Bankruptcy Is A Last Resort

Bankruptcy is not a get out of jail free card for your debts, it’s a nuclear weapon. If you use it, expect to be considered credit unworthy for a decade.

A lot of people believe that if they fall behind on their debts, bankruptcy is the quickest way out. Much like the scammy get rich quick infomercials you see at 3 AM, bankruptcy sounds wonderful but is in reality an awful experience.

There are two types of personal bankruptcy – Chapter 7 and Chapter 13. Chapter 7 is total liquidation where all of your possessions are sold to help pay off the debt. Chapter 13 is known as the “wage earner’s plan” and is used to help restructure the debts so that the debtor can work towards paying them off over the course of several years. Local laws will affect how each type of bankruptcy is administered and what is protected but the basics are the same everywhere.

So why is bankruptcy bad? It’s bad because Chapter 7 and Chapter 13 bankruptcy is recorded on your credit report for ten years. For ten years you’re going to have to deal with explaining why you went into bankruptcy and for ten years it’ll be difficult for you to get a loan. It’s not impossible, but it’ll be difficult. The FHA will insure a mortgage two years after a Chapter 7 bankruptcy as long as you can show you’ve changed your ways. They will also insure a loan for someone one year after a Chapter 13 bankruptcy as long as they have stayed current on the plan payments.

What about a car loan? The rates are going to be very high. Bankrate offers up some tips on how to secure post-bankruptcy car financing and they quote double digit rates. Bankruptcy won’t preclude you from loans, but it’ll force a higher level of scrutiny.

What about the “other” areas your credit is used, like by landlords or employers? Bankruptcy Code § 525 protects someone who has declared bankruptcy from discrimination but it’s often difficult to prove bankruptcy discrimination. If you were a landlord and had to choose between two renters, one who had declared bankruptcy or one who hadn’t, which would you choose?

Bankruptcy won’t solve all your problems and the people who go that route often have no other choice (which is why so many people report having higher credit scores after declaring bankruptcy). The best advice is to never let yourself get in this situation in the first place, but if you are, you should be aware of what’s in store for you.

What do you think about bankruptcy? Think it’s still too easy to start over? Think it’s too hard?

Jim writes about personal finance at his personal finance blog, Bargaineering.

(Photo: andrewbain)

Comments

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  1. adamczar says:

    “Bankruptcy won’t solve all your problems and the people who go that route often have no other choice (which is why so many people report having high credit scores after declaring bankruptcy).”

    Good article but this didn’t make sense to me. Why would they have high credit scores? Wouldn’t they be low?

    • Sam Wille says:

      @adamczar: Your scores go up because your debt-to-income ratio improves. You have less debt and presumably the same or similar income. Your score won’t skyrocket back to the 700’s or even the 600’s, but it will be enough to make you take notice.

      • Anonymous says:

        @Sam Wille:

        This is not true, about the debt-to-income ratio. Credit scores do not take income into account at all.

        Your scores will go up when you start to rebuild your credit after bankruptcy, by acquiring more credit and using it responsibly. If you now have available credit, low utilization and no delinquencies, you will probably find your scores higher than when you had high utilization and delinquencies. Income is not part of the credit score computation.

    • kev313 says:

      @adamczar: I assume that he meant “higher”, since a bankruptcy probably has less of a negative impact (numerically) than a whole list of delinquent/collections items…but I am not sure.

  2. Blueskylaw says:

    At least they will have no problem getting a credit card.
    In Connecticut, you can’t declare bankruptcy again for 7 years, so the credit card companies know they can at least garnish your wages for the next 7 years if you don’t pay.

    • savvy9999 says:

      @Blueskylaw: Bingo. My brother (an idiot) used CC cash advances to try to play a commodities day trader. When his “system” sucked, margin called, and voila, he racked up $60k in debt in a matter of 2 months.

      Of course, he declared bankruptcy (only 1 CC showed up at his hearing, so he’s still paying them back). Within 30 days of judgment, he had at least 20 offers for more credit cards. Some, from the same companies that he just defaulted from.

      The “you won’t get credit for 7 years” thing is a total myth. There are simply too many greedy bank/CC outfits out there scrounging around.

      Or at least, there used to be. Economic Darwinism may be painful, but it actually may have a slim silver lining.

  3. SonicMan says:

    Wouldn’t someone be better off just not paying there creditcard debt, just default on it. Thats on your record for only 7 years right?

    • "I Like Potatoes" says:

      @SonicMan:
      A great choice if you love dodging debt collectors. Don’t plan on answering your phone ever again.

      • EarlNowak says:

        @changed my name: the fair debt collection practices act will put a stop to that..

        “Do not call me again. Only contact me by mail.”

        • Sam Wille says:

          @EarlNowak: @EarlNowak: And they will respond to you, by mail. And later with a knock on the door by the local sheriff to serve you with a summons to appear in court because you are being sued for the debt.

        • Blueskylaw says:

          @EarlNowak:

          If they cant harass you by phone, then they will have no choice but to take you to court.

          • Flame says:

            @Blueskylaw: And the fun part about that is, once you get a Judgment, there are rules that say that you can renew it! Depending on the state, and for this one I’m talking Idaho, they can renew the Judgment every five years until it is paid off. That means it doesn’t EVER go away. It can then be recorded in the county that you live in, and will show anytime you try to buy or sell property. Fun, huh?

            Point number to, and this has nothing to do with Blueskylaw, but “There are two types of personal bankruptcy – Chapter 7 and Chapter 13. Chapter 7 is total liquidation where all of your possessions are sold to help pay off the debt.”

            Actually, they can only sell off your non-exempt, unencumbered property. So that third car that you don’t really need, but gee it’s cool, yeah, that one’s gone. But you get to keep your toaster.

            Just thought I’d point that out.

        • mac-phisto says:

          @EarlNowak: keep in mind that FDCPA only applies to 3rd party collectors – not the original owner of the debt.

          important to know, b/c not all companies sell off their debt right away – you could be in for a few years of constant phone contact before FDCPA applies.

          • storm says:

            @mac-phisto:
            They only collect if it makes financial sense for them to do so. If it’s a small debt, let it hang.

            And you can always negotiate, even after a judgment, and you can still bk after the judgment, right up until they execute it on your stuff.

            • SC123 says:

              Even after the bankruptcy disappears from your credit report, most financial institutions will still ask if you’ve gone bankrupt EVER before they loan you any money, so it never really disappears

      • Snarkysnake says:

        @changed my name:

        (With all due respect)

        …Maybe in 1978.But technology is on your side in the here and now. You can buy a throwaway phone for less than a ten spot and make it a merry chase for the debt collectors.Not saying that you should,but you can.

