Researchers: Shame, Pride Fuel Personal Bankruptcy Filings
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Researchers: Shame, Pride Fuel Personal Bankruptcy Filings

March 6, 2012

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Researchers at the University of Arkansas recently released a report suggesting that the primary factors responsible for personal bankruptcy filings are shame and pride, reports Northern Ohio’s Morning Journal.

The research found that personal bankruptcy is largely easy to avoid, provided that consumers recognize the condition of their finances and take the steps necessary to avoid needing help from the court. But because most Americans still feel ashamed about needing financial help and perhaps are too proud to ask for such help, they delay seeking assistance until the only option available to them is the bankruptcy court.

One law professor at the University of Arkansas noted that many bankruptcy filers cry during their pre-bankruptcy interview because of the high emotional stakes involved in seeking financial help for debt-related problems.

Harvard Law Professor Elizabeth Warren reported similar phenomena in her book The Two Income Trap. Apparently, in Warren’s experience, some bankruptcy filers wouldn’t even admit to being in bankruptcy protection, even though the records from the bankruptcy court detailing their cases were a matter of public record.

Interestingly, those who did not admit to having filed for personal bankruptcy were much less likely to recover financially following a bankruptcy discharge than those who were open about their bankruptcy status.

Prevent Bankruptcy with Early Action?

The findings suggest that those interested in avoiding bankruptcy must first be willing to confront their financial situation before it gets out of control. Unfortunately, when negative attention in the form of calls from debt collectors and mounting minimum balance bills on credit cards arriving every day in the mail, many people try to ignore the problem—especially if they aren’t sure what to do to correct it.

This latest study harmonizes with advice that analysts have been giving to the nation’s school system for years now, that Americans need better financial literacy education in order to capably navigate the world of personal finance they are thrust into at age 18.

Researchers behind the study emphasize the importance of personal bankruptcy filers acknowledging their power to exit bankruptcy and prevent future filings. Those who blamed the court, one researcher suggested, are confusing the effect rather with the cause of the problem of overwhelming debt.

Despite filing totals that indicate personal bankruptcy filings in the U.S. fell 12 percent between November 2010 and November 2011, 1.4 million Americans still needed bankruptcy protection last year. According to this study, that number could be greatly reduced with more proactive debt management on the part of filers.


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