There are many people who can benefit from bankruptcy, but put off filing due to fear and the myths surrounding bankruptcy. Bankruptcy offers consumers a fresh financial start and relief from the burden of debt, but for many, it is the fear of the unknown that holds them back from ever taking the first step. Every year, only a small portion of consumers who could benefit from bankruptcy actually move forward with starting a case.
According to the Federal Reserve Bank of New York, approximately 14 percent (14%) of U.S. households or nearly 17 million consumers owe more than they own. While most of these individuals could benefit from bankruptcy, less than one percent (1%) of them file for bankruptcy annually. In 2020, there were only 752,160 personal bankruptcies filed.
Bankruptcy experts refer to this gap in filings as “missing bankruptcies” or otherwise known as bankruptcy filings that should theoretically be happening, but are not. However, an even wider gap has been made in the past few months with bankruptcy filings dropping significantly in the second quarter of 2021. Figures are at about 60 percent (60%) of what they were for the previous five years.
During the COVID-19 pandemic, courthouses were forced to close, making it hard for creditors to pursue legal collection actions against consumers, including foreclosures and wage garnishments. For the most part, foreclosures and wage garnishments are the biggest driving forces behind bankruptcy filings. Without these moving forward in the court system, bankruptcies have also been affected.
This decrease in bankruptcy filings is only temporary, as courts begin to reopen and business getting back to normal. One fear many have is that people will wait too long to file, relying on the temporary benefits they have received during the pandemic to get by.
Many times, consumers delay filing due to the fear of losing everything they own, including cars, homes, or personal property. This fear is rooted in misconceptions regarding the protections that bankruptcy exemptions offer consumers. In fact, the great majority of people who file for bankruptcy never have to give up any of their possessions.
Other individuals hold off on filing for bankruptcy for fear of what the filing will do to his or her credit. While, yes, a bankruptcy filing leads to a drop in the person’s credit score, this credit can be rebuilt as soon as the filing is complete. It is possible to be approved for financing in the future with proper financial habits and good spending behavior. A bankruptcy case does not mean the person is forever barred from ever taking out a loan or mortgage in the future.
Whatever the reasons may be for the delay in filing for bankruptcy, a consultation with a bankruptcy attorney can quickly clear up many of the fears and misconceptions that may be holding a person back in taking that first step towards a fresh financial start.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.