August 2019
When businesses find themselves unable to handle their debts, they can file a type of bankruptcy called chapter 11. This allows them to reorganize and restructure their debts, giving them an opportunity to start over, pay their debts under the chaper 11 and begin anew with a plan for success and growth.
-
Photo by Melinda Gimbel
Individuals, on the other hand, are more likely to file a chapter 7 or chapter 13 bankruptcy when facing financial hardship and cannot pay their debts. In a nutshell, the chapter 7 eliminates debts altogether and the chapter 13 allows for a repayment plan under the supervision of a trustee.
Overall, bankruptcy filing serves as a solution for resolving and relieving of debts gone awry for individuals or businesses.
There is one stigmatizing difference in terms of public reaction to working individuals who file bankruptcy vs businesses or wealthy people that file bankruptcy. When a business and the wealthy files for bankruptcy, it is considered as not a big deal, even smart to aim for reconstruction. Even if a business files a business chapter 7 and has to inactivate the business, there is a different social reaction when everyday folks file for bankruptcy.
Negative reaction to businesses that file bankruptcy is not common. This is the same for wealthy people who file bankruptcy. Both seem to avoid the shame and pressures that everyday people face when they are left to deal with the years that follow bankruptcy filing.
Businesses and the wealthy are able to restart just as the bankruptcy law promises. They often are well connected and are able to speedly recoup from the penalities of filing a bankruptcy, such as low credit score.
Those who are not wealthy, struggle to attain any future credit for 7-10 years, facing housing attainment hardship, lack of credit cards, to do things such as rent a car, and an inability to be employed in jobs that check credit reports for hiring, to name a few.
There is no upside for people who are not wealthy in the years following bankruptcy. It is a very harsh reality for them and life can become incredibly stressful and hard to survive during these years.
If the purpose of bankruptcy is to give people a second chance then that principle should be incorporated in the recovery process, especially since almost 600,000 families file bankruptcy annually due to medical issues and bills.
The road to recovery from bankruptcy filing is unfair and inbalanced. It creates roadblocks and bankruptcy filed hardships, for the so called average person, that businesses and other network intertwined people of wealth do not face.
