Why the Wealthy File for Bankruptcy

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Bankruptcy courts are now experiencing so-called "eleventh-hour conversions," mostly by the wealthy, in which debtors quickly change their non-exempt property into exempt property. In fact, many debtors are even figuring out which liberal exemption states to move to prior to declaring bankruptcy in an effort to maximize exemptions. Despite these attempts by some to circumvent the system, there are plenty of wealthy people who are finding themselves in financial trouble, and are not playing the system; they merely need help. 

Wealthy Families Filing Bankruptcy More Common

The number of wealthy Americans who filed Chapter 11 jumped 73 percent in the second quarter of 2009 from a year earlier. These statistics come from Bloomberg, which further notes that these wealthy families have over a million dollars in secured debt, and average $336,900 in unsecured debt. The foreclosure crisis and falling home prices have left many wealthy Americans unable to either refinance or sell property which is declining in value at a head-spinning rate. The real estate boom caused many of the wealthy to overextend, accruing debt which vastly overshadows their income and net worth. Chapter 11 Bankruptcy can be a realistic solution for the wealthy because it allows debtors the chance to come up with an effective repayment plan, while also offering stay protections which prohibit creditors from seizing assets or attempting to collect on debts.

Unemployment as a Cause of Bankruptcy

The downward spiraling job market has left many wealthy Americans unemployed, and unable to find work with a comparable salary. Many of those who have been making six-figure salaries for years and years, can find themselves shockingly overextended when that regular paycheck is no longer coming in. These previously upper middle class folks are forced to take work at a much lower salary, simply to get by, but are unable to continue to make large mortgage payments or high-interest credit card payments. While filing bankruptcy is a psychological blow for anyone, it may hit the wealthier especially hard after many years of spending freely. The good news is that it is your legal right as a U.S. citizen, whether rich or poor, to file for bankruptcy. Bankruptcy laws truly do not discriminate based on how much you earn or how much you owe to your creditors. As long as your petition for bankruptcy is legitimate, then the courts don't care whether you are $5000 in debt, or over a million.

Consult a Bankruptcy Attorney

No matter what your income bracket, don't be embarrassed if you are forced to file for bankruptcy. After all, why let your pride stand in the way of a brighter financial future? Be sure to consult a knowledgeable bankruptcy attorney before you make the final decision to file bankruptcy. A bankruptcy attorney will know the laws specific to your state of residence and will be able to offer you the best legal advice and options.

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