The perception of bankruptcy is the second of six blog posts in a series about emotional hurdles to overcoming debt. Struggling with debt takes an emotional toll on a person.  It’s a helpless feeling when you’re trying to rebuild your financial future.  Getting help is the key; but more importantly, taking care of your emotional health is very important.

There are six emotional hurdles to overcoming debt:
  1. Trust
  2. Perception
  3. Courage
  4. Acceptance
  5. Belief
  6. Fear

This blog post focuses on the second hurdle of debt – Perception. It is extremely important to remember that perception is NOT reality. There are three main types of perception attached to bankruptcy: 1) what is it; 2) who chooses to file; and 3) why does a person file bankruptcy.

perception is not reality

Don’t let another person’s errant perception skew your reality when you’re trying to get out of debt.

First, let’s tackle the perception of what bankruptcy is exactly. The majority of individuals do not know much about it, so they define bankruptcy buy listening to what family and friends think it is (which may or may not be true). People also hear about bankruptcy in the media (such as when famous movie actors declare bankruptcy or pro athletes declare bankruptcy) and then make a determination of what it is.

Bankruptcy, in its most basic definition, is a legal status of a person or other entity (such as a business) that cannot repay the debts it owes to creditors. In most jurisdictions, it is imposed by a court order, often initiated by the debtor. There are two key elements of this definition that are very important to recognize: it is a “legal status” and “imposed by a court order.” These are important because bankruptcy is part of the legal system and it is a person’s LEGAL RIGHT to get out of debt. Bankruptcy is not something that happens on its own or because someone has debt and just says one day, “I am not going to pay my debts.”

History of Bankruptcy?

The history in the United States is quite fascinating. In 1800, Congress passed the first federal law relating to bankruptcy. Subsequent law changes occurred in 1841, 1867, 1898 and 1978. The point is that there is a deep history of a person’s right to get out of debt. Most Americans don’t know this, so there perception is ingrained in their minds without having all of the facts.

The second perception to overcome when getting out of debt is knowing the type of person who chooses to file bankruptcy. The typical stereotype is one who is “worthless” and trying to take advantage of the system. Those who have this stereotype make it seem as if you have many other options and that bankruptcy is the easy way out. That is just not true for the majority of people who file.

So why do most people file for bankruptcy?

So who files bankruptcy? The vast majority of bankruptcies are filed by normal, hardworking citizens who had a negative financial event happen to them – not because they decided to go on a spending spree and intentionally work the system to not pay back their debts. The most common reasons for filing are:

  • A medical emergency happens and the medical bills are too high to pay back
  • A job change occurs (either downsizing or a layoff) and the person is not able to find a new job at the salary they were previously making
  • A person invests in a business and a third-party backs out leaving them with all the debt
  • A couple decides to divorce and the debts incurred are too much to pay back
You Have Other Options

So it is essential when you are thinking about whether bankruptcy is the right option for you, try to look past all of the perceptions that others have about bankruptcy. There are many lawyers who can help you and give you legal advice. Colorado Debt Help is here to help you. Whether you are looking at bankruptcy, or another debt relief option like debt settlement, Colorado Debt Help can provide you with the information you need in order to make the best financial decision for you and your family despite other people’s perceptions.