        A better solution is found below by Earl- Fair Debt Collection Practices Act. They have their weapons,we have ours.

    • Sam Wille says:

      @SonicMan: If you fail to pay on the credit card, eventually it will go to 3rd-party collection and they will have the right to sue you for the monies owed. Judgment will take place if you opt to bury your head in the sand and hope for it to all go away.

      Then your wages will be garnished, or worse.

      For some, their debt load is so high they honestly have no other choice because their creditors won’t bargain with them, they have too much debt and they haven’t found a way to bring in enough money to make their way to financial freedom.

      For some, bankruptcy does make sense. For some, not all.

  4. Anonymous says:

    Well my credit score is over 700 but my wife & I now make 50% of what we did last year and so we’re buried under our 80K debt we acquired when it was trivial to pay the minimums plus some.

    I make over 50K a year and have less than $150 a week to live off of right now.

    • Traveshamockery says:

      @PerryFox: I don’t know what you’re going for here, but there probably won’t be much sympathy for someone who ran up $80k in debt with the justification being “it was easy to pay the minimums”.

      Good luck getting out from under…I’d suggest looking into Dave Ramsey for education and more importantly, motivation, for getting out of debt.

      • storm says:

        @InfiniTrent:

        What does sympathy have to do with it? Emotion has nothing to do with finance. Numbers. Ratios. Analysis. Period. Consider BK. Consider negotiating with the creditors. Consider all your options based on your financial situation and analysis of your marginal increase of credit, based on your projected need for credit.

        At the end of the day, food in mouths and lights on is more important than “sympathy.”

      • Wormfather is Wormfather says:

        @InfiniTrent: Seriously, that didnt seem like a sympathy cry. Further more, Consumerist.com is not a place where only the 700 credit score and up having, frugal thrifty buying and financial savant weilding typs can gather.

        There are a lot of people who looked up one day and said shit how the fuck did I get here. The bottom is an ugly place and you need not step on them whilst they try and claw their way out.

  5. heybtbm says:

    We have some family friends who declare bankruptcy every 7-10 years or so. I know of 3 for sure. This has never impacted their ability to get new credit cards, car loans or mortgages. The interest rates might be higher…but they don’t pay the loans back anyway. They’ve never had their wages garnished or really been held accountable in any serious way. This is their sad lifestyle. A constantly repeating cycle.

    Whenever I read these “bankruptcy is bad” type of articles, I always laugh and think of this family. It certainly hasn’t been bad for them…just their sucker creditors.

    • rpm773 says:

      @heybtbm: Keep in mind how easy it has been to get loans for the last 25 years, and what such lax lending standards have wrought on the economy and the industry.

      Perhaps the creditors that were willing to continue to write loans for your family friends despite their bankruptcies won’t be around the next time the latter is looking for a loan.

    • quail says:

      @heybtbm: In the past bankruptcy really wasn’t that horrible. But in today’s climate banks and other lending institutions won’t be so willing to work with someone who’s declared bankruptcy.

    • Chantillian says:

      Not only do folks like those “family friends” screw over “sucker creditors, they make credit just that more expensive for anybody else looking for credit too. But they don’t care. They’re selfish and careless. More of their ilk can be found at creditboards.com. :(

    • CFinWV says:

      @JohnDeere: I was just about to post something like this. I saw it in action, I was floored.

    • mac-phisto says:

      @heybtbm: well, they’ll be in for a rude awakening this time around – a major provision of BAPCPA is the new “presumption of abuse” test – a judge can dismiss a chap 7 filing (or force filers into chap 13) if there is a presumption of abuse. this is very loosely defined, so multiple filings, if introduced in court, could very well hurt their case this time around.

      • varro says:

        @mac-phisto: It doesn’t happen in practice.

        People can file for Chapter 7 bankruptcy every 8 years, but if you last filed for Chapter 7 8 years and 1 day ago, judges will not dismiss the case.

        “Presumption of abuse” is if the United States Trustee believes you can make Chapter 13 plan payments toward your debt. This may come into play if your income is near or over the median income for your state and family size.

        • mac-phisto says:

          @varro: they amended that clause so that any interested party can now make a presumption of abuse claim, not just the court or trustee.

          i would think someone could make a “bad faith” argument if it was known that a debtor was a cyclical filer – wasn’t that the whole point of BAPCPA? how an interested party would know that information is beyond me…

          i understand your point though. still, i think the means test would catch most people trying to game the system.

          • budder says:

            @mac-phisto: LOL. [www.bankruptcylawnetwork.com]

            If you click that link, a $6060.00 B22 deduction is not considered abuse. The judge said so! UST may review cases, but they only catch the most egregious offenders. Most people taking advantage of the system won’t have the presumption arise and UST probably won’t (and shouldn’t- that would be horrendously expensive!) catch them.

            And think about all the deductions you can take! Ownership/Operating expenses (lines 22-23) here in NDGA are 228/489 for 1 car. If you’re married with a non-filing spouse, you can take pretty much anything off on line 19. Line 32 lets you take off for cell phones and internet. They don’t limit you to the local $35 unlimited cell and $20 Netzero account. You can throw $200 on without the Ch13T or UST even giving it a second look. I don’t want to start a religion debate, but if you’ve filed BK, your deity probably thinks you should pay your unsecured creditors back for the money you spent. Unless you only worship Loki. He’s pretty cool, though, so maybe I’ll let that one slide anyway.

    • storm says:

      @heybtbm: They aren’t suckering anyone. Part of the interest you pay is the default risk. The banks have math Ph.Ds formulating what they have to charge to recover. If they don’t charge your friends a high enough interest rate to make the investment work, it’s their problem.

    • u1itn0w2day says:

      @heybtbm: I think the changes in bankruptcy laws a fews back will make it harder to become a repeat offender .I know people like that as well – it is a lifestyle they want to maintain as much as it is about obtaining something .

      Every now and then someone might get in over their head on one item .But when I see people who always buy upper end cars or high end electronics or refuse to buy generics I have little sympathy .

      I can even deal with the credit card companies gouging you with excessive fees and interest rates .

      But I think the housing bubble is still the perfect example of an unwiley sense of entitlement .If your doomed to rent , go without a pool ,go without a the latest & greatest in electronics ,or drink dollar store soda or have to drive a Hyundi then so be it .

      I think the description of bankruptcy is like using a nuke is a very good way to put it .

  6. spoco says:

    I have a moral problem with some bankrupcies. Some are warranted, but I know someone that went 1.2 million in debt, making and spending a couple million along the way, then declared Chapter 13 and paid back about $150,000. I know this because he bragged about it. Moved things out of his name and into his parents and kids name to hide some assets. It was disgusting to see.

