For decades we were (incorrectly) told that butter was bad for us and, instead, we should eat artificial hydrogenated oils contained in margarine.

That was until doctors, following the lead of knowledgeable nutritionists and holistic health professionals, figured out that the margarine caused  heart and health problems and that butter and saturated fats are, actually, really nutritious.

As one example, see this NY Times opinion piece on how the tide is turning for butter.

Bankruptcy May Be Good For You–Really

It may not taste as good but, like butter, bankruptcy has gotten a bad rap.

It has long been disparaged by society as a whole, as being a dreaded last resort.

And sometimes not even that.

Like the nutritionists and holistic practitioners mentioned above, bankruptcy attorneys and others who deal with bankruptcy on a daily basis have known for a long time how beneficial bankruptcy is for those filing and, believe it or not, for society as a whole. (more on this below)

Fortunately, now, like the scientists with butter,  we have the opinion of distinguished economists and employee analysts of the the Federal Reserve Bank in New York.

The Federal Reserve’s blog, Liberty Street Economics, recently published results of a detailed study on the effects of bankruptcy following the 2005 bankruptcy “reforms”, undertaken by economists, analysts, and researchers in the Federal Reserve’s research and statistics group.

Their conclusion was that for people with debt problems, those filing bankruptcy fared better afterwards than those who did not file bankruptcy.

Not filing bankruptcy, and just staying insolvent or attempting consolidations or other expensive alternatives, is the equivalent of eating margarine rather than butter.

Credit Scores Rise More Quickly After Bankruptcy Than If Bankruptcy Not Filed

From the report:  “The individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt.”

This is consistent with my clients’ experiences post-bankruptcy.

Bankruptcy gives a definite starting over point to rebuild credit; whereas, without bankruptcy, it takes many years to improve your credit score, and with multiple creditors, different judgment dates, and so on, it can literally be 7 years to rebuild after the last judgment or late charge posts.

Bankruptcy Filers Contribute More Quickly To The Economy

The report also stated that “[c]learly, individuals who do go bankrupt open a larger number of new unsecured accounts”.

What this shows is that after being relieved of their financial burdens people are able to obtain credit and get back to being consumers:  Pumping money back into the economy by purchasing goods and services.

And for those of you skeptics thinking these “morally bankrupt” (pun intended) people will just charge up and then file bankruptcy again, there is a restriction on filing another bankruptcy case for 8 years (for a Chapter 7) or four years (for a Chapter 13).

But aside from that, believe it or not, people do not want to file bankruptcy and very few ever repeat filing.

Always Consider Bankruptcy

It should be becoming obvious that bankruptcy should always be considered when deciding how to intelligently deal with debt and financial problems.

And instead of being the last choice, it should be moved towards the top of the list.

The Federal Reserve article is now one of many that support that conclusion.

Related Articles

When You Should File Bankruptcy

Bankruptcy And Non-Bankruptcy Debt Solutions

Debt Settlement, Consolidation, Or Bankruptcy

 

 

Image Courtesy of Julie Magro