The Psychology of Bankruptcy, Part 1

I don't know if anyone has ever written a blog on this subject before, but when I woke up at about 3 am this morning, the thought came to me out of the blue that I should write a blog called The Psychology of Bankruptcy. And when I thought about it, I started thinking that far too many people have wrong beliefs and wrong opinions about bankruptcy. And that's probably because about 99% of the population didn't go to law school and learn the truth as to what bankruptcy is all about. So then I started thinking that if 99% of the people in the United States didn't go to law school and learn about bankruptcy, well then where are all of these people getting their ideas, their opinions, and their beliefs as to what bankruptcy is all about.

I guess if you asked the average person as to whether they thought bankruptcy was a good thing or a bad thing for a person to do, most people would say a lot of bad and negative things about bankruptcy. For example, they might say that if you file for bankruptcy you must be a real loser. Or they might say that bankruptcy is really bad because you will never be able to get credit again, or you will never be able to get a mortgage to buy a house,or you will never be able to buy and finance a car. All of those opinions and beliefs are not true, but probably the vast majority of people in this country believe that they are true. So why do so many people have the wrong ideas about bankruptcy?

In the early 1980's I was playing in a friendly little footbal game with about 14 people. I had been a lawyer since 1973, but I really didn't know very much about bankruptcy. During a break in the game, I overheard one of the guys on the other team talking with a few of his teammates, and of all things to be talking about during a friendly football game, he was telling them about how smart and how great it was for people who were in financial trouble to file for bankruptcy. He was making it sound like filing for bankruptcy was one of the smartest and greatest things that someone could to do.

I sure don't remember every word he said, but I do remember him saying something like this: "You know how years ago it was a big shame for people to file for divorce, and now half of the country is divorced. So now, instead of being stuck with someone you just can't stand anymore, you can easily get divorced, and no one is going to think badly about you. In fact some of your friends might be telling you that it's about time you got divorced, and they couldn't believe that the two of you were able to stay together for so long."

Then he started talking about all of these benefits of bankruptcy, and he concluded by saying something like this: "In a few years from now people will be understanding the real truth about bankruptcy, and they will be telling their friends who are in financial trouble, "What do you mean, why are you suffering and struggling to pay all of your bills? What are you waiting for? Be smart and get out of your debts the legal way. Don't feel bad for all of those million dollar credit card companies and those bill collectors who have been taking advantage of you and other people like you. File for bankruptcy and get a totally fresh start. It's the smart thing to do, and you really should have done this a long time ago." He concluded by saying that in a few years people would be saying to each other, "you mean you haven't filed for bankruptcy yet?"

I just looked up this lawyer on the internet, and I see that he appears to be a highly respected and successful lawyer in Philadelphia, and he is still actively practicing bankruptcy law, although I would doubt that he is still playing football. I guess he was ahead of his time, because he understood the real purposes and policies behind the laws of bankruptcy. He understood the truth about bankruptcy whereas the vast majority of people were being fed a bunch of lies about bankruptcy. I suppose he understood that the bankruptcy laws went back to the days of the Bible, where in the Old Testament Book of Deuteronomy chapter 15, God talks about forgiveness of debt every seven years, and a year of Jubilee. I guess he knew that in the Bible according to Proverbs 22:7 (NIV), “The rich rule over the poor, and the borrower is slave to the lender.”

So why do so many people have the wrong ideas and the wrong psychology about bankruptcy? It sure seems that God wants people's debts to be forgiven, so what's the big deal if someone files for bankruptcy? Well, we'll explore that in our next blog, The Psychology of Bankruptcy, Part 2.