    • Eyebrows McGee (now with double the baby!) says:

      @spoco: There are two kinds of people who file bankruptcy — people who are being SCREWED by life, often by an unexpected illness followed by massive medical bills while one earner in the family can’t work; and people who are absolute assholes gaming the system. The assholes are by far the smaller proportion, but they stick in your mind and make you want to punch them in the face, koala-style.

      My husband does some hospital collections, often involving people in bankruptcy. He’ll see 9 families struggling with horrible situations and one asshole driving a Porsche in his mom’s name. It’s the asshole that he’s still muttering about three days later.

    • storm says:

      @spoco: I hope your “moral problem” applies equally to business bankruptcies that game the system as well as individuals.

      What you may not know is that there is actually a justice department lawyer, called the U.S. Trustee that monitors bankruptcies for fraud. They take care of the “assholes.”

      I don’t believe what you are saying, because what you describe is a fraudulent transfer and would be enforced by the U.S. Trustee, or the other creditors. Otherwise, it’s really his mom’s and unless she goes bankrupt it’s her property and she can let whom she pleases drive it.

      • SC123 says:

        The US Trustee has a large caseload and doesn’t have time to look at each case closely. That is if he even gives a fuck

  7. JohnDeere says:

    i know people who have filed bankruptcy and the next week be driving new cadillacs.

    • Snarkysnake says:

      @JohnDeere:

      “i know people who have filed bankruptcy and the next week be driving new cadillacs.”

      I do too. I am a bail bondsman. The people you mention are car thieves.

      It’s this kind of thinking that makes it look “easy” and “painless”. Very dangerous. If you are tempted to file the old “Blue Collar Two Step”, because you want a new Caddy,you need better advice than you will get on this board (including my advice)…

    • storm says:

      @JohnDeere: Ah, yes, the proverbial bankruptcy queen. Just as real as the welfare queen.

  8. rubyfrog says:

    One thing I’ve always wondered is (and I’m hoping someone can explain it to me) why lawyers on TV out here are saying “most people who are doing credit counseling SHOULD have been filing bankruptcy! we think the new law is better than ever!” Are these attorneys just after fees from clients to file bankruptcy, or are they getting some sort of cut? I just wonder because I mean, how much can you really charge someone who is bankrupt already…?

    Pardon my naivety!

    • Flame says:

      @rubyfrog: Most of the ones you will see on TV are ambulance chasers, unfortunately. That being said, you can actually charge quite a bit to do the paperwork for the bankruptcies. I worked for a bankruptcy attorney for about a year, before I had to quit because I was going to murder a debtor or two.

      We used to charge between $750 and $1,500 for a Chapter 7, and upwards of $2,500 for a Chapter 13. This was in Idaho. Other areas may have MUCH higher fees.

      Mostly, that’s because there is a LOT of paperwork involved in filing and you have to actually look at their paperwork to see if you think they are cheating in any way.

      I was the one that did all the paperwork. It usually took me between 1 to 2 weeks to get the first part of it done, then the client would come in and we’d go through it to revise.

      Most attorneys will want all the money up front, before they will even do the paperwork. The guy i worked for was kind of soft-hearted, and would take payment arrangements. Sometimes it took people two years to get us paid off.

    • mac-phisto says:

      @rubyfrog: yes, they’re after fees. it’s how they make money. & this isn’t like personal injury law – they get paid even if the bankruptcy is dismissed.

      @Flame: the laws are different from state-to-state…i believe here in CT, a lawyer can require payment up front for chap 7 (i believe it is ~$3000) & can only require a portion up front for a chap 13 – the rest is paid as part of the reorganization.

      • storm says:

        @mac-phisto: You don’t know what you’re talking about and should shut up before you get a letter from the State Bar for illegal practice of law.

        Bankruptcy law is uniform nationwide except in one aspect: exemptions. The lawyers get paid off the top. Sure some of them are scammers, but no less than this poster who is surely scaring people out of something that could help them.

        • mac-phisto says:

          @storm: i’m not trying to scare anyone out of bankruptcy. & what i deemed “the law” perhaps i should have called “local practices”. since attorney costs are governed by state, not federal law, how much contracting an attorney (& how much they’ll want up front) will differ from state-to-state (& even from office to office, which is why most state bars have legal cost dispute resolution).

          if you are considering hiring a bankruptcy attorney, speak with legal aide or at the very least, find & consult with more than one attorney before you decide to file. or since credit counseling is often a pre-condition to filing, consider speaking to an approved credit counselor before speaking to an attorney. you can find a list of FTC-approved counselors here –> [www.ftc.gov]

          that said, i really don’t have any sympathy for someone in trouble who asks a bankruptcy attorney if they should file bankruptcy or not. i think it’s akin to asking a realtor if they should contract a realtor to sell their home or FSBO. or asking a stock broker if you should buy actively-managed funds or no-loads or asking CASH4GOLD if sending all your gold to them is a good idea. one answer = $$$ for the advisor, while the other answer = $0.

          • u1itn0w2day says:

            @mac-phisto: I know people who have tried negotiating with their credit card companies and talked to credit counseling agencies realizing that would be just as bad for their credit and yet keep on saying I gotta see a lawyer .

            AND knew they would be layed off IN ADVANCE-for monts-and still spent on credit to the very end .

            The friends who went through bankruptcy before 2005 make it seem like it’s just a thing to go through just like here .

            These are different times and different laws .If you filed after 2005 I don’t think we would be hearing the same stories .And by the way by their own admission the formally bankrupt friends admitted having to pay like 28% on an auto loan .You can’t tell me a 28% APR won’t cramp your life style .And many people who have been lucky enough to not have to apply for a new job the last decade have got realize a credit check is the norm now .

            People now will be labeled housing bust victims even though they would’ve been headed to BK anyway .

  9. swicklund says:

    What this article should do is offer alternatives, like credit counseling, negotiating with creditors, snowballing debt payments, …
    If you are going to talk about how bad one choice is, at least offer up the alternatives.
    I hate admitting it, but I went through bankruptcy once myself (medical bills were part of it, but hardly the major problem). Never again.
    It does suck on the other side, you will get turned down for any good credit deals and I was unable to get a mortgage for many years.
    OTOH – I think I would be better off today if I *had* been turned down for my current mortgage and not offered any credit cards. :(

    • storm says:

      @swicklund: Thank you for pointing out that going BK isn’t some kind of easy cheat. It’s a decision you should make only if you are pressed into it. This poster simply ignores many of the real reasons why it may be beneficial, even while it is tough.

      However, I think you may see that a BK in 2009 is less of a stain than at other times due to safety in numbers.

