If They Can Do It, You Can Do It
What do Abraham Lincoln, Henry Ford and Walt Disney have in common? Yes, they were motivated, driven, passionate individuals, each with their own vision. Without a doubt, these three individuals left their mark on the world we live in. However, the abolition of slavery, the affordable automobile and an enchanted world for children and adults almost never were.
Prior to their overwhelming and undeniable success, these three individuals were either dead broke or forced to file for bankruptcy. If it were not for the built in fresh start contained within our bankruptcy laws, these three never could have risen from the ashes of debt. The fresh start is not just handed to you. It is something you must work for, with your financial freedom as the ultimate goal. Many people believe bankruptcy is the finish line, however, it is just the starting gate.
The Fresh Start: Bankruptcy's Ultimate Purpose
You don't have to take my word for it, this comes directly from the Supreme Court of the United States:
One of the primary purposes of the Bankruptcy Act is to, "relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes." Williams v. U.S. Fidelity & Guaranty Co., 236 U. S. 549
In another case, expanding on the purpose of the fresh start, the Court stated:
This purpose of the act has been again and again emphasized by the courts as being of public, as well as private, interest, in that it gives to the honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of bankruptcy a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. Local Loan Co. v. Hunt - 292 U.S. 234
In addition, both the Federal and State governments ensure that debtors emerging from bankruptcy do not end up destitute. Exemption laws are in place for exactly this purpose. Exemption statutes foster the fresh start by allowing people to keep certain assets while relieving their debt.
There is an immediate and direct benefit to the individual or family who receives a fresh start in bankruptcy. They now have the ability to move forward and work towards that ultimate end: Financial Freedom. However, less apparent and sometimes overlooked is the indirect benefit to society. Bankruptcy is almost like a financial probiotic, cleansing the overburdened individual and creating a healthy, stable consumer. It is this cleansing process that indirectly serves the public good while providing the fresh start for the debtor.
Where Does Bankruptcy Leave Me?
Some of the most common bankruptcy questions relate to when the bankruptcy case is finished. "Where do I go from here?" "When will I be able to get credit?" "How long will my credit be ruined for?"
This is where the concept of a fresh start is so important. If all goes well (and it usually does), you will receive your discharge at the end of your case. That means you are debt free and with no debt comes reduced stress. The emotional benefit of the fresh start is often overlooked.
Another neglected aspect is the effect on your credit report. Many fear that bankruptcy will "ruin their credit." In fact, in many cases, bankruptcy can improve credit by cleaning the negative occurrences from your record and immediately enhance your debt to income ratio. Look at it from the creditor's perspective: Were you a greater credit risk with $40,000 in unpaid debt (pre-bankruptcy) or $0 debt (post-bankruptcy). It is a good question.
A Bankruptcy Lawyer should work with you past your discharge and mentor you moving forward to ensure that you make the most of your fresh start and begin to improve your credit.
Your Fresh Start Is Not Automatic
It is a two way street. The bankruptcy process paves the way, however, you have to walk the road. It is very important that you take positive steps to rebuild your credit post-bankruptcy while avoiding some of the pitfalls that come with establishing new credit.
In addition to building new credit, it is vital that you build new habits. Debtors coming out of bankruptcy should practice principles of frugality and try to save for future emergencies. Medical emergencies, loss of employment, education expenses, divorce, etc. are just around the corner and a small amount of savings can alleviate some of the pressure in the event of an emergency.
In my experience, most people should be able to put away 10% - 20% of their income with some minor adjustments to their luxury spending. Again, a Bankruptcy Lawyer should be able to help you with minor budgetary adjustments and give you tips on saving to make sure you do not become a "repeat client."
"It All Started With A Mouse..."
If you can look past the colorful, lovable character, Micky Mouse is a symbol of independence, freedom and success. Bankruptcy can give you a fresh start and lay the groundwork for your own financial independence, freedom and success.
As Walt Disney once said, "The way to get started is to quit talking and begin doing."