Why is BK a "Stigma" and Is it Really?

[redwritingmom]

A common theme I read here is about the embarrassment of BK and the "stigma" that we are losers, slackers, etc. I had the same concerns when I went through BK ten years ago. I find, however, that when I am open and honest about what we went through, people are understanding. Often they have never known a person going through BK...because very few admit that they are going through one or have gone through one.

So I wonder, is there really a stigma? Or do we make the assumption that there is a stigma out of our own embarrassment? or our own previous perceptions of a bankrupt person? or?

If there is a stigma, from where does it come?

What do you think? And how could we change the common perception?

[Never_Again]

I haven't admitted to anyone, to be honest.

The stigma for me comes from the fact that you are supposed to honor your word, pay your bills, and do as you said that you would. A person is only as good as their word.

Of course, the law does provide for bankruptcy. There is nothing illegal or immoral about bankruptcy. It is a legal remedy provided when needed.

Maybe a good deal of the stigma comes from the people who file and are looking for a way to work the system? I used to think that they were the majority, but now I know that they are the minority. Sure, they are out there, but not everyone, nor even most people, filing fall under those guidelines.

I also don't talk much about it because I think that bankruptcy is a temporary thing. I believe, even though it has not been that long, I have moved on. The real reckoning came in the time before I filed.

For more reference to how I feel about bankruptcy being a temporary thing, see the post here.

[StartingOver08]

Interestingly enough, I have used it sometimes in listing presentations (remember I am a realtor). Not so much to say that I am in BK - but to mention it as one of the viable alternatives to selling their home when they are too upside down to make it work.

For me it is more important that the potential seller know ALL of their alternatives so they can select the one best suited for them. If a sale won't work and a BK will - I have no problem recommending a couple of good BK attorney's.

As my own situation is concerned - I am able to recognize someone's financial condition a little earlier because I have/am going thru the same thing. So we talk about BK - just NOT my BK - except in very, very few instances.

Do I feel shame? Yes. But that is quickly dissappearing as I recognize that only I can change the outcome to make it work for me by changing my lifestyle. I am now eager to make those choices to be the "Millionaire Next Door" or something similar. I actually am enjoying the budgeting part. And the car shopping part with no money ($3500)! So the shame is turning into a great desire to turn this around and make the right choices.

[AngelinaCatHub]

OK all above, my story in a nutshell: We had 10 mil + on paper. We gave the land to the State for a park as it was our family home since 1860. No one to pass it to. We got a free park and we still have the land and house to death.

Next, we had money, not a lot but always lived below our means. THEN: Made an enemy out of a very evil and hated person in our county. He outspent us as well as removing three employments. THEN: Got cancer and no medical. Law suits and such that milked our wealth by design. THEN: Bankruptcy. Am I embarrassed? Not at all. I gave to society our land to be a preserve. The man is still attempting our demise but as far as bk, it is good for us as the jerk cannot get too much from us and what we have is protected from attachment.

We lost more than many, but we have more than many. Bankruptcy was never in my life’s plan as my credit score was 820, near the ultimate top of 850, I think.

This is the beauty of our Country. Bankruptcy, the New Start of last resort. Very few people plan to go into bankruptcy. Not to say, they don’t plan THE bankruptcy, that is only wise to do. NO sane person wishes to damage themselves. However, when the need is necessary, thank God we are here and now and will not be drawn and quartered for owing the “Majesty” a crown of gold.

There is no debtor’s prison and it is not something we all wish to do by design. That is why the tougher bk laws. Simply stated, it truly is a business decision.

This is my repose and I take every day of life as a gift. Every day, you live, you choose how that day will go. Happiness is truly a state of mind. Pick, ‘Blessed’. ‘Hub

[magyar123]

I think the word "stigma' will soon not be used anymore. Bankruptcy is a matter of survival, or in other words you're bailing yourself out.
Take a good look at AIG, the banks, automakers.

[JRScott]

Bankruptcy does not carry the stigma it once did. In all likelihood on every street in American you can find at least one person who has filed a bankruptcy either personal or business in their lifetime.