  10. EarlNowak says:

    For the last twenty years, the primary reason for consumer bankruptcy is medical debt.

    Which makes sense- consider you’re a low to middle-class earner who can’t afford health insurance. Your son/daughter/father/mother/husband goes to the hospital after being hit by an uninsured motorist on the street. You’ll sign anything to get them treated- and then get stuck with hundreds of thousands of dollars in debt. What the hell else do you do?

    • Skankingmike says:

      @EarlNowak: Actually pay attention to your car insurance maybe? Instead of Getting the lowest possible rate.

      My wife and I sat down and increased our coverage to 1 million, we increased our uninsured motorist to 500k

      Cause you never know.

      I mean all these companies boast cheap insurance and people rush out to get them.

      Then if something like getting hit by an uninsured motorist happens, or you hit somebody the hospital bills will be devastating.

      Even if everybody had “free” medical insurance i highly doubt it will cover if you cause injury to somebody.

  11. spoco says:

    For one thing, medical and prescription expenses are just insanely high. Hundreds of thousands of dollars should be $10-$15k max. That will sting some but won’t kill many.

    A couple of years ago, my wife was having unfamiliar pains. Turned out to be a kidney stone, but we didn’t know and went to the emergency room. A couple of x-rays, A morphine drip for the pain and the sight of a doctor that told her to drink lemonade once a day and they billed our insurance $7000.

    • cf27 says:

      @spoco: Your insurance didn’t pay $7,000. $7K was the retail cost.

      One of the hidden secrets about hospitals is that insurance companies demand a discount off the “Rack” rate. Rather than decrease what insurance companies pay, hospitals increase the “Rack” rate. Most people have insurance, so there is no real change. But, for those that don’t, the hospital bills can be huge. (Because of this, hospitals often negotiate reduced payments.)

      You could have also saved a bunch of money by going to an urgent care center. Emergency rooms are expensive.

    • HooFoot says:

      @spoco: No kidding. I broke my leg last year and the total hospital bill was $250,000. That’s right, $250,000 for a broken leg. Even the health insurance customer service reps were shocked by the amount. I would have declared bankruptcy if I didn’t have health insurance.

    • Rache says:

      @spoco: Actually, often, hospitals will throw any and every charge that they can at insurance providers and just wait and see what sticks.

  12. bohemian says:

    Half of the bankruptcies are for medical bills, a large percentage of those had insurance. We need to address the problem rather than the symptoms.

    Either we need to establish national health insurance or we need to limit what medical creditors can do to collect on medical debts.

    Just think how much better off businesses would be if half of the people didn’t file for bankruptcy and could pay their other bills.

  13. Silversmok3 says:

    If I recall,the reason credit scores rise after filing BK for some is because before filing all their debts went delinquent anyways.Keep in mind living 10 years without credit isn’t impossible-most who file would be credit-less for at least 7 years anyways,and if their finances have fallen behind long enough before filing they’ll already be living without credit .

    Which,to be honest,is something we should all try to achieve.I can think of a few examples of why 10 years without credit might be a blessing in disquise.More $$,less loans never sent someone to the poorhouse.

    • Sam Wille says:

      @Silversmok3: I know that we’ve been without credit, aside from a car note, for some time. Another ten years will not be awful, but will be trying at times. I’m in a good place now, and I need to work hard to keep things in order and that is something that I’m committed to do for my family’s sake.

      Yes, a BK is a ‘nuclear bomb’ on your credit report. Done properly, it can but a stop someone from bleeding to death. If you didn’t figure out before filing why you got into so much debt, you are going to revisit the situation again in a few years if not a few months. While its a portion of the filing that many do not take seriously, debt education is important.

  14. Eyebrows McGee (now with double the baby!) says:

    “If you were a landlord and had to choose between two renters, one who had declared bankruptcy or one who hadn’t, which would you choose?”

    The one with bigger boobs.

    • Sam Wille says:

      @Eyebrows McGee: That quote from the article is ridiculous. In most cases the people coming out of BK should know to build up to have more cash on hand. If they are smart, they will have the first month’s deposit plus an additional month or two of rent they can put down right away. Money talks.

      • failurate says:

        @Sam Wille: Because people filing for bankruptcy are known for their cash management skills?

        • Sam Wille says:

          @failurate: Since you don’t know what their situation was like pre-Bankruptcy, it’s not like you are truly able to assess what their situation was and whether or not it was truly the incompetence of the perspective renter or if they fell on hard times and such is life. With the bankruptcy you at least know that their debts were ate up with the filing (Chapter 7) or reorganized (Chapter 13). It is visible to anyone who wants to look up the credit report to approve them for apartment. From there, you are taking their word they will pay just as you would be taking other party’s word that they would pay. You know neither from anyone else just walking off the street – one may have better credit now but that’s not to say they won’t encounter difficulties down the road.

          After filing for BK you better develop competent cash management skills; credit is difficult (but not impossible) to come by.

    • menty666 says:

      @Eyebrows McGee:

      but what if that’s a fat guy?

  15. Oface says:

    Ok…I’m in a situation where me and my ex bought a house together (we were engaged but never married). We broke up and he stayed in the house. He’s not making payments on time and my credit is suffering…since he’s not making timely payments he can’t refinance to get my name off this house. I don’t want to file bankruptcy, but I can’t let him continue to ruin my credit. So what is a viable option?

    • spoco says:

      @Oface: kick his ass.

      Seriously, there’s not much you can do now. Contact the lender and make sure that they know the situation. However if he’s not making the payments, you are just as responsible for it as he is. Not trying to scold but this is why you don’t co-sign or get joint things until you are married.

      • Oface says:

        @spoco: Hindsight is 20/20. We had been together for almost 4 years. Main reason I signed on the loan is he was in Iraq and if something happened to him, the house would go to the estate and I’d be out on my ass…which is really funny now because I am. I’d gladly take over payments cause I know I could handle them, but he won’t give up the house. *sigh* UGH. I hate him.

        • spoco says:

          @Oface: You may be able to fight him on it. If you can make the payments, you have as much right to the house as he does.

        • Eyebrows McGee (now with double the baby!) says:

          @Oface: Yeah, depending on your state and on whether you’re on the deed, you may be able to evict him or buy him out — and force him to accept the buyout. I’d call a lawyer.

          (I will warn you, I absolutely hate this sort of case, because people usually call me frantic with unreasonable expectations and with a ton of venom they want to vent on the ex that’s not really relevant to the LEGAL situation. You sound pretty reasonable and collected in the post, but recognize that perception might be a hurdle and you should sound very calm and reasonable when discussing it with prospective lawyers. I’d confine my emotional statements to, “I’m sorry, I’m just very frustrated with the situation” if you start to get emotional or overexcited. Unless the lawyer asks you if you care about screwing him, in which case, feel free to make clear you would not feel a BIT bad about him getting screwed. Also, make sure you know who’s on the deed and who’s on the loan. And what sort of ownership the deed specifies. I couldn’t tell you anything or begin to guess at the case without knowing those three things.)

