The 20th century may go down as the century when many age-old stigmas were largely ground down. They may not have been completely eradicated but they are less of an issue. This is arguably true of the stigma that formerly surrounded bankruptcy. Its emotional impact, however, can still be significant. Here are some key points you need to know about it.
Bankruptcy has gone mainstream
In the context of bankruptcy, going mainstream is not at all the same as being commonplace. It means that enough people now know enough about it for it to have been demystified. Unsurprisingly, the internet has played a large role in this.
Firstly, it enables people to inform themselves, in general, about bankruptcy. Secondly, it allows them to see examples of people going bankrupt. For example, certain online forums support people going through bankruptcy and certain real-world bankruptcies make the news. Typically, however, there needs to be some additional factor to make a bankruptcy newsworthy. This is likely to be celebrity (or notoriety), e.g. Katie Price.
Real-world events have probably also raised awareness of the many ways people can end up going bankrupt. Since the beginning of the 21st century, the UK has seen 2008, COVID19 and Brexit. Each of these events had a profound impact on people’s financial health. This makes it much more likely that people will know or at least know of someone who ended up bankrupt through no real fault of their own.
Being bankrupt can be emotionally challenging
Going bankrupt can be a relief. In fact, it probably should be since bankruptcy is essentially intended to be a relief from unmanageable debt. Being bankrupt, on the other hand, can be a very challenging experience. One of the key points about bankruptcy is that it isn’t just a “one and done” experience.
After you are declared bankrupt, any significant assets will be confiscated and sold to pay your creditors. If you own a property, this means that you will potentially need to move. Your income will be subjected to bankruptcy terms. This essentially means that you will be allowed to keep enough to have a decent, modest, standard of living. Anything you earn above that will be confiscated and used to pay your creditors.
These terms last until you are discharged. Generally, this will be in a year. The bankruptcy itself will, however, stay on your credit file for 6 years. During this time, it may impact your ability to get credit. It may also impact your ability to get a house and disqualify you for certain jobs. In short, therefore, bankruptcy tends to enforce lifestyle changes that can have a significant emotional impact.
You find out who your friends are
During the term of your bankruptcy, you may need to make more of an effort to connect with your social circle (and vice versa). For example, if you need to change your home and/or your job, you may need to travel further to meet people in real life. You may also have to shoulder commitments you may not have had before. For example, if you have children who had to change schools, you may need to take them to visit their old friends.
You’re also likely to have much less money available for casual socialising. For example, if you were in the habit of regularly going out for entertainment, this will probably have to stop. Alternatively, somebody else will need to be able and willing to pay for you.
This means that your social life is likely to change significantly and so will the people who come with it. Your relationship with certain members of your family may well change too. The good news is that this change is not necessarily bad. In fact, overall, it can be very much for the better.
