We hear this statement from clients all of the time; “If I had the money to pay for bankruptcy, I wouldn’t need to file in the first place!”
Let’s see if this is actually a true statement. Considering how many people file for bankruptcy every year, they are either making a giant financial mistake, or this statement is a huge exaggeration. Read on and we will find out fore sure.
Let’s Talk About the Benjamins
According to research by the National Bureau of Economic Research published in 2012, the average cost of a bankruptcy is $1,500. It may be slightly more expensive considering the number is from four years ago, but we have to assume it’s at least in the ballpark. That’s not cheap, but how much is it compared to how much debt people have?
According to creditcards.com, the average amount of credit card debt people have when they file for chapter 7 bankruptcy is $23,300. Credit cards typically get completely eliminated when filing for chapter 7 bankruptcy.
Additionally, most people who file for bankruptcy also eliminate other debts including medical bills, old utility bills, personal loans, payday loans etc.
If You Can Afford Bankruptcy, do You Even Really Need It?
We just learned that the average chapter 7 bankruptcy costs about $1,500 and the average person who files likely eliminates much more than $23,000 in debt when their case is done.
I have $23,000 in my pocket. I’ll trade you for $1,500. What do you think?
Sounds too good to be true, doesn’t it?
But it’s not. It’s bankruptcy. And that’s how it works.
In Part 2 we will see how there is more to the issue than spending a fraction of your debt on fees to eliminate all of it. We will also see how there could be a solution to making bankruptcy more accessible to all of those who need it.