          • Oface says:

            @Eyebrows McGee: We’re both on the deed and the loan. I’m not too concerned with being a bitch. I just want my credit to not be ruined anymore. His name is listed first on the loan and the deed if that makes any difference?

            • Eyebrows McGee (now with double the baby!) says:

              @Oface: “His name is listed first on the loan and the deed if that makes any difference?”

              Shouldn’t. I’d call some lawyers.

            • Wormfather is Wormfather says:

              @Oface: It’s time to kick his ass. If he’s military, your going to probably need multiple people and a weapon.

              Seriously though, listen to McGee, he gives really good advice. If he stops giving it then tell him the advice he’s already dispensed qualifies as an attourny/client relationship…snap his ass right up.

            • mac-phisto says:

              @Oface: sorry, but if you’re both on the loan, you’re both responsible for it. a lot of people don’t understand “joint contractual responsibility”, but that’s what it means.

              this is why divorce typically results in a lot of messed up credit – it’s not atypical of one or both parties to play control games like “they f-ed up my life; i’ll f- up their credit” as part of the process.

              is there a chance that you both could sell the place & at least get out from under it?

              • Oface says:

                @mac-phisto: Yes. I am WELL aware of that fact. I’m trying to do what I can to stay above water.

                And its in a new subdivision. The house across the street has been for sale since Feb of 2008. No one is buying right now.

  16. quail says:

    A few years ago when credit card companies were still raking in billions of profit, it wasn’t too difficult to get them to forgive a portion of the debt. You had to prove hardship and you’d pay tax on the forgiven debt but getting $8K lowered to $1K was worth the aggravation. Does anyone know if CCs have stopped this for the most part? Or are they cash strapped too and feel that any money is better than no money?

    • spoco says:

      @quail: They’ll still work with people in hardship, but they aren’t happy about it. They’d rather get $1000 than nothing. They know that someone that hasn’t paid their bill in 3-6 months is less likely to try to get current because it does nothing to their FICO score. That needs to be changed.

      For instance – someone who is 3 months late on a credit card takes the same ding on their credit score as someone who just let one charge off.

      I am noticing a lot of “Credit Repair” signs going up where I live. Sign of the times.

  17. cecilpl says:

    It’s so sad to hear about so many families having to declare bankruptcy and lose everything they’ve worked for due to a stroke of luck (illness/disease/accident). We may pay more in taxes in Canada (I pay about 22% total federal and provincial income tax on my salary of $70k), but at least I never have to worry about money when I’m in the hospital. Being sick is stress enough…

  18. lalaland13 says:

    My mother filed for bankruptcy after a divorce. It taught me to 1) Never get married and 2) Never file bankruptcy.

    Kidding (sort of) about the first one, but bankruptcy was miserable for her, and I’d even get calls claiming I owed people money when I didn’t and they were just trying to get it from someone in the family. Same thing with my brother. Her wages are currently being garnished, too. It sucks all around, but she didn’t have many other options at the time.

  19. AmbiUbi says:

    I declared bankruptcy in 2004 and it was discharged in March 2008. I had lost my job in So Cal and we were living on my husband’s salary and racked up the cards to buy groceries and gas to drive to work. We even moved to the East coast a few months later for a better job for me and to live somewhere much more affordable.

    We continued to make our minimum payments and never used the cards again, however that didn’t stop the CC companies from continuing to raise my minimum payments because I wasn’t paying them off aggressively enough. When I would call to explain my situation I got no sympathy or offers of help to get into some kind of reasonable payment plan. It got to the point where my auto insurance rates were higher because of our debt to income ratio.

    So we did the bk before the laws changed, got a Chapter 7, wrote off about 30K in cc debt, and were able to buy a house the following year with a 100% financing fixed rate loan at 6.5%. I was also able to get into a car lease 6 months after the discharge. I think the bankruptcy was the best thing I ever did.

    • spoco says:

      @AmbiUbi: So the best thing you ever did was borrow $30,000 that you didn’t pay back?

      Ladies and gentlemen, I present to you or nation’s core problem.

      • savvy9999 says:

        @spoco: Zing!

      • AmbiUbi says:

        @spoco: Um, did you read the whole thing? Most of the debt racked up came from losing my job and racking up the cards to you know, be able to eat and drive around for interviews and keep the electricity on and buy books for college.

        Or maybe, according to you, I should have been homeless and starving and without a college degree instead of using the cards that were at my disposal?

        I’m just sharing my own personal experience. As far as the car lease goes, well, that was before I started reading consumerist so chalk it up to being an ill-informed 23 year old. I know better now, thanks.

        • spoco says:

          @AmbiUbi: Losing a job is not a reason for just giving up and throwing in the bankruptcy card.

          I did read – you said in six months you were able to qualify for a car lease. You should have been able to get caught up on your credit cards in six months.

          My parents had a friend that did something similar after losing a job. A few months later they were back on their feet. About a year later they started paying back the discharged credit card debt because they felt like it was morally the right thing to do.

          That, and karma is a mean bitch.

          • AmbiUbi says:

            @spoco: I didn’t give up. I continued making the min payments and even borrowed money from my parents to do so because I didn’t want my credit ruined. It was the cc companies who decided I was not being “aggressive” enough in paying down the existing debt who would double/triple the min due each month who were unwilling to work with me when I got into financial trouble.

            And yeah, 6 months AFTER the discharge I was able to get into a car lease. Those payments were $200 a month as opposed to the $1100 a month in min payments for both my husband and I were having to deal with. But yeah, you’re right, I should have not had a car at all to drive to work to make money to cover rent and put food on the table and paid those credit cards off instead. Good plan.

            I’m not saying I’m not at fault for some of that debt intially before it got out of control with no income coming in each month and min payments being raised. But until bad luck falls on you don’t presume to know what was best for my personal situation. Like you said, karma is a mean bitch.

            • jusooho says:

              @AmbiUbi: ” It was the cc companies who decided I was not being “aggressive” enough in paying down the existing debt who would double/triple the min due each month who were unwilling to work with me when I got into financial trouble.”

              It is so ironic that the credit card companies forced you to stop paying them, by asking you to pay too much. It is definately their fault.

          • shepd says:

            @spoco:

            Karma is a bitch, and giving someone who went through bankruptcy for what normal people (apart from yourself) consider good reasons a hard time is asking for some karma yourself.

