Personal Bankruptcy Versus Corporate Bankruptcy
It is one of the oddities of life: a business can file for Chapter 11 and remain respectable, while those who file for Chapter 7 or 13 are ashamed and embarrassed. Is bankruptcy really something to be embarrassed about, and is there a difference between a corporate bankruptcy and a personal one?
The main reason people may feel shame in personal bankruptcy is the fact that many people file for personal bankruptcy as a last straw. After trying everything else, because most people want to pay their obligations, they resort to the protection of the Bankruptcy Court.
Meanwhile, corporations file for bankruptcy in anticipation of a financial problem or an inefficiency in their business model. Sometimes, they do it just to get out of an unprofitable agreement with another business.
This difference has a huge effect on the way we think of personal versus corporation bankruptcy. One is strategic, while the other is a last resort. This makes personal bankruptcy filer feel like “losers,” and corporate bankruptcy filers feel pragmatic.
But it doesn’t have to be this way. Personal bankruptcy can also be a strategic device. Although personal bankruptcy is often less advantageous than corporate bankruptcy unless you are in dire straits, it is a great tool to keep in your pocket during negotiations with creditors. And those who plan for their bankruptcy are less likely to repeat one, and more likely to get what they want and need out of the law’s protections. There may be something to say for approaching financial troubles the way a business does: with a plan, and with as little emotion as possible.
