Bankruptcy is Responsible

Guilt, Shame and Feelings of Failure Have No Place Here

Many who come in to talk to us about filing for bankruptcy feel that they have been irresponsible or are failures and feel guilty and ashamed.     For some, this is an obstacle which prevents them from obtaining the relief that they need.    While I understand, I hate that this occurs and hate even more that it prevents some from obtaining the relief that they are entitled to and, in many cases, desperately need.   Here are some of the many reasons that guilt, shame and feelings of failure have no place in the decision-making process of the debtor.

Should I Feel Guilty About Filing Bankruptcy?

For the vast majority of those who come in to talk to us, the answer is resoundingly NO.

Guilt is defined as the fact or state of having committed an offense, crime, violation, or wrong.      As with a crime, there are many levels of culpability and often a balancing of equities involved.    So, a debtor who inclined to feelings of guilt, should consider their level of intent.     With the exception of the following examples, it is unlikely that you committed an “offense” as opposed to a simply falling prey to a mistake or unanticipated consequences.    The following would indicate wrongs recognized under the bankruptcy code and if proven, would prevent the discharge of a debt.

  • Borrowing money with no intention to re-pay the debt.
  • Obtaining money by knowingly making false statements to someone.
  • Causing someone or their property a wilful and malicious injury.
  • Causing death or a personal injury while intoxicated.

These are exceptions to the discharge set out by Congress as so wrongful that debtors do not receive a discharge.    Notice that simple inability to repay debt is not included in this list.    It is not something to feel guilty about and not likely something that was intended.

Yourself and Your Family Should be Prioritized Over Your Creditors

In most instances, the debtor and the debtors dependents suffer real sacrifices to pay bills, giving up necessities like food, shelter, medical and dental care and medications to pay credit card bills.     Many debtors will try so hard to avoid filing bankruptcy that they lose assets needed for the future of themselves and their family before being forced to file bankruptcy anyway.    There are laws to protect some of your assets, called exemptions.     These exemptions allow you to protect certain assets from your creditors.    This represents a public policy decision that these assets are necessary and should be protected.

Any of the following may be a sign of prioritizing creditors over yourself or your family:

  • All of the assets you have left would be exempt in a bankruptcy or under state law.
  • You have liquidated or are considering liquidating retirement assets or taking out an additional mortgage on your home in order to pay bills.
  • You do not have adequate health insurance for yourself and your family.
  • You have deferred necessary maintenance on your home or car to pay bills.
  • You cannot pay for food, medicine, rent, utilities or home or vehicle payments in order to pay credit cards or other debt.
  • You cannot pay child support because of credit card debt.
  • You are not making estimated tax deposits or withholding adequate taxes in order to pay debt.
  • You are not repaying student loans because of other debt.
  • You are unable to save any money or deal with unanticipated events because of monies used to pay debt.
  • You are not able to pay the minimum payments on all of your debt each month.
  • You are borrowing from a friend or family member to allow you to pay bills.
  • You are relying on a friend or family member to support you or your family.
  • A creditor has obtained a judgment against you, and your assets are in danger.
  • You are considering something rash such as suicide (If this is the case, please seek help.)
  • You are considering criminal activity.

Do not let false pride keep you from taking care of yourself and your family.    If you meet the qualifications for filing a bankruptcy case, chances are good that you need bankruptcy relief and should not feel guilty about obtaining relief.

Creditors Make Business Decisions, So Should You

Creditors do not generally lend you money because they like or care about you.   Creditors lend money because that is how they make money.    Creditors have made a business decision to lend you money.   They make business decisions as to what to do when you do not pay your bills.   Many creditors make it harder for you to  pay your bills.   They may increase your interest, add late charges and overlimit fees and threaten you with reports to your credit report.    Often, they do not employ adequate numbers of employees to assist distressed debtors in making re-payments.    They often refuse to accept payments made in less than the amount owed and continue with collection efforts even when a debtor is making his or her best efforts.

These are business decisions.    Creditors have made a determination that, in many instances, they would rather write off the debt or file a lawsuit rather than accept the debtors best efforts.

In most instances, debtors who file bankruptcy have repaid what was borrowed and then some.

Since the Great Recession of 2008 and passage of the CARD Act in 2009, credit card industry profits have declined a little, but not that much.  In fact, profits in 2012 are beginning to rise as Americans return to using their credit cards in much the same way they did before the recession began in 2008.  And credit card issuers are beginning to issue more credit cards and loosen standards for acceptance.
Total earnings for the year 2011 for the entire credit card industry were $18.5 billion, which was up slightly from the 13.6 billion earned in 2010. 
A credit card company voluntarily takes the risk of lending money, knowing that some will be unable to re-pay the debt.    Despite this, the credit card companies continue to profit in a down economy.   The credit card companies are compensated for the risks they take with interest and continue to profit.
Is is more responsible to ensure that you will be able to meet your own needs and that of your family when it becomes clear that you cannot realistically do both.    Much as we tell divorce clients, however difficult it may be, there comes a time when decisions need to be made not based upon emotion but based upon business judgment.   While you may regret events of the past and their consequences, this should not stop you from obtaining the best solution going forward.
Credit card companies do not want to spend money seeking payment from debtors who are unable to re-pay a debt.   In this instance, even for the creditors, it makes more sense to be able to write off the debt and not continue to expend resources attempting to collect an uncollectable debt.