How Bad Is Filing For Bankruptcy
You will probably have heard some people refer to bankruptcy as bad. Sure, bankruptcy does indicate that someone has personal financial problems, the reason for the bankruptcy is an individual one and no two bankruptcies are ever exactly the same.
When someone makes a statement like, “bankruptcy is bad” it usually means they have no idea how bankruptcy works and the reason why the bankruptcy process was instituted.
At the moment the USA, and the rest of the world, are facing the impact of the worldwide pandemic, something nobody had predicted, and this impact has been vastly different for people. Some have managed to be largely unaffected by the effects, while others have lost jobs, and suffered long-term medical issues. How can anyone say that those who have been directly or even indirectly impacted by the pandemic and been forced into bankruptcy are bad?
Putting aside COVID-19 for the moment, there are always unexpected events and miscalculations that can result in a situation where bankruptcy is the only option. These can be sudden downturns in the economy or personal circumstances that hit just one person.
Think about the husband who was completely unaware that his wife was maxing out his credit cards, and taking on further loans, before leaving him and running away. Leaving the guy with an unmanageable pile of debt that he can never satisfy. He is already suffering from the betrayal of his loved one. Should he also have to have his life ruined by debt as well? Every bankruptcy has its own story to tell. Some may be caused by personal tragedy, others by making bad decisions.
Perceptions Of Other People
Success Is Not Something That Is Measured By Your Financial Status
Part of the mentality that causes debt in the first place is measuring your financial status against your neighbors. The bankruptcy process was created to allow a fresh start and thousands of people and companies take advantage of this opportunity. Are you going to deny yourself this opportunity because of what your neighbors might think about how successful you are? Later on in this article, we will look at successful businessmen who have made mistakes and gone bankrupt, only to emerge later and become a huge success.
Whilst bankruptcy proceedings are available to the public, how many of your neighbors routinely make the effort to go and check who might be bankrupt? Unless you have some very strange friends and neighbors, they are pretty unlikely to ever know about your bankruptcy. Even if they were to find out, most people would not really care. This stigma of bankruptcy primarily exists in the mind of the person going through it.
Bankruptcy Is A Constitutional Right
The right to go bankrupt is a fundamental right under the United States Constitution (Article 1, section 8). Under this provision, Congress enacted the bankruptcy code, which was last amended in 2005. This code is a uniform federal law. covers all bankruptcy cases. Congress saw that there was a need for a way to allow citizens a fresh start. You have every right to take that opportunity. Bankruptcy is a fundamental way that the American commercial system works. Many of the greatest industrialists and business leaders succeed only because when they got things wrong the first time, they were given the opportunity to try again, through bankruptcy.
Business Leaders Who Bounced Back From Bankruptcy
There have been so many key figures in American history that have been through bankruptcy, learned from it, and come out stronger, that I would need a massive book to tell their stories. Instead, I will briefly give some examples of people you may have heard of.
Henry Fiord who ultimately was the figure that created a successful USA Motor Industry had several goes at it before finding success. Bankruptcy was part of this learning process. In the beginning, Henry Ford’s cars were too expensive for the American public. They also failed to have high enough quality standards. He also was so indecisive that he produced limited numbers of vehicles. He learned from these mistakes and after bankruptcy, he put what he had learned into practice and he set up the Ford Motor Company, producing the Ford Model T.
This was the world’s first affordable motor vehicle and led to ever greater success. Had there not been the opportunity to go bankrupt and have a fresh start, he probably would have been so bogged down by debt after his first failure that we would never have seen the Model T.
After early success this animation pioneer expanded his business rapidly, capitalizing on his “Oswald the Rabbit” character. After losing the rights to the character and discovering he had expanded too quickly the company went into liquidation. Thanks to bankruptcy, Disney raised just enough money to have a second attempt at building his company, and following the release of Snow White and the Seven Dwarves in 1938, the company went on to global success.
Bill Gates and Paul Allen had their first business together, called Traf-O-Data. Unfortunately, technology moved on and it became obsolete, leading to failure. Bill Gates bounced back from bankruptcy and started a new business that you may have heard of called Microsoft. Bill gates learned from his early failures and used bankruptcy to allow a fresh start.
These three entrepreneurs demonstrated that hard work is an essential factor of ultimate success, but so is accepting when you got it wrong, and not being afraid to start again. They used bankruptcy as it was intended and had their fresh start, a fresh start which ultimately brought them great wealth and also created thousands of jobs that changed the lives of many people.
If you are facing an apparently unmanageably high mountain of debt. You can just carry on drowning under the pressure or you can be realistic and accept you got it wrong, or you were hit by exceptional bad luck and move on to a fresh start, by using bankruptcy as it was designed by Congress.
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