Why Do Federal Bankruptcy Laws Have a Bad Stigma?

The most notable stigma attached with federal bankruptcy laws, or rather just bankruptcy in general, is the financial implications of such a decision. Not only does bankruptcy carry a significant social stigma, but also, the filer will face difficulty and scrutiny as a risky or not worthwhile financial risk in the eyes of lenders and other creditors. Any bankruptcy filing automatically becomes part of the public record, allowing for public scrutiny and dissemination of this information. Additionally, any bankruptcy filing plays a prominent role in any form of financial history, most notably credit reports. As a debtor struggling with the decision to file bankruptcy, the first and best resource one should consult with is a bankruptcy attorney.

Federal versus State Exemptions in Bankruptcy

Another stigma, or perhaps better labeled as fact, surrounding federal bankruptcy laws are the relatively sparse exemptions allotted under the federal exemptions list. However, most states also allow for filing of exemptions under a state list, which is typically more beneficial for an individual debtor.

Problems with Locating Legal Counsel

Per the changes in bankruptcy law, bankruptcy attorneys and lawyers are on the hook more than before, especially concerning the requirement that a lawyer must vouch for the accuracy of any claim filed. This means that from a legal perspective, handling bankruptcy cases become much more time consuming, costly, and possibly, risky for the lawyers involved. It is notable, however, that these concerns are more grievances, rather than a problem, and in turn, a consumer who seeks the counsel of a lawyer will most likely be able to receive counsel and representation, assuming they look in several places.

Implications of Changes to Bankruptcy Laws

In the past, bankruptcy laws often had the stigma of being lenient or easily abused by filers in as part of an overall debt strategy, when the requirement for filing bankruptcy was not necessary. The relative ease of obtaining discharge in the past, prior to the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, gave grounds for many lenders, credit instructions, and other entities to criticize the process as being easily abused and misused. However, with the passage of this Act and other statutes, the current bankruptcy laws only allow discharge and relief under Chapter 7 or Chapter 13 for those individual who meet a relatively reasonable need level, based on a wide number of factors.

Getting Legal Help with Bankruptcy Issues

As with anything, most individuals will feel uncomfortable about the bankruptcy process until they know exactly what will happen, if they choose to file. For an individual and case-specific insight into one’s own debt and potential bankruptcy issues, consulting with a bankruptcy lawyer is the only option.