What People Are Doing Wrong This Week: Declaring Bankruptcy
There is a growing movement of self-proclaimed financial advisors online who are trying to change the perception of personal bankruptcy. Instead of seeing bankruptcy as shameful, as the theory goes, we should view it as an act of financial independence and not regret filing Chapter 7, even multiple times.
“We need to pay attention to all the things we’re told not to do but we do,” TikToker @Thebouncebackcoach explains in a video . “The rich file for bankruptcy every seven years, and that gets rid of any debt they may have accumulated over the last few years, wipes out all their debt, and opens up a whole new chapter for them.”
“The poor see bankruptcy as a failure; the rich and powerful understand that bankruptcy is not just a tool, but a lever to achieve greater success,” @nikeoje says in the video . “The average wealthy person will file for bankruptcy at least six times in their lifetime,” they add.
So are these online traders right? Should we just write off our debts every seven years? Short answer: no. Long answer: nooooo .
What Online Bankruptcy Lawyers Do Right
Let me start with the positive: people really shouldn’t be ashamed of bankruptcy. Bankruptcy exists for a reason, and personal shame is not an excuse to make bad financial decisions. In a capitalist system, it is extremely likely that you will go bankrupt through no fault of your own, and it is good that we have a way to avoid it. But if there is another option other than personal bankruptcy, it is probably the best choice. Bankruptcy is a last resort, not a clever trick or a trick that the banks don’t want you to know about.
Rich People Bankruptcy vs Poor People Bankruptcy
Bankruptcy is a complex topic, and there is some truth to the idea that some wealthy individuals and large corporations use bankruptcy for strategic purposes, but it is a business bankruptcy, typically aimed at restructuring debt while protecting assets and maintaining operations. Wealthy people do not typically file for bankruptcy themselves . They file for businesses, investments, or real estate, not for car loans and hospital bills.
If you’re seeking financial advice from a TikToker in his car instead of a lawyer you hired, you’re probably thinking about Chapter 7 bankruptcy, or personal bankruptcy. Going broke as a person is not the same as going broke as a business. Personal bankruptcy can wipe out some types of debt, like credit cards, medical debt, and personal loans, but there are others you still owe no matter what: student loans, child support, recent tax debt, and more. And if you think you’re going to get rid of your problems and worries every seven years, you’ll quickly learn that the legal and financial systems have long memories, and they don’t care about you.
The Reality of Filing for Bankruptcy
It would be great if we could all say, “I declare bankruptcy!” and our credit card debt would magically disappear, but the reality is a grueling, tedious journey through paperwork and legal hell—the opposite of “empowering.” Here are just a few of the challenges you’ll face if you declare bankruptcy:
Disclosure of all financial information : All income, expenses, debts, and assets, including your Venmo account, must be accounted for and documented. Failure to comply could result in bankruptcy protection being denied or even prosecution for fraud.
Mandatory Credit Counseling: Before you can file for Chapter 7, you are required by law to take a government-approved credit counseling course. After you file, you will have to take a second “debtor education” course before your debts are discharged. I can imagine how frustrating that is.
Legal Fees: Despite some TikTokers’ claims that they’ll “do it themselves,” you’ll likely need a lawyer to handle your bankruptcy, and it’ll typically cost more than $1,000. As if you have the money!
Court Investigation : If you were hoping to deceive someone by lying about money under the mattress, you better be a master of perjury. Bankruptcy requires meeting with court-appointed trustees and sometimes your creditors, and testifying under oath. “Just lie under oath” is almost never an answer.
Liquidate assets : If you have anything that exceeds the exemption limits—nice cars, expensive jewelry, family heirlooms—you won’t have it anymore.
Interacting with the “system”: In my opinion, the key to a happy life is to interact with the state as little as possible. Bankruptcy is essentially inviting the state to live in your bedroom for many years .
When the Dust Settles: Your Life After Bankruptcy
Successfully filing for bankruptcy, which affects both your personal and financial interests, may result in your debts being discharged, but your life after bankruptcy will be difficult in many ways, including:
Your credit is ruined : Bankruptcies stay on your credit report for 10 years, meaning you’ll have serious trouble getting a car loan, renting an apartment, or using a credit card for a decade. Do you like places where you can cash checks? Because that’s where you’ll spend your time.
Potential employers judge you : Many companies run credit checks and do not hire candidates with a bankruptcy history. This may not be fair, but it is a common practice.
You have no safety net : You can only declare bankruptcy every eight years, so if you run into financial trouble after bankruptcy, you literally have no choice but to make do with what you get. (Thankfully, we don’t have debtors’ prisons anymore, but who can say what the future holds?)
It will likely leave you in poverty : if you spend ten years paying off a cash loan, it will be nearly impossible to improve your credit score, and any money you are lent will likely have a very high interest rate.
It’s stressful : Living on the fringes of the established financial system is terrifying. There’s no “I’ll just put money on a card” or “I can always get a loan.”
In any case, you can’t declare bankruptcy every seven years.
The main myth behind many TikTok financial advisors is that the rich regularly declare bankruptcy, getting rid of debt as often as you or I buy a new mattress. But that’s not actually true.
The rich don’t actually do this: Rich people who file for bankruptcy use corporate bankruptcy, LLCs, and asset protection. These rules are completely different from the rules governing credit card debt. You probably don’t live in that world if you watch TikTok.
The courts don’t like serial bankruptcies : You’re unlikely to get away with filing bankruptcy once as a financial strategy, but if you try to do it twice, woe to you. The judges and trustees assigned to scrutinize your case will scrutinize it closely and will likely deny you a discharge or even charge you with fraud. (Which you’ll probably be guilty of.)
TikTok “financial advisors” may be dishing out disastrous advice, but there’s a reason people believe them. Medical bills, student loans, rent, and credit cards are crushing people in 2025 America, so of course they’re looking for a way out. But they’re also looking for a little dignity. People don’t want to feel shamed for falling behind in a system that wasn’t built for them, especially when they see others “failing” so often. “Don’t be ashamed” is a powerful message, especially in communities that have historically been excluded from wealth accumulation, so yes, it’s worth being skeptical of TikTok financial advice, but also understanding why so many people aren’t suffering.