The news wasn't unexpected, yet it came as a surprise for many.
The city of Detroit has filed for a Chapter 9 bankruptcy, a special type of bankruptcy reserved for governments that will allow the city to negotiate lower payment plans with its creditors. This has been big news as Detroit is the largest city in the United States to ever file for bankruptcy. Forbes published an online article Friday entitled, "Why Business is Cheering Detroit's Bankruptcy.” I think that the article has a few important lessons in it that individuals experiencing financial difficulty can use.
Life goes on.
The residents of Detroit and the citizens that live there will not be impacted by the bankruptcy. They will still be able to go about their daily lives and daily operations as they please. Much is the same for people who file for bankruptcy. While you do have to get out of the habit of using credit cards, the rest of your life will be pretty much the same. You'll still get up in the morning, go to work, cook dinner, watch your son play soccer and enjoy the Pirates' long-overdue success. You are still exactly the same person you were before the bankruptcy. You're just a person with a better hold on your finances.
The stigma of bankruptcy isn't that bad anymore.
People who were not in favor of Detroit filing for bankruptcy argued that the city would get a black eye by filing for bankruptcy. While Detroit's image has suffered in the past decade or so, that was because of the economic downturn in the area, and it is not likely to be hurt further by the bankruptcy filing. The Forbes article used the example of General Motors to demonstrate how quickly a bankruptcy is forgotten and how little it impacts people's perceptions for very long. No one still discusses GM's bankruptcy. No one avoids buying GM cars because of the bankruptcy. GM had its debts organized, negotiated repayments and then got back to the business of making cars. The same is true for individuals. No one will know that you filed for bankruptcy unless you tell them. Even if you tell them, they probably won't care. I'm sure you'd be shocked to find out how many of your family members, friends, neighbors, co-workers, etc. have filed. Once again, filing a bankruptcy does not change who you are.
A bankruptcy today can set you up for a better tomorrow.
Detroit has a hard time getting businesses from outside the region to move there and invest money. Businesses are worried about how Detroit's financial problems will impact their operations. Once Detroit's financial problems are under control, businesses can feel free to move to the city without these concerns. Bankruptcy has a similar impact on individuals. First of all, the stress of your debt has a big impact on your life. I have many clients who can't sleep, have trouble concentrating at work, argue with their spouses and are depressed over their finances. Once a bankruptcy is filed and the debts are no longer an issue, you can get over the problems the debt created in your life. Also, by filing a bankruptcy, you give yourself the opportunity to rebuild your credit and save money in a way that you would have never been able to do had the debts remained. This can open the door to getting a reliable car, furthering your education or buying a home. Don't let your debt hold you back.
While Detroit has a long history of problems to overcome, filing a Chapter 9 bankruptcy is the first step to getting on the right track. If you are suffering from financial troubles, filing a Chapter 7 or a Chapter 13 bankruptcy could be the first step to getting you on the right track. Give Steidl & Steinberg a call at 800-360-9392. We can see you for a free consultation and explain the process to you.