Both. It’s what you make it. Congress states in the legislation that it intends a fresh start for individuals and businesses who find themselves saddled with debt that has gotten out of hand. (Fault is not a factor. It does not matter whose “fault” it is and nobody even asks.) If you and your attorney manage your proceeding well and if you follow through with recommended courses of action (like rebuilding your credit), it can be a means of leaving an unfortunate past behind and getting a fresh start.

A bankruptcy petition is filed in federal court. It is not like a regular lawsuit where you go to trial, fight it out, and somebody wins and somebody loses. It is a petition which normally goes through a prescribed process and is then closed. In most cases, about the only quibbling to be done is as to details.

Generally, remember that debt is a necessary precondition to success in business ventures. If there were no escape from a debt situation that becomes unmanageable, few would attempt to build anything new in the economy. The founding fathers two hundred years ago decided that we would not have certain institutions in this new country that they had known in Europe. Among those rejected institutions were royalty and debtors’ prisons.

Consumer bankruptcy in its present form and dimension is a relatively new thing in our economy. It appears to be tied to sharply rising healthcare costs, much of which is either uninsured or underinsured. Also, the proliferation of credit cards and their use during times of unemployment and underemployment is a major contributing factor.

The Bankruptcy Code is Title 11 of the United States Code enacted by Congress in 1978 to replace the old Bankruptcy Act of 1898. It consists of five substantive ‘chapters’ (programs). The stated purpose of the Bankruptcy Code is to provide people who have more debt than they can handle with a fresh start. Qualifications for the various programs are keyed primarily to an interworking of one’s income, cost of living, debts, and property. Generally, the purpose is to ‘discharge’ you (release you from personal liability) on most of your unsecured debts. These debts include, typically, bank credit cards, medical and legal bills, items in collection, and things such as that. Secured debt (like mortgages, liens on vehicles, purchase-money security interests in furniture, appliances, tires, and other such merchandise) can be handled in various ways. One way is to ‘surrender’ the property (that is, return it to the creditor holding the lien against it). You are then free and clear of the involvement and the creditor cannot come against you in the future for any deficiency because resale did not pay off the debt. Another popular option is to keep the ‘collateral’ (the property) and continue to pay for it. This option is often selected to keep one’s home and vehicle(s). Depending on the particular situation, you may have to reaffirm the debt to keep the property. In some limited situations, liens can be removed from property as part of the bankruptcy. There are a few other options applicable in more specialized situations. Certain types of claims such as student loans, child support, and certain (but not all) taxes are generally not dischargeable in bankruptcy. (If you have serious problems with non-dischargeable claims, though, a bankruptcy may clear away other debt to enable you to pay the non-dischargeables.)

Who files bankruptcy these days? Only poor people? You might be surprised. My clientele over the past few years has ranged from medical doctors and attorneys to retirees living on nothing but Social Security. My business clients have included corporations with offices all through this part of the state as well as people operating their businesses out of a room in their homes. I have filed for employees, managers, and other officers of banks, finance companies, credit unions, and other creditor institutions. No one is immune from economic misfortune. No one.

Insolvency is caused by many things and it affects all walks of life. Some people are victims of unscrupulous lenders or merchants. Some are swindled by con schemes. Some get into trouble by using credit cards to tide them through layoffs and periods of unemployment. They find that even if they get back to fulltime work the high interest rate, overlimit and late charges, etc., on the cards pushes them further into debt each month. And there is the ‘Payday Loan’ treadmill. Borrow $500 for two weeks to pay the rent and you have to pay back $700. People can easily end up in a hopeless situation. Others get into trouble with medical bills stemming from inadequate or no health insurance.

Most people (especially creditors) would be surprised at how few people go into bankruptcy because of credit card spending sprees and other such abuses. Our economy is diversified and uneven enough to afford an incredible number of traps for the unwary.