            Think ’bout it. Assuming the comment is correct, these are perfectly normal things to rack up debt for when you’re broke. When society’s safety net for people in these situations breaks (it did for me for the same type of reasons as well, and it clearly did for him or he wouldn’t have needed to buy food and shelter with debt) people who fall through indirectly punish society for society’s mistakes through bankruptcy and similar means.

            That’s exactly *why* society has those safety nets–not just because of the feel-good factor, but if we didn’t have employment insurance and the like, we’d have people hitting up bankruptcy court each time they lose their jobs. This punishes the working people by making them pay higher premiums on their debts, which is the way it should work in these exception cases, since those people are the ones that needed to vote for better safety net style legislation.

            That’s not to say all bankruptcies are due to unforseen circumstances, although I can’t imagine there’s too many people who purposely look to get themselves into unmanageable debt.

            I’m close to the same situation, after having tried to go back to school and get a better job and discovering it wasn’t going to work out too late. Not bankrupt yet, but at the current rate, who knows. Guess what the government here just started to offer this year? Anyone who loses their job gets $26k to help them go back to school. I can’t imagine why that might be…

        • cromartie says:

          @AmbiUbi: This is blame the victim central, so take the bulk of the response with that in mind. Good for you on the lesson learned.

          • AmbiUbi says:

            @cromartie: Thank you! As of now, my husband and I each have one credit card that we don’t use unless we can pay it off each month. We refuse to let them raise our limits even though they attempt to do so every other month. We have no intention of getting ourselves into that situation again.

      • varro says:

        @spoco: “Everybody’s getting on my nerves!
        Everybody’s much stupider than me!
        Why don’t you do things
        The way that I do?
        I am right and you are wrong.
        Me!”

    • Jon Mason says:

      @AmbiUbi: “I was able to get into a car lease” Which is, of course, a great financial move…

    • Firethorn says:

      @AmbiUbi: Hmm… Did you ever try a consolodation loan? Many times they’re improperly used, but with the lower interest rates you can get lower monthly payments AND a lower interest rate allowing you to pay things off faster.

    • Tmoney02 says:

      @AmbiUbi: So we did the bk before the laws changed

      That should be noted to anyone reading the story and thinking things could work out like that for them. It probably wont now.

  20. kaptainkk says:

    There is nothing wrong with filing for bankruptcy and yes I did it back in 2005. Best choice I ever made. I haven’t had any problems getting credit cards, car loans, ever since. I was told by a lender I would qualify for a FHA loan but I own my home and I don’t plan on buying a new home anytime soon. I will file Chapter 7 again in 2010. There are no moral issues involved with this one. The banks and lending institutions want to screw over the little people and profit from them, then I have no problem dishing it to them.

    • spoco says:

      @kaptainkk: There are times when it makes sense to declare bankruptcy, and about 99 percent of them include medical bills.

      There was a time in America not too long ago when one would be completely embarassed to declare bankruptcy. It signified personal failure. Now people are “planning” bankruptcies to “dish it to the banks that screw over the little people.”

      You may not have a problem with it, but I surely do. I’m not for banks jacking up rates, etc., but Someone who would knowingly run up debt planning to declare bankruptcy so that they don’t have to pay it off – there is something wrong with that person.

      • feline says:

        @spoco: “Someone who would knowingly run up debt planning to declare bankruptcy so that they don’t have to pay it off – there is something wrong with that person.”

        I agree. Having watched an ex game the system and get out of debts he legitimately owed, I came to believe that there’s a fuse missing someplace when someone can say “Well then if it’s wrong, they shouldn’t be trying to stick it to me. The system lets me, so I will.” I figure karma will catch up with him eventually.

        People who do that are driving the rates up for the rest of us. If other people weren’t “sticking it to” the creditors, maybe the creditors wouldn’t be “sticking it to” us. Vicious cycle.

        • Wormfather is Wormfather says:

          @felineslade: Which do you think came first, the sticking of the little guy or the little guy sticking the big guy?

          I’m not endorsing the behavor, but I will say that, bankrupcy could be declared illigal tomorrow, everyon could start paying off their debts in a timly manner, do you really think they’re going to lower your interest? In fact they’d be more likely to raise them.

          The banks make most of their money off of two people. The people who are usually good and then screw up (ie, overdraft fees, a late fee on a payment, etc) and the person that used to be bad but is trying to get good (ie. mobster loan shark type interest rates)

    • Anonymous says:

      It’s not that bad, once you get over the toll it takes on your pride. But for some people there really is no better way out.

      My wife and I were forced to file Bankruptcy in 2006 due to $250k+ in Medical bills, and another 40k in credit card debt (more medical services). And when its your child who needs the care you do what ever the hell you have to get it! I hate the health care system in this county! Insurance companies take your money but denies care when you need it. And simply did not have the time to fight them and wait for them to cover it.

      Any way – before this we had steller credit. Granted it hurt our score, but so what?? We were still able to buy a house on a fixed 30 year with a 6.25 rate 10 months after we filed. We did loose our credit cards but we really don’t need them any more. We buy our stuff with cash now. And we still get tons of mail for more credit, go figure. We don’t regret filing one bit, and given the position we were in were in a much better place financially now then we were before.

  21. Silversmok3 says:

    Let me start by saying this: I will be filing BK at the end of this year.
    No mortgage or credit card debt-its $16,000 in past due college tuition that I cannot mathematically pay off on my current income ahead of the service fees(its NOT a student loan,btw).

    But let me be clear-The whole experience of owing huge amounts of money, even on an investment like my education,has soured me on borrowing ANY money. Once my car loan is paid off next year, that’s it.

    No more credit cards.
    No shiny new car “fl”-leases.
    No store cards.
    No $500 monthly car note.
    No ’90’ day same as cash BS.

    I may get a reloadable Amex so I can buy items with chargeback protection, but no more credit for me.
    Not now, not after I file.
    I wont be buying a house anytime soon, so thats not a concern.Yes, I have to put down deposits, but that’s better than having to choose to pay the credit note or eating.

    Just thought Id mention this,to make it clear not everyone who files is out to game the system.

  22. Anonymous says:

    I’m looking into bankruptcy right now. Somewhat on account of huge unpaid debts, partly on account of hospital bills, and mostly on account of employment. I was doing fine a year and a half ago, making decent money, little (but some) CC debt, and a car.

    As the market went south I took a paycut and lost bonuses. Without even really realizing it, my fault of course, I was dipping into my savings to pay the bills. Then I had some medical problems which quickly racked up the bills.

