Many people worry about filing for Chapter 7 bankruptcy. They think that it will make them look like they were simply bad with money or as if they’re just trying to rid themselves of past debts without paying back what they owe.
That’s not the best way to look at bankruptcy. In fact, bankruptcies are exceptionally helpful to those who have done their best to pay back creditors but who have too much debt to pay back each month. Some people may have lost jobs, while others may be struggling with medical bills or high-interest rates. Regardless of the cause, all people should have an opportunity to get a fresh start.
Why is there a stigma around Chapter 7 bankruptcy?
There has always been a stigma about bankruptcy that people who have to go into bankruptcy were just bad with money. Chapter 7 bankruptcy is liquidation bankruptcy, which means that any nonexempt items must be sold off to pay back creditors. This further creates the idea that people choosing this form of bankruptcy have lots of items lying around that they can sell, even if this isn’t the reality.
People who choose Chapter 7 bankruptcy have to fall under certain monetary guidelines. They can’t earn too much; if they do, then they have to enter into Chapter 13 bankruptcy and repay what they owe over three and five years. That difference is what makes it so important for people to realize that those in Chapter 7 bankruptcy may have no other options, and Chapter 7 is there to help them out of a bad spot in their lives.