The most common myth about bankruptcy is that the only type of person who files is a big spender, irresponsible who is bad with money and lives a lavish lifestyle. This myth, or rather stereotype, has been perpetrated throughout the decades by people who will do and say anything to get people not to file bankruptcy.
The actual truth is that the vast majority of bankruptcies are caused by one of three things: 1) Job Loss or disruption in income (such has reduced hours or pay); 2) Medical Bills; 3) Divorce. In my experience the remaining bankruptcies are the result of a business failure.
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Are there people who file bankruptcy who live irresponsibly, yes. But to state that all people who file bankruptcy fall within that category is an outright untruth. The truth is that the vast majority of people use bankruptcy as their last resort. The truth is that a disruption in income can lead to a hole which is impossible to dig out. The truth is that when you are a single mother and your 15 year old child has a heart attack on the basketball court (yes this is an actual case of mine) there are medical bills and a disruption in come. The truth is that when you get divorced you no longer have two incomes to manage the marital debt and when your X files bankruptcy the creditors come knocking on your door.
What is disturbing about this myth is that it doesn't take into account the creditors lending behavior. If lenders were so upset about people filing bankruptcy then why do they extend so much credit? The answer is because they make money when you charge your card (they get a fee from the business who accepts the cards) and they know that people do everything they can not to file bankruptcy and end up paying their minimum's for months (if not years) and thus pay massive amounts towards interest. Make no mistake, the creditors have massive risk models and mathematical formulas to rely on so they make money. Crocodile tears my friends, crocodile tears.
The bottom line is this, people file bankruptcy because there has been an event in their lives which effect their finances. People, rich and poor file bankruptcies. Blue collar and white collar. Friends and family. If there is no more money, then there is nothing left to do. Bankruptcy exists for a reason, to give honest but unfortunate people a fresh start.
DISCLAIMER: The information contained in this distribution is intended for informational purposes only. It is not intended to be legal advice. Your situation may vary and different facts creates different advice. So do not take legal action based on this content! Always contact a lawyer near you. The attorney's posting this advice are licensed in COLORADO only and thus there may be a dramatic difference in procedures in any other state. This is not an advertisement for legal services except where permitted by law.
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