Young TikTokers are reframing bankruptcy as a financial hack. Experts say it's far more complicated.

• Personal bankruptcy filings are on the rise in the US.
• Some young people have taken to TikTok, framing their bankruptcies as life-changing wins.
• Financial experts caution that bankruptcy should be treated as a last resort due to the risks.

For a growing number of Americans on social media, bankruptcy isn't a scarlet letter — it's a way to shed crushing debt and reset financially.

On TikTok, a wave of recent videos under the "bankruptcy" hashtag shows young people framing their personal bankruptcy filings as life-changing wins, drawing hundreds of thousands of views.

In clips viewed by Business Insider, individuals touted their bankruptcy filings as the "greatest" and "best" decision they've ever made, saying it allowed them to wipe out massive amounts of debt — sometimes tens of thousands of dollars — in just a few months.

This celebratory sentiment comes as personal bankruptcies rise nationwide. According to the American Bankruptcy Institute, citing data from Epiq Bankruptcy Analytics, individual bankruptcy filings have been climbing since 2022, with more than 533,000 cases last year.

Nearly 333,000 of those filings were Chapter 7 cases, the most common form of personal bankruptcy, which can eliminate most unsecured debts such as credit card balances or medical bills. Chapter 13 filings, which involve a repayment plan to pay down some or all debts, accounted for just over 200,000 cases.

Though the complex legal process of bankruptcy can provide real monetary relief for some consumers, certified financial planners caution that it should be treated as a last resort due to long-term risks like higher borrowing costs, credit damage, and a mark on credit reports that can remain for up to a decade.

Why experts urge caution

Going through bankruptcy can be a "much more traumatic event than TikTok might make it sound like," Jesse Lineberry, the director of the Financial Planning Program at Virginia Tech, told Business Insider.

Bankruptcy laws exist to protect people who find themselves in financial situations where there is "no way out," Lineberry added.

Chapter 7 bankruptcies stay on a credit report for 10 years, and Chapter 13 bankruptcies for seven years. This can hurt credit scores and make it harder to secure loans, housing, or even a job, financial experts said.

"Many private companies pull credit files before they make hiring decisions," said Lineberry.

Only 11 states in the country restrict employers from using credit history in most employment decisions.

Given the yearslong effects of a bankruptcy filing, Mary Clements Evans, the owner of the Pennsylvania-based Evans Wealth Strategies, said anyone considering the move should "really sit down and see if there isn't any other way they can get themselves out of this financial situation."

"If you can borrow money," the certified financial planner and author said, "they're going to lend it to you at a very high interest rate."

Evans also stressed that when bankruptcy stems from personal financial habits rather than an unforeseen or uncontrollable event, it's important to seek help to avoid repeating the same patterns.

Bankruptcy rebranded

On TikTok, a less dire narrative around bankruptcy has emerged, with some young people portraying it as a kind of financial hack.

"I 100% believe that filing bankruptcy has been the best thing that has happened to me," a 29-year-old woman posting under the handle @saraphineisabellestainer said in one TikTok video.

The woman said she was $65,000 in credit card debt and that her Chapter 7 filing wiped the slate clean.

The woman said her credit score was higher than before she filed and that she's since been offered new lines of credit by card issuers.

Another user posting under the handle @victorfromhell said in a video that filing for bankruptcy "changed the trajectory" of his "financial life."

"I had thousands and thousands and thousands and thousands of dollars of debt erased in the matter of like a month and a half — it's incredible," the man said. He said he was able to rebuild his credit score to about 650 or 670 within several months.

Business Insider has verified the bankruptcy cases of both TikTok users through federal court records, but has not spoken to the users to verify the rest of their stories.

A chance at a 'better life'

Florida bankruptcy attorney Chad Van Horn told Business Insider that he's been hearing from an influx of young people exploring bankruptcy as an option.

"In their mind, it's a way for them to live a better life, and in most cases, they're absolutely correct," Van Horn said.

Van Horn said people who emerge from bankruptcy are often targeted with credit card offers — though at high interest rates — and may qualify for a Federal Housing Administration (FHA) loan two years after discharge.

Still, the bankruptcy process is far from simple.

"There's significant disclosure that has to be made to the court, to the creditors, to everybody, and you need to do it the right way, or you can get your discharge denied," said Van Horn.

Not all debts can be eliminated through Chapter 7, either. Student loans, alimony, child support, and most tax debt are typically not dischargeable. And in some Chapter 7 cases, assets like a second home or a second car could be sold to repay creditors.

Van Horn said the majority of his clients come to him financially "maxed out" and with poor credit scores.

In roughly 70% of the bankruptcy cases he has handled, especially those involving young people, Van Horn said that poor financial planning was not the cause. Instead, he said, an unexpected event pushed them into bankruptcy.

"It was something out of their hands that happened," said Van Horn.

For example, Van Horn recalled an 18-year-old client who let a friend drive his car, only for the friend to get into an accident. The car owner was sued for hundreds of thousands and had his license suspended after he couldn't pay the judgment, the attorney said.

"We filed bankruptcy at 18 years old," said Van Horn, "and he was able to get his driver's license, save his job, and start to rebuild."