People end up in personal debt for many different reasons. Some people get hurt in a car crash and have major expenses. Others might lose their job when the company where they work lays off dozens of people at once.
Many people struggling financially have lived responsible and even frugal lives. It only takes a few weeks of reduced income or a sudden spike in expenses to imbalance someone’s budget and push them toward financial insolvency. Often, people assume that those who file for bankruptcy are just irresponsible. They imagine people going out and shopping with credit cards while working a minimum wage job or otherwise spending money frivolously.
The stigma of bankruptcy and the idea that someone must have been irresponsible to end up in a situation where filing became necessary may hold some people back from filing. While some people may be judgmental, the stigma around bankruptcy is not as severe as people sometimes assume.
Most people won’t know about a filing
Technically, news about bankruptcy filings and other court matters are part of the public record. Local newspapers often print information about those who have filed, just as they print details about divorces and marriages. The vast majority of people do not read the legal section of the newspaper, if they read a newspaper at all.
Most people who interact with a filer on a day-to-day basis may have no idea that someone decided to file for bankruptcy. Even parties that do have access to someone’s credit report, such as employers and landlords, typically do not place much weight on bankruptcy. Particularly when someone has reestablished their credit after their filing, the long-term impact that bankruptcy has on their personal opportunities should be minimal.
People understand financial hardship
Even in scenarios where someone’s bankruptcy could put them at a disadvantage, it is possible to work around the negative impact of a bankruptcy filing. Providing an explanation to a prospective employer or landlord about the reason behind the bankruptcy could help someone connect with opportunities that the record of their bankruptcy could otherwise affect.
Parties that perform background checks when evaluating applications often give individuals an opportunity to explain blemishes, particularly if some time has passed since the bankruptcy. The bankruptcy discharge only remains on someone’s record for 10 years after a Chapter 7 filing or seven years after a Chapter 13 bankruptcy.
Someone who successfully files for bankruptcy can prevent creditor lawsuits and may be able to discharge many of their unsecured debts. Realizing that social stigma is not generally a major concern in a practical sense might benefit those to struggle financially but who worry about filing for bankruptcy.