Bankruptcy is good social policy.

There are many myths surrounding bankruptcy.  People think that you can just run up a bunch of debt, file a bankruptcy and walk away scot-free.  That is far from the case.  The bankruptcy code contains numerous provisions to explicitly prevent abuse.

Bankruptcy abuse prevention

For example, the bankruptcy code’s “means test” is a formula to prevent those who can repay their debt from just discharging it in a Chapter 7 Bankruptcy.  If you don’t pass the means test – no Chapter 7.  Your only other option then is Chapter 13 Bankruptcy where you are required to repay a portion of your debt.  Another example comes in the form of bankruptcy code exemptions.  Exemptions are the “asset protection” tool of the bankruptcy code.  They allow you to protect a certain dollar amount of your personal property.  However, you cannot purchase lots of luxury goods on credit and then file bankruptcy to wipe out the debt yet keep the goods.  The bankruptcy trustee has the right to seize those goods and sell them at auction to obtain funds to repay some of your creditors.

Bankruptcy is for the honest, but unfortunate debtor.

Like many things in life, a couple bad apples tend to spoil the bunch.  The general public only hears the bankruptcy horror stories.  You don’t hear about the tens of thousands of bankruptcies filed that result in people rightfully discharging debt and moving on with their lives.  You hear tales of people losing everything and bankruptcy ruining their lives.  Those tales are the exception, not the rule.  Also, if you looked closer at those horror stories, you will inevitably notice that the person filing did something dishonest or something they weren’t supposed to.  A well-executed bankruptcy achieves the desired result 99% of the time.  The most often comment I receive from clients after they finish their bankruptcy is that they wish they had done it sooner.

If you have questions about bankruptcy or just debt in general, contact The Law Offices of Dax J. Miller today for your free consultation.