The Purpose of Bankruptcy
We often see clients come through the door who are ashamed to even be meeting with a Bankruptcy attorney in the first place. Unfortunately, Bankruptcy has, for whatever reason, gained an association with laziness or failure in our country when that is often the farthest thing from the truth. In fact, the most common cause of Bankruptcy filings in the modern-day United States is medical debt. In 2009, Harvard University performed a study in conjunction with Congress to determine the main cause of Bankruptcy filings in the United States. Of the 1.4 million bankruptcies analyzed in the study, 62% were determined to be caused by medical debt.1 It is hardly fair to associate someone with laziness or failure when one unexpected illness flipped their whole life upside down.
The idea of bankruptcy has always been the same since its inception, to give a debtor the chance to become a productive member of the economy again.2 We all know how the process works, new businesses open every day, some succeed and others do not and are forced to close their doors. Throughout this entire process, loans are being extended, money is being made or lost, and when a business doesn’t work out someone is always left holding the bag. Although it may seem counterintuitive at first, the best thing for the health of a nation’s economy is to provide an avenue for individuals to deal with their debts when things don’t work out. This allows the creditor to be made as whole as possible while still allowing that individual to move on with their life and maybe try their next big idea, rather than simply being forced to live with creditors breathing down their neck trying to collect every penny that was lost for years and years to come.
Many Famous People We Remember as Successful Have Filed for Bankruptcy
It is important to remember that the bankruptcy process was written into law for a reason. It is there to give you a way out when you are in over your head so you can start over as a productive member of the economy. There are several famous and historic individuals who are remembered today as business magnates but who themselves took advantage of the bankruptcy process when they needed it most. The following historical figures filed for bankruptcy at least once in their lifetime:
Abraham Lincoln – Filed bankruptcy when his general store failed to turn a profit.
Walt Disney – Filed bankruptcy after he was stuck with bills from a film deal gone wrong.
Henry Ford – Filed bankruptcy in 1903 before building Ford Motor Company.
Ulysses S. Grant – Filed bankruptcy after being cheated out of money by a business partner.
Donald Trump – Our current President has filed corporate bankruptcy four times himself.
Mike Tyson – Filed bankruptcy to help address outstanding tax debts.
Elton John – Filed bankruptcy in 2002 after his spending habits got out of control.
As you can see, bankruptcy has nothing to do with how hard you work or talented you are. Even some of the most talented and intelligent individuals our country has ever seen have needed to seek the protections of the Bankruptcy Code, and that’s exactly why its there. Well now you know; there is nothing shameful about filing for bankruptcy. It is a legal process available to help consumers when they get into a tough spot. Anyone who would fault a person for that just simply doesn’t understand the entire purpose and heart of the Bankruptcy Code.