anymore as this is a financial decision and has nothing to do with morality. However, even “forgiving” your debts has been provided in all the holy scriptures and it does have a religious foundation. Now, middle class clients are finding themselves in huge deficits, debt loads, and the imminent prospects of a Chapter 7 or Chapter 13 filing. I am surprised even police officers are filing for bankruptcy.
My observation in this regard is that a typical Chapter 7 debtor or chapter 13 debtors have the following characteristics:
• a homeowner
• Caucasian
• annual income of $45,000
• credit card debt of $41,000
• mortgage and car payment totaling $2,600 per month
• average credit score of 541
• negative net worth of $90,000

As I had written in my earlier posts, it is not advisable to borrow from your 401 (k) accounts as this incur heavy penalty and the debt payment is not considered a “debt” under the Bankruptcy Code. Filing for bankruptcy is your entitlement to exercise your federal rights and it should not be based on emotions or opinions but purely on financial data and your ability to catch up. If you cannot catch up on a sizable debt loan, there should be no hesitation in filing bankruptcy and seeing an attorney for consultation. One should not see embarrassment as a barrier in seeking your federal rights. Your bankruptcy should be a financial decision and not one based on embarrassment to your self.

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