Some people believe that people who filed for Bankruptcy have actually caused the financial depression that we are in right now. Is that true?
Bankruptcy is actually good for the economy. Without strong bankruptcy laws, a person overloaded with debt won’t own any real estate or an automobile, since it can be attached and sold; have a bank account because it can be attached; and/or avoid working for a normal employer because wages are garnished.
Instead, they work for cash off the book, don’t pay taxes, don’t own stuff, don’t buy much stuff and don’t contribute to the economy. Unless and until money comes from somewhere to pay the debt in full, with interest, a person spirals into eternal debt.
Bankruptcy gives a consumer a way to have their debts discharged and encourages borrowing, spending, taxpaying and saving for retirement.
Bankruptcy gives a business the means for taking on more risk by investing in research and development and expanding.
Bankruptcy gives the creditors an equitable means for collecting to the fullest extent possible on debts and repossessing collateral property.