Middle Class Bankruptcy
Who declares bankruptcy? Of the roughly 1,000,000 Americans who file a bankruptcy petition every year, the large majority of debtors are from solidly middle class backgrounds. In fact, some may not even be financially insolvent. Of course, at the moment of bankruptcy, their personal balance sheet and bank statement may look bleak, but debtors rarely come from an impoverished background – and they generally return to some level of prosperity after their bankruptcy.
Why do debtors declare bankruptcy? Most often, Americans file for Chapter 7 or Chapter 13 protection because their high-interest debt payments seriously threaten to overwhelm their monthly income. In many circumstances, major life events – family deaths, job losses, medical events, or business failures – wipe out an individual’s personal equity, require a rapid increase in debt, and precipitate a balance sheet imbalance that ultimately results in insolvency and bankruptcy.
What’s better: Chapter 7 or Chapter 13? A straight liquidation, codified in Chapter 7 of the Bankruptcy Code, offers distinct advantages over a payment plan, provided for in Chapter 13 of the Code, in some cases. However, for debtors who are prohibited from filing Chapter 7 or who are looking to hold onto particular assets, Chapter 13 may be the preferred approach. Ultimately, a liquidation or a restructuring of debt is a choice that depends on the needs of the debtor. Advice of counsel is important to make this decision.
Ready to talk about whether personal bankruptcy is right for you and your family? The professionals at Fears Nachawati have the experience and expertise to advise you well. You can trust that our years of practice will help you move from insolvency to a new financial future. For your free consultation, talk to us today.