Study: Bankruptcy Improves Life; Improves Society

I feel like I’ve seen these facts demonstrated in real life on hundreds of occasions, but it’s great to see some solid research backing it up.

The paper published by Will Dobbie of Harvard University and Jae Song with the Social Security Administration looks at the lives of Debtors who were in the midst of a court-approved chapter 13 repayment plan (i.e. a “confirmed plan”) and found the following:

a) Increased annual earnings following bankruptcy (about $5,000 average over the 10 years after filing)
b) Increased employment
c) An increase in small business start-ups by debtors
d) A decrease in the receipt of “welfare” benefits
e) An increase in retirement savings
f) A reduction in mortality (presumably from decreased stress)

When someone is overwhelmed by debt, they’re miserable, stressed, and often feel hopeless. Bankruptcy gives them their life back, and they in turn refocus on work, and business, and boosting the U.S. and Colorado economies.

Notably though, the study found significant differences between outcomes for those whose chapter 13 plans were confirmed and those whose cases were dismissed. The moral of the story is pretty simple:

1) If your financial situation is overwhelming you and leaving you feeling stressed out and with no where to turn, look to a bankruptcy lawyer to guide you through your options.
2) If you file bankruptcy, hire a good lawyer who will handle your case competently and with compassion from start to finish.

The full paper can be read here.