Ultimately the stigma was much as the early poster pointed out the lack of paying back money you agreed to do so. However there are circumstances in which a person cannot pay it back. The increased stress can lead to further health problems which in turn can make the situation worse. Thus in many ways the bankruptcy can be a good thing for the person enabling them to get back on their feet and become as productive as they can again.

If my circumstances changed tomorrow such that I had the money I would go back and pay the debts I bankrupted on over a year ago. It is unlikely that will happen, but if it did I would do so. To me that is important but not to everyone. It is much like seeing the beggar on the street and having a strong desire to give him something even if your own pocket is empty. The desire is great in heart but you simply have nothing to give. If even in the bankruptcy you keep the mindset that if you could have paid it off you would have I think you will be okay. (Note many financial advisers don't suggest paying back debts you bankrupted on even if you can, but morally it would be the right thing to do.)

[Flamingo]

Yes, there is a "stigma" but it is not as bad as it used to be because with this economy, more and more folks who thought they would never have to encounter filing bankruptcy, have had to face hard facts and realize just what can occur to put one in that position. It doesn't have to be a person going crazy with credit cards or using credit cards to cover gambling at slot machines, etc. There are still folks, however, that live without credit and credit cards and look down on those who do and they feel that those people should learn not to live above their means utilizing credit to do so. Those people include the well to do that could be your boss or someone you work with or know that just may not understand. It is just like anything else one has live with - whether or not and to who to disclose any private information.

[Phillymanhere]

redwritingmom,

I think you are right on your basic point. The stigma is largely one that filers or would-be filers impose on themselves. I would say it's a part of the same self-criticism we give ourselves for not making more money, etc. Your point is correct: worse than the stigma in reality is the fear of stigma.

I disagree completely with the person who said there is a stigma because we have broken our word about repaying a debt. Maybe for a very honorable few (and I'm talking very very very few!), that is the case. But in the business world, no one I know sits around feeling bad that they have to lay off someone, not pay someone, etc. for the mere fact that we gave our word. Loans from companies are far too impersonal for this. Now, if I have borrowed from a friend, then I would feel very bad not paying that friend. But from these major financial institutions, it's a strictly business proposition on both sides. They don't loan people money because people gave their word, they loan people money because based on their detailed research, they know there's a high likelihood they are going to score a good profit from doing so.

Furthermore, almost every contract has within it an implicit understanding that you can break it or renegotiate in case of financial emergencies. I work at an institution that can't fire its workers except for grievous offenses--except in case of financial emergency. Company X has to pay the pension it promised to worker Y--except when it cannot do so.

I think the origin of the stigma probably comes from hearing people talk about bk as the ultimate point of financial failure. What we missed in hearing those stories is the fact that bk is there in the law to help people get a restart and that some of these folks who declare bk later rebuilt their financial lives and lived quite well.

And yes, no one I know as a friend really looks down on people filing for bk any more than they look down on people who save less money than others save. But it has been drummed into our heads all our lives, the worst thing to do is to file bk. And obviously, it's not the worst thing to do. The worst position to need to file for bk but to be unable to file. Sometimes what leads people to be unable to file is the fear of the stigma.

One question I have: in rich families, where people might be familiar with ups and downs of investments, I wonder if bk carries the same stigma. Somehow I don't think Donald Trump and others are walking around with the weight of stigma.

[Never_Again]

redwritingmom,

I disagree completely with the person who said there is a stigma because we have broken our word about repaying a debt. Maybe for a very honorable few (and I'm talking very very very few!), that is the case. But in the business world, no one I know sits around feeling bad that they have to lay off someone, not pay someone, etc. for the mere fact that we gave our word.

Well, I must be pretty honorable then, because it does bother me. I understand that it was necessary, but I don't exactly wear it as a badge of honor that I did not pay back over $150,000 in debt!

But, I move on, and continue to live life.

As for layoffs as you mentioned, it is different. Most employment is "at will," and you have not given your word that anyone will be employed for a specific length of time.

