Article written by Attorney Marc Dwyer
As the holidays approach, I find it relieving to appreciate the parallels between the celebratory aspects of ordinary life and the celebratory relief from creditors. As Easter approaches, I cannot resist highlighting the allegorical parallels of Easter to the relief from creditors found in bankruptcy.
Finding this parallel is not a stretch, as bankruptcy began in Biblical times to begin with. The concept of Bankruptcy was initiated in the Old Testament of the Bible. [See Deuteronomy chapter 15 for reference]. It was called “the Lord’s release.” So it is no mystery that the story of debt salvation should parallel the story of salvation.
As the focus of the Easter is death and resurrection, the story of bankruptcy is the same. While the banks and credit card companies would like to convince all debtors that bankruptcy is death of credit, it is actually the Death of Debt. You should understand the difference. The truth of the matter is that the bankruptcy code was not designed to end in credit death, but to secure the Resurrection of credit worthiness. So in truth, bankruptcy, like Easter is the story of Death and Resurrection.
Revolving debt was designed to do just that: revolve around an individual, like the earth revolves around the sun forever in perpetuity. As the earth never stops revolving around the sun, revolving debt was designed to remain with a person making minimum payments for a very long time, if not forever. If a person can no longer make minimum payments, the “help” the creditors offer comes in the form of higher interest rates, higher monthly payments, and lawsuits. These tactics make it even less possible for an individual to rehabilitate their credit.
The most powerful aspect of relief in bankruptcy is the discharge of your debt. Bankruptcy forever discharges certain debts, which is particularly liberating for those with unbearable or unpayable revolving debt. Your debt no longer exists. Furthermore your credit cannot get worse, because the bankruptcy also stops any further negative remarks from being placed on your credit.
Just as the banks gave you your original credit life, the banks also will be responsible for your credit resurrection. You must understand that banks are in the business of lending. The only way they survive is by lending money. If a bank does not find people to lend to, it will die. Thus, lenders both “live to lend” and “lend to live.” Lenders look for persons who are less risky to make their loans to. This is the purpose of a credit rating in the first place.
Accordingly, lenders realize that a person who has no debt is a pretty safe lending risk. The lenders also know that they can charge a little extra because of the debtor’s past credit troubles, so the lenders are paid more for doing the same thing. Accordingly, a responsible post-bankruptcy debtor (one who shows they will make payments on time) is actually more desirable to many creditors than those who are saddled with debts, have late payments scattered all over their reports, and are one emergency away from bankruptcy.
The overwhelming majority of individuals who file bankruptcy, have higher credit scores one year later, than those who continue to struggle with their revolving debt through defaults and delinquencies. This is a statistical fact. If you still had any doubts, you need simply ask yourself why did General Motors, Washington Mutual, Chrysler, Trump’s Taj Mahal, WorldCom, Enron, and US Airways all file for bankruptcy relief? Their leaders were seasoned educated people with years of experience in finance. These pros knew what you know now. The bankruptcy code is not designed to permanently kill your credit life, but to give you a fresh start, and a fresh and healthier credit life.
Just as the Bible dispelled the mythology of polytheism, I hope this article helps to dispel the myths about the negative stigma of bankruptcy relief. In an age where jobs, even car insurance now depend on your credit scores, consider your options wisely.
Marc Dwyer is a partner at Chiumento Selis Dwyer, a leading bankruptcy firm located in Palm Coast Florida.