Making the decision to file personal bankruptcy (prepare for long post)

[Toby'sFriend]

I have to disagree with this...
it IS NOT immorral to file bankruptcy..

Well I suppose that is the thing about Moral judgements. Opinions differ.

I personally feel that when 2 adults have the ability to work extra jobs, cut back on spending, and pay their bills, then it is morally wrong to file bankruptcy and leave other consumers paying your debts through higher prices.

I have seen people absolutely decimated by circumstances beyond their control -- thousands of dollars in medical bills, lost jobs, disasters such as fire or whatever where they lost their house. In some of those cases, they certainly could not pay their bills within their lifetime and I don't blame them for not doing so.

But, personal bankruptcy is rising at