bankruptcyThe common view on bankruptcy is that it’s a way for someone who’s down on their luck to get a fresh start financially and that would be fine if that’s all it was. Unfortunately many Americans are using bankruptcy as a “get out of jail free” card when they make irresponsible and bad financial decisions and filing bankruptcy does not help-out their long term situation. For this reason, we should work to eliminate Chapter 7 bankruptcies as part of federal law.

I don’t have any problem with Chapter 13 bankruptcies in which people get financial counseling and come up with a plan to repay their debts at lowered interest rates, because with Chapter 13 bankruptcies, people are at least taking responsibility for their debt and paying it off over time rather than just throwing their hands up in the air and yelling, “I don’t owe you money anymore!”

When many people start new businesses and try out new investing schemes, they know in the back of their mind that the worst possible thing that could happen to them is that they would have to filed bankruptcy and be back at square one. Maybe if people knew that the only way to get out of their debts was to actually pay them, they wouldn’t be so reckless with their personal finances, business startups, and crazy investment schemes. There would be real accountability for people who make bad financial decisions because people would actually have to pay back the debts that they’re owed.
Many people will decry this message as cold and heartless and question about people who file bankruptcy because they get in huge medical debts by no fault of their own. It’s true that people who have major health episodes often come out with hospital bills in the tens of thousands of dollars, but it’s also true that healthcare providers know that sometimes people just can’t afford to pay them the full amount and by sitting down with the hospital administrator one can easily get a significant portion of their debt forgiven. Perhaps knowing that you would be completely responsible for any medical bills one would receive would further make insurance a priority in our lives and encourage us to adopt healthier lifestyles as well.

Bankruptcy is a way to eliminate your existing debt; the problem is that it does nothing to curb the over-spending and lack-of-income which got them in the huge pile of debt to begin with. If you take someone who spends much more than they make, and take away all of their debt, they’re just going to wind up in debt again and file bankruptcy again a few years down the line.

Instead of turning to bankruptcy to eliminate debt, we need to come up with plans to live within our means and pay-off our debts, not just kick and scream and decry that we don’t owe people money anymore.