Social attitudes about bankruptcy can be contradictory and even downright confusing in some cases. Some people associate bankruptcy with poverty or unemployment. They assume that those who file have limited resources and little or no income.
Other people think of celebrities and millionaires when they think of bankruptcy. Some of the wealthiest people and businesses in the United States have filed for bankruptcy to rework their finances and limit their financial obligations. The reality is that bankruptcy can be useful for people in a broad range of different economic circumstances. Bankruptcy is not just for one type of people, and certainly not just those with above-average income.
Different types of bankruptcy help in different cases
Affluent individuals who need temporary relief from unsustainable levels of debt or a surprise downturn in income may file for Chapter 11 bankruptcy. Small business owners and those who have regular income or valuable property may decide to file a Chapter 13 bankruptcy. Chapter 7 bankruptcy is usually only available to those with income levels below the state median for their household size. Each of those types of bankruptcy can be very helpful for people in different financial circumstances.
Bankruptcy does not have to be expensive
People who associate bankruptcy with wealthy people and large companies may expect bankruptcy to be prohibitively expensive. More complex forms of bankruptcy often require more intensive legal support and may have more costs associated with the process.
However, individuals pursuing a straightforward Chapter 7 bankruptcy likely face far lower costs and could potentially discharge far more in debt than they pay to undertake the process. Those with limited income or few assets sometimes think that bankruptcy isn’t necessary because creditors may not be able to garnish their wages or place liens against their property. However, they may underestimate how aggressive collectors can be. Also, the elimination of financial stress can be valuable on its own.
Recognizing that there are different types of bankruptcy available for people in different circumstances can help people obtain the financial relief they need. Both the automatic stay that stops collection activity and the discharge of debts that bankruptcy provides can be useful for those struggling financially. Choosing the right type of bankruptcy and navigating the process can be easier with the right help.