    6 months ago, I was let go as my company laid off 10%. I fought hard to get a job, networked with everyone I knew, but it took me until last week to finally get a job. And it’s at 60% less than I was making at the last job. I had cut down all extra expenses in the period of unemployment, but I did manage to keep the car and house payments current.

    Now, at this salary, I don’t see how I can keep the car, the hospital bills have gone unpaid, and the small amount of CC debt as well. It’s a matter of cutting my losses, redoubling my efforts at my savings account, and getting on with life in the new economy.

    I’m trying to deal with the car company, but they aren’t exactly being flexible. I’m going to try to sell it at the cost of the loan before they try to take it, but I’m afraid that won’t work in this market.

    Lessons have been learned. First, pay more attention to what you make if you start to make a little less. do the math, and double check it. Second, my car was by no means expensive. It’s used and the payments aren’t all that high compared to what I see being offered in ads. Still, I would have rather kept that money per month and put it towards savings and buying the same car sans loan. It would have taken about a year to do, but I’d own the thing.

    I regret, but only a little. This is life. There are ups, and there are downs. I learn from both, and I keep an open mind and try to fix my mistakes. Life indeed marches on, and in the end this is only a credit score and a bit of money. A week and a half ago I witnessed first hand two motorcyclists die on the highway and talked to one of them as he took his last breath. There are people dying in wars in other places. Bankruptcy isn’t the end of my life, and really, I look at it as the beginning of a new era.

    • Anonymous says:

      @ZafirChalciope: Um, the above is me. I don’t know what happened to the formatting, but there were spaces when I submitted it. And the second sentence shouldn’t be, “Somewhat on account of huge”, it should be, “not on account”.

      There are only one or two small CC’s. The rest is a car and hospital related.

  23. Garrick Greathouse says:

    My family filed Ch 13 about three months ago. Medical bills relating to complications during my wife’s pregnancy are what put us over the edge in debt. American Health Care System for the win!

  24. Mary Marsala with Fries says:

    Forgot the single biggest reason that bankruptcy is a last resort — and it’s not credit-related. For most people for whom bankruptcy is even an option, their credit is already trashed; going through bankruptcy AND THEN PAYING ALL DEBTS ON TIME will actually make a HUGE improvement in one’s credit-worthiness.

    No, the biggest reason to avoid bankruptcy is that YOU CAN ONLY DO IT EVERY 8 YEARS. Since bankruptcy is your only resort in the case of real emergencies — huge medical bills, house burning down, crap like that — you want to keep it available at all costs until you REALLY need it. Unless your debt is way higher than you could ever pay off, it doesn’t make sense to exercise your “nuclear option”.

    Oh, and just a little “fuck everybody who thinks that bankruptcy is immoral” at the end. Nowhere in the law does it say that corporations have the right to ruin someone’s entire life to collect their debt, and it makes perfect sense for society to build in a failsafe for that. Or perhaps you were a fan of debtor’s prison?

    • pax says:

      @Mary Marsala with Fries: I don’t think anyone is actually saying that bankruptcy in and of itself is immoral. There can be emergencies, disasters, and just great big mistakes in a life that is very responsible and conservative (financially) overall, and I do not begrudge people in those situations a fresh start.

      What I, and I imagine everyone else here, bemoan are people who knowingly run up debts planning to simply declare bankruptcy and walk away–and here I’m not talking lifesaving medical care, I’m talking flashy cars and fancy houses and other crap. I am finally making some headway into paying off $15,000 in credit card debt and it gets my goat that there are people who CAN pay but choose not to. I could walk away, probably, but I won’t–it would hurt my pride, my credit score, and everyone else who is trying to play by the rules. I’ll pay off every damn dime.

  25. varro says:

    As a bankruptcy attorney, I can say that Jim only has a basic understanding of what bankruptcy entails.

    First off, Jim says that all a debtor’s possessions are sold in a Chapter 7 bankruptcy. That’s wrong – debtors have significant exemptions for personal property.

    In Oregon, the state I practice in, debtors get exemptions of $30,000 of equity in a house for a single person or $39,000 for a married couple; $2150 in equity in a vehicle; $3000 for household goods; $1800 for clothing and jewelry; $600 for books, art, and music; one handgun and one long gun up to $1000; the entire amount of ERISA-qualified retirement accounts; $3000 in “tools of trade”, and other specialized exemptions.

    Bankruptcies do remain on your credit report for 10 years, but their actual effect on your ability to get credit only lasts for about 2 years.

    Bankruptcy is a business decision a debtor should make. Most of my clients do not consider it an “awful experience”; it’s often a relief from living paycheck to paycheck to pay unsecured debt and shuts down rapacious debt collectors.

    • Sam Wille says:

      @varro: And honestly, the relief that you get from the remedies taken in a Bankruptcy filing are almost immediate. We were already approaching litigation status with a few creditors so calls had stopped anyways, but there were 1-2 that would call every 3-4 days without fail. (Recorded greetings, and their offices were usually open while we were at work and only for 10 minutes after we got home)

      After about three weeks we had verbally told the stragglers that called in what we had done and it was…….amazing. On the other end of the line you had someone that went from a crazy collector’s tone to that of someone concerned about notating an account correctly for fear we be contacted again during the court-ordered stay.

      My wife and I can go to the mail now and you don’t see notices from collectors, demand letters and the like. We can answer our phone now, and I know that I’m not having to make unusual payment arrangements and field collection calls while at work and attempt to redirect them to my home line after hours.

      The way I saw it – I’m going on 28 years of age. For 10 years this will be on my record, so by the time I’m approaching 40 it will be off. My daughter will be 16 years old and looking into college. With our finances turned around I want to be able to assist her with getting her degree. Waiting to file Chapter 7 would have potentially put a dent in any chance I would have had to help her, and eventually her younger brother, to get into school.

    • brandyk says:

      @varro: Finally! Consumerist – have someone knowledgeable about bankruptcy write a post!

      To many people, bankruptcy isn’t immoral (it’s a legal process). The trustee doesn’t care about your stuff unless you have a super valuable collection. They aren’t going to sell it off. Your credit isn’t going to be ruined for years – especially if your payments were current when you filed. Most people file because of medical payments or a failed business. I refuse to judge either!

      Another (non-bankruptcy!) attorney

  26. WeAre138 says:

    I went bankrupt about 13 years. Although I have good credit now (750+ score), I haven’t noticed the slightest difference when getting loans and approvals now versus when I filed bankruptcy and the supposed 10-years horrible credit that follows.

    I purchased a house a few years after bankruptcy and also again about 7 months ago – no difference at all. Same with the autos I’ve purchased.

    If I got in over my head, I wouldn’t feel the slightest hesitation in filing again — it’s not as bad as people say it is.

