emotional response than that of ‘bankruptcy

Perhaps no more financial term causes a more emotional response than that of ‘bankruptcy’.

Bankruptcy carries with it subtle and not so subtle connotations of personal failure and a loss of hope. As much as the notion of bankruptcy denotes a financial and legal situation, it is also has a strong underlying social (and some even feel a moral) meaning for many.

Financially speaking, bankruptcy protects individuals from collection and legal action by creditors and eliminates debts which are unsecured. As a consequence however, its effect on one’s credit rating is total and it can put many unprotected assets in the hands of a trustee. The considerable emotional and psychological stress and guilt the notion of bankruptcy carries is often as harsh as the financial ramifications that result.

The term unfairly and severely burdens many of the tens of thousands of individuals in North America who are forced into bankruptcy each and every year. Even those incredibly conservative with their spending habits can find themselves in danger of personal bankruptcy. One of the most common causes of bankruptcy is divorce.

The legal expenses associated with a messy divorce, especially when the custody of children is in dispute, can skyrocket far beyond what the total assets and incomes of the divorcing parties can manage. Unexpected health care costs can also put formally solvent and financially healthy families deep into a debt level they simply cannot get out of. Students who are burdened with large tuition and educational expenses, coupled with insanely high interest charges, often see no other recourse that to seek bankruptcy protection. As economic times worsen like they are now, and as more organizations tighten their belts and seek to cut costs by trimming staff, unemployment rates rise. That leaves many hardworking people, without the income needed to pay their bills and meet their financial obligations.

Recessionary times often put dedicated, hardworking people and families in situations where personal bankruptcy is the only option. It is amazing how quickly one’s savings can dwindle a steady paycheck no longer can be counted on to pay the bills. The fact that well-intentioned people often find themselves facing the emotional burdens carried by bankruptcy and the social stigma associated with it is unwarranted and counterproductive. The financial impact of bankruptcy is a heavy-enough burden in and of itself. It is possible to comeback from the financial abyss of bankruptcy, but the journey does not have to be full of intense guilt and shame.

Paul Robgher writes for debt-free.org.uk and takes great pride in helping people to be debt free