Bankruptcy Help
Often, people with debt problems fail to consider the non-financial implications of bankruptcy (either Chapter 7 or Chapter 13). Of course, the financial consequences of bankruptcy are usually greater than borrowers are led to believe, but it is usually the non-financial aftermath that causes the greatest strain.
When faced with debt problems that warrant bankruptcy considerations, debtors have two options. Chapter 7 or Chapter 13. We will take a very, very general view of both options here, then dig into the non-financial drawbacks.
Chapter 7 Bankruptcy
Chapter 7 essentially wipes out all debt. This involves liquidating existing assets and paying off the corresponding debt. Of the two bankruptcy options, Chapter 7 more accurately provides borrowers with a "fresh start" since the borrower will be left with nothing except a bad credit report. Chapter 7 bankruptcy is usually the option of choice for borrowers with no assets (nothing to "lose").
Chapter 13 Bankruptcy
Chapter 13 wipes out all unsecured debt, but allows the borrower to keep (maintain) secured debt, such as vehicle loans and home mortgages.
High Stress
As for the non-financial implications of both, borrowers need to realize that both Chapter 7 and Chapter 13 bankruptcy involve a tremendous amount of stress, particularly between couples. Often, it is one spouse's money management that leads to the bankruptcy, which then results in the blame game. Whenever the couple is unable to achieve a material goal (e.g. buying a new car, upgrading their home, etc.) the offending spouse is blamed for all debt problems and everything else that may or may not be related to the bankruptcy.
Public Information
As well, bankruptcy becomes a public record, allowing the nosiest of neighbors or friends to dig into the depth and nature of the couple's debt problems. This will not only increase tension levels among couple's but could also introduce a small degree of paranoia to the relationship, which eventually turns into the blame game once again.
Guilt and Depression
With a bit of time, the offending spouse will begin to accept the responsibility that his or her bad money management skills contributed to their bankruptcy, even if the family home was retained (under Chapter 13). This guilt often leads to outright depression and this can also put distance between couples, which contributes to whole other series of relationship problems in the long-term, including divorce, separation and sometimes domestic violence.
Ultimately, the decision to proceed with bankruptcy needs to be undertaken by both members of a relationship. Given the serious tension that bankruptcy, both Chapter 7 and Chapter 13 can add to a relationship, couples need to be assured of the strength of their relationship and understand that many of the non-financial consequences can weaken that strength.
For couples who are unsure that they can survive bankruptcy, other options should be considered.