  27. LogicalOne says:

    This is what infuriates me about bankruptcy: If bankruptcy is bad for individuals, it should be equally as bad for business bankruptcy. Probably, even worse – Businesses should know better. They have expertise and training in money matters. Instead, they declare bankruptcy and move on, with little or no future consequences.

  28. CaptZ says:

    I am in the process of filing Chap 7. The main reason I am filing is because of teh way the credit card companies DO NOT want to work with you when you have problems. Anyway, long story short. 2 of the collection agencies for the credit cards tried to put a judgement against me. I only know because I started to get letters from lawyers wanting to represent me. I never got the subpeona. I finally looked into it after I decided to file BK and the lawyer told me the judgements both were dropped. In Texas, where I live, it is nearly impossible for them to garnish wages because of the laws in Texas to protect consumers.

    I am filing next month. The only thing I will lose is maybe a little pride, but nothing material. Had the credit card companies accepted the terms I could provide, I would have gladly paid them in full. Since they didn’t want to play, fuck’em. They lose!

    • AustinTXProgrammer says:

      @CaptZ: You need to talk to a consumer lawyer before you file! In Texas if all the debts you are over your head with are unsecured it might not be necessary to file.

      You can use the FDCPA effectively to control collectors, and save the filing fees.

  29. storm says:

    This article, I hate to say, is crap.

    Let me count the ways.

    (1) You will not be considered credit unworthy for a decade. When I clerked for a a bankruptcy judge, credit card companies would come in and copy the lists of people who received discharges to offer them credit cards because they no have disposable income. I found this a vile practice, but it refutes this notion that you are not able to get credit.

    (2) FHA loans after two years? That’s supposed to be a punishment. I count this point as refutation number 2. Of course, this means you theoretically can’t get a jumbo, I guess, but with prices the way they are even in the Bay Area you can get a house without one.

    (3) Car loans. This is where the rubber really hits the road (pun intended). First, any bankruptcy lawyer will have you go buy a car before you file for numerous reasons, the first of which is that you can’t always keep a car that isn’t mostly owned by the bank to begin with, or at least it makes it hard. Second, so what? The question of whether a BK is worth it is a simple formula:

    Is the increased marginal cost of future credit (i.e. through higher interest rates) projected over the future 10 years less than debts you owe, or can reasonably negotiate down. If the answer is no, you go BK. Period. Otherwise you are a financial idiot. This is the cost benefit analysis a business does. United Airlines doesn’t think about anything other than this bottom line calculation. Why should you?

    (4) Yes. It is easy to prove bankruptcy discrimination. If the question is even asked, it’s probably a sign that it’s improper, just like an employment application that says “Please indicate your race.” Plus, seriously, at this point saying you filed a BK in 2009 is hardly a unique badge of shame. If you are improperly denied, you can sue whoever it was. They won’t take that lightly if you are serious about your rights.

    As for whether it will let you rent. Well, consider this. Filing a BK could help you keep the house you own.

    This article is bad advice, and it’s actually bad legal advice, so I hope the person writing it was a lawyer, otherwise it’s also illegal bad legal advice.

    Consult a bankruptcy attorney if you are in trouble. Explore your options and analyze your situation, and most of all, don’t feel ashamed.

  30. storm says:

    Correction: if you C/B analysis is that the marginal increase is less than the debts you owe, BK is smart.

  31. squablow says:

    Boy, plenty of people coming on here trying to justify why they went bankrupt. I could understand some incredible medical bill or horrible unforseen circumstance but some of these stories seem like outright thievery to me.

    I don’t accept an argument of “the banks are evil” or “the US doesn’t have free medical care” as justification for bankruptcy.

    I would support measures to make bankruptcy more difficult to prevent abuse, and I sure hope credit for bankrupt persons becomes much, much harder to aquire after the recent bank troubles.

    • u1itn0w2day says:

      @squablow: I think those people who try to justify bankruptcy look for one event they can identify with .But the reality is they either didn’t care or pay attention to detail .

      I’ve seen and heard a lot of interviews over the last year where people were complaining ” oh I never had to look at a price tag ,I just bought it ” .But when I hear that it infuriates me because if they never cared about price they probably never cared about thier total debt ,their future or what if scnerios or looked for sales and use generics .

      Then when I see these repo shows on TV take a look at the car is being towed and how the debtor is dressed or the house they live in .And there in lies the problem-their life style and mindset .I know people who could do the homeless thing in a second and know others that if you take away their big screen life is over .

  32. doodaddy says:

    With due respect to the filers of BK for medical reasons, etc…

    Oh please. Those who pay bills on time and live within their means would like to think BK sucks. That’s because there needs to be justice for all the discipline and self-sacrifice. I know because I’m one of them. But all the stories point to BK not being a big deal in any way.

    Besides, they are about to reset the principle on houses because too many people got greedy. It would be too big a catastrophe to let them all fail. By the same reasoning, soon all the BKs will be no big deal. The Democrats will probably pass a law that you have to give BK-bearers more rights to a loan than people with good credit, “to be fair.” This will be subsidized by my taxes while I try to afford a first house (still haven’t been able to in the Seattle area).

    Soon BK will be fashionable — the new “baby bump” if you will. “Did you hear the new get rich scheme? You buy a house, have it reset, then file for Chapter 7 anyway, and extract the equity and buy another one after a year.”

  33. Pinget says:

    Maybe things have changed. My husband and I declared Chapter 7 12 years ago. Within 2 years we both had credit cards. Within 3 years we bought a house. It’s not the big, bad thing people want you to think it is.

  34. baristabrawl says:

    I have filed and directly after that I started building my credit score back up. In less than 4 short years after a financial disaster wiped us completely out, we have 2 new cars and a pretty good score.

    Our mistake was buying a money pit when we shouldn’t have and charging everything to fix it. Sadly, we lost our shirt just trying to have something nice. In retrospect we should have burned it down when the plumbing failed.

    I don’t know who wrote this “Chicken Little” article, but I don’t agree with all of it. That being said, I have an old friend from high school that is on his third bankruptcy and I can’t run fast enough to stay away from him. I don’t know how you let someone file 3 times…Is that even possible? These people should never qualify for credit of any kind. Currently he has 3 car repossessions. How can you even drive?

  35. Grace Troupe says:

    I don’t know a lot about bankruptcy. I don’t know the details of the changes that happened recently. I don’t know who bankruptcy laws were intended to help most. I do know that after divorcing my drug-addict father, my mother filed bankruptcy, and it saved her from the debt he incurred. So maybe it’s not such a bad thing, for some people, that starting over is not impossible. She got the chance after ten years for her credit to be spotless and not tied to a man who didn’t care enough to come home at night.