I am also facing the prospect of having to lay off some people, and I do feel bad about it, as does our upper management.

[CatsInTrouble]

Before I personally looked at Bk to get out of 100K of CC debt, I did not see it as a stigma. I saw it as something businesses do, and had no personal opinion of it whatsoever.


Once I started researching it for myself, I have actually been looking at it as a smart option and something I wish more people would look at or consider.

However- wow- it's not something I go around advertising, so... hmmm....

[danaf]

Screw the stigma BS. If major corps can file then so can we. That I was given over 100k in credit given my salary was insane although I didn't realize it at the time. The cc companies made tons of money off of me throughout the years. I was too uneducated to realize what was happening and the cc companies were greedy and enjoyed their predatory lending. Embarressed that I filed? Hell NO! Worried about a stigma - NOPE! I don't think anyone would have the guts to judge me about my bk in this day and age and if they did - their problem, not mine. People who lives in glass houses shouldn't throw stones.

And CatsinTrouble - you sorta do advertise it. You have a blog. If that isn't advertising, I don't know what is.

[treehugger1]

In addition to other arguments, if you allow folks to get out from under their unsecured debt and high interest payments, they have more money to continue to spread arourd the larger economy. Many folks who declare BK will continue to spend the same amount, while also learning to save. In the big picture, there can be very large economic gains made by societies that allow the bankruptcy of debts (unsecured.) While financial institutions suffer the consequences, other parts of the economy gain as money is spread wider through the broader economic system.

Secured debt can be a different matter, but only in the cases where the original lender was sharp enough to request a significant chunk of money up front (20+% down on homes and/or autos.) Unfortunately, many lenders based their lending models on speculative future value of money they lent requiring little or no down payment. They took the same risk as those they lent the money to.

In this past decade of speculative borrowing and lending, how can anyone find a stigma attached to debt? If private industry can use Bk as a financial tool, then so can others.

The economy does not run simply on the whims of institutional debt. Folks still need food, shelter, transportation, commuication, healthcare, etc. Just because the lending and borrowing of money slows down does not imply the basic needs of life will also decline.

JMHO

[CatsInTrouble]

And CatsinTrouble - you sorta do advertise it. You have a blog. If that isn't advertising, I don't know what is.

nope, that's totally anonymous. Not one friend/family or coworker knows about our BK.

[GoodKarma]

I think the reality is there is a stigma. Obviously, all of here are anonymous. I venture to guess it's because of the stigma. Sure, we'll "come out" to friends and family when we are ready, or maybe never, but it takes times to get to the mental place where you realize you are going to be OK even with this BK. For me, at first (We have not filed yet, will be doing so in Jan) I was so horrified by the idea, I did not sleep for months. Really, I still am not sleeping well, but I have accepted that it will be best for me to join my husband in BK to get rid of our house in another state that has not sold in 2 years. I have not charged up credit cards and have managed money well, nevertheless, this is my situation. There comes a point in time, which I think I have reached, that you are OK with it, the BK. Damn, it really will be good to be debt free, you know? After it is over, this house will be gone, off our shoulders. GONE. We have 3 happy kids, are in a good rental house in a great school system. Will follow the guidelines to improve our credit as quickly as possible. At some point, you just have to let it go. Stigma, schmigma, we're talking about survival.

[HHM]

Someone recently provided some perspective on this issue.

Paying bills and not bouncing checks are not a moral issue, you do not pay bills late not out of some moral sense, but out of practicality. You don't bounce a check at the grocery store because you want to be able to use a check in the future, you want to be able to use bank accounts, you pay your creditors because you want to have available credit. In short, you pay because you want the product, not because you made a "promise" to pay. There is nothing honest or dishonest, it is just practical. You don't pay your electric because your honest, you pay it becasue you want to keep receiving electricity. Thus, I get frustrated when I see people financially struggling but are adamant about not filing BK because of some misplaced morality.

The stigma is a remnant of pre 1960 America (and really pre 1940's). Your creditors were people in your community, people you knew. Thus, there was a personal relationship that was being affected. However, that is not longer the case.