There are several reasons someone may be reluctant to file for bankruptcy. Some people might feel shame and think that people will judge them, and others may not realize just how perilous their situation has become. But for many, their reluctance is based on a more fundamental question – is filing for bankruptcy a moral choice?
We won’t leave you in suspense – the short answer is an absolute yes.
Although there will always be cases of people exploiting the system, the vast majority of people who file for bankruptcy have legitimate and legal reasons for doing so. The bankruptcy process exists for the very purpose of helping individuals get out from under their debt. While creditors may harass you and accuse you of “not doing the right thing” or “trying to escape your responsibilities,” the relief you seek is neither unethical nor immoral.
In fact, that type of intimidation is considered predatory and could get the creditor in trouble with the law.
Let’s take a look at your legal rights under the law.
- You have a legal right to file for bankruptcy. Congress enacted specific bankruptcy legislation to permit individuals – and corporations – to file bankruptcy. You have the option of seeking a discharge of qualified debts or choosing to reorganize your debt into an achievable payment structure.
- You have a right to avail yourself of the “second chance” that bankruptcy provides. Congress wrote the Bankruptcy Code with the purpose and intent to provide relief and give individuals and businesses the legal right to file bankruptcy. The Bankruptcy Code includes provisions that prevent fraud and abuse, such as requiring debt counseling and forbidding the discharge of some types of debt. Most debtors have a valid need for financial relief. Don’t forget, when you file for bankruptcy, you are proactively seeking a solution involving your creditors – not avoiding them a dodging your responsibility.
Many businesses will file for bankruptcy without reservation, seeing it more as a strategic business decision than any type of failure. Bankruptcy can be utilized to sever yourself from debt that no longer serves you. If you can disassociate the process from your emotions, you can look at bankruptcy like businesses do.
But is it a Moral Choice?
Those who have a moral or religious objection to bankruptcy may be surprised to learn that even the Bible speaks clearly of debt relief provided for those who could not repay their obligations. The historical and Biblical term “debt jubilee” refers to complete debt forgiveness every seven years. These “jubilees” were put into place to permit debtors to be released from unrealistic and insurmountable financial burdens.
But modern bankruptcy is not a “jubilee” in the same sense, as debt obligations are not forgiven across the board.
Under Chapter 7, saleable assets will be sold by the bankruptcy trustee to pay as much of your debt as possible. If you are looking to reorganize your debt under Chapter 13, there is a three-to-five-year payment plan established legally by the courts. Therefore, you are not reneging on your responsibilities – instead, your debt obligations will be modified, with creditor participation, to allow a legally codified second chance at financial freedom.
For those still wrestling with doubts or questions, remember you are far from alone. Over the last five years, there have been nearly 500,000 annual Chapter 7 bankruptcy filings on average; and approximately 250,000 Chapter 13 bankruptcies during the same period – although there was a notable drop in filings of both Chapters in 2020.
Do you have more questions or concerns? We are here to help. Call the law offices of Richard V. Ellis today to further discuss bankruptcy solutions.