"Bankruptcy has always had a stigma and it always will," says Vito E. Lella, president of Accord Associates Denver Ltd. But should it? Today, stigma aligned with bankruptcy, resonates in words like,"deadbeat," or, according to Debtor Mike E.'s neighbors,"credit criminals."But when bankruptcy comes under examination, it seems the stigma surrounding it is just another set of false fears void of any merit.
In society, stigma crop up when a group of people consider themselves dominate over another group due to perceived subtle yet unfavorable differences occurring in the second group. Social labeling then transpires, resulting in a definitive separation of those who are labeled from those who are the labelers. In this case, the dominate group happens to be anyone in society who believes bankruptcy is strictly negative and suitable for those who are careless with their money. But that is simply not true because, "today the average two income family that makes house, car, insurance and child care payments has less disposable income then a one income household making those same payments." (Warren & Tyagi, 52). Also, little does the dominate group know that the majority of the middle class lives paycheck to paycheck to achieve a middle class standing where their kids can get a good education, somewhere safe. Nor, do they know that, "medical bills, mortgage payments and job losses are the main reasons for over eighty five percent of filings,"(Warren & Tyagi, 81). What deserves the criticism is that phenomenon which causes bankruptcy, not the debtors.
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Yet debtors are still blamed. Why is this? In an attempt to answer that question we must first look into the past, to centuries ago, when gold was passed in coin currency and banks were born. Then, like to today, banks offered to be are our friend in need, willing to give out loans at the toughest of times. However, when the borrower or debtor was unable to pay the loan back, the banks took it upon themselves to recapture their money. And, of course, this is their right although one of their most successful techniques in doing this is to cause fear in the debtor's mind. Similar to a mafia's strategy, save the violence, the banks like to condemn to debtor who has trouble paying back there loans by scaring the debtor's credit history, hiring collection agencies to harass the individual and notifying the debtors employer of the situation. While at the same time, they've also perfected another technique: indoctrination of the public. In other words, they us the dominate group to spread the idea of the "credit criminal," until it becomes a malignant discrimination and the debtor feels stuck between not being able to pay his bills yet unable to do anything about it because the "credit criminal" is afraid of being a criminal, afraid of being discriminated against.
And ultimately, that's how credit card companies make there money today. The longer the principal debt is unpaid the more interest on the debt grows and the more payments the stuck debtor will have to make. In fact, most debtors, 93% or more, believe in the stigma attached to bankruptcy as much as the dominate parties do. They spend (on average) more than a year trying to avoid bankruptcy. They are responsible and attempt repayment of a crushing debt but: at most, only 3.6% of Chapter 7 debtors could repay only 20% of their unsecured debts over 5 years. So a year drifts by. They have been paying interest payment after interest payment, not even coming close to their principal debt and, according to Attorney Raymond Ferrario, it's, "the interest from the credit card debt that ultimately pushes people over the edge." They reach a break down, either financial or emotional and then end up walking into an attorney's office to file for bankruptcy, ashamed to be there.
Yet they should not be ashamed. They should be educated as to why bankruptcy occurs and what they can do to prevent it in the future. So why not create programs that teach both young and older adults how to budget their money, or restrict credit card usage in the beginning of someone's credit history instead at it demise? A good idea yet when dominate members are in power and are the ones responsible for making such a decision, it becomes difficult because on one side there are people like Senator Orrin Hatch of Utah claiming, "These people abuse the system in order to get around their debts which they are very capable of paying," (Warren & Tyagi, 71). While on the other side you have no one dissenting. Why? It's possible that politicians don't take a stand against credit card companies and institutional banks is because of the benefits they receive by not doing so. For example, the credit card industry gave 61.6 million dollars (an average amount of $100,000 to each member of the senate since 1987).
So as a slim fraction of the dominate party benefits (the politicians and the bank managers) the rest are left ridiculing the debtors, blaming them for eating up tax dollars or living "off the system." Which is unfortunate because according to Attorney Mike George, "Bankruptcy isn't a bad thing. It actually helps the economy by injecting all of the debtor's disposable income back into society." That's the sobering aspect of it. All of the discrediting talk, which reduces the debtor from a whole and ordinary person to a tainted, discounted one, not only hurts him but also those who perpetuate the stigma and the general public. Ironic that most who deem bankruptcy so horrible actually benefit from its existence. Only if they knew but they don't because: the public is generally not aware about the specific concepts, the technical aspects of the legal system of bankruptcy.
In essence, this stigma is simply unwarranted. America must evolve and realize that the external circumstances are the real culprits behind bankruptcy. Then again, if the masses are educated, credit card companies and others like them wouldn't be able to profit as much. Wouldn't that be a shame?
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