Too Broke to File Bankruptcy

Today, there is a new group of Americans who have become too broke to file bankruptcy. It kind of sounds like an oxymoron, but in reality it's true. I don't think there's one person in the US that doesn't know about our current economic condition and when it started. It has affected everyone from a maid all the way up to a corporate CEO. This recession is going after everyone and taking no prisoners. Prior to the 2007 financial meltdown, Americans were spending money like drunken sailors. The only difference was drunken sailors at least spent their own money, these people were spending money they borrowed. People took out all the equity in their homes, some even as much as 125% the value.

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When everything came crashing down, there was no one to blame but ourselves for being so foolish. When all the dust settled, the damage continued to riddle the fabric of American society causing businesses to file for bankruptcy and with that large numbers ended up unemployed. This is like a giant snowball being pushed off the hill and as it still continues down the hill is eating up everything it touches. Most people didn't realize that this would cause the damage economically that it has. I remember hearing realtors saying that this was just a small dip and the real estate market would come right back. The real estate market continues to slide as many more people are losing their homes to foreclosure. The overly optimistic Americans have really shot themselves in the foot by not being proactive about their finances.

In the past, we have had recessions, economic downturns and one depression. Traditionally, we will have a slowdown that will be followed up with another economic boom. This time it didn't happen. Unemployed families have kept waiting for the return of the good paying jobs and instead unemployment continues to stay above 8%. It hasn't been this bad since the Great Depression. The smart ones realized it was time to pull the trigger and filing bankruptcy would be their solution out of debt. The overly optimistic crowd decided to wait it out for the hope and change to arrive. Hope and change never came, the unemployment insurance ran out and now it's time to go through the savings and start selling assets to keep the boat afloat.

This is one of the biggest mistakes anyone in financial trouble can make. When they should be talking to a bankruptcy attorney, they are instead cashing in on their 401(k) while waiting for the return of the economy. When someone is filing bankruptcy they have the benefit of bankruptcy exemption laws that would protect one's pension, a portion of the equity of their home, and generous amounts for all their personal property. Many people filing Chapter 7 bankruptcy rarely lose any property at all, the only thing they lose to that pile of bills that won't go away.

After the optimists burn through all of their assets, they join a unique group of people that a bankruptcy attorney will consider too broke to file bankruptcy. The old adage you can't squeeze blood out of a turnip comes into play here, because these people have nothing to lose. Sent some end up sleeping on their parents couch because the house is gone to foreclosure, the unemployment has run out and they have burned through their pension and sold any property they had left.

Talking about hitting rock bottom, it would have been so much easier to be realistic, humble themselves, speak to a bankruptcy attorney and file Chapter 7 bankruptcy. They would still have most of their property and their 401(k). Filing bankruptcy was created to give good hard-working Americans a second chance and a fresh start. This is exactly what it was created for and it's foolish to ignore the warning signs and not file.

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