Taking a Fresh Look at Bankruptcy
- Greg Crabtree
Oh, the shame of bankruptcy. It’s a negative action that caps off a failure — or so we often think of it. But do we really need to treat bankruptcy as something awful? In the fiscal year ending June 30, 2020, U.S. courts saw 682,363 business and non-business bankruptcy cases. The factors that drive a business or individual to file bankruptcy vary, but they almost always include an unexpected turn of events that created inordinate financial difficulty. Life is unpredictable, and leading a business is challenging, to say the least. U.S. Small Business Administration data indicates that around half of new businesses don’t make it through their first five years, and only about one-third survive for ten years. Looking at those figures is enough to discourage entrepreneurs from ever giving it a shot! But try they do, and that’s a good thing. Without entrepreneurs willing to risk failure, there could be no innovation, no growth — and not many jobs, either. Amazon would never have happened, nor IBM or Pfizer, or any of the other companies that transform lives and economies. And for every Amazon, IBM, and Pfizer, there are countless bankruptcies representing other ideas and companies that didn’t make it through the early years.
In a world of economic uncertainty where risk is a necessity, bankruptcy is an essential tool that allows both businesses and individuals to wipe the slate clean and begin anew. The process can take different forms depending on which type of bankruptcy is filed.
Sometimes things simply don’t work out despite solid planning, hard work, and sound management. That’s when bankruptcy can provide enough room to turn around a challenging situation — or offer a clean slate and an opportunity to start over, assuming the debt is dischargeable. Always seek advice from an experienced financial professional before moving forward. Filing bankruptcy isn’t always the answer, and it may not be the only solution to your financial situation. If the conditions that led to unmanageable debt remain in place, then the problem is likely to return even after bankruptcy. It’s also important to understand that certain types of debt, such as student loans, are very difficult or impossible to discharge under the U.S. Bankruptcy Code. When bankruptcy makes sense, there’s no need to feel guilty about making the choice to file. If you are considering any type of bankruptcy, contact your CRI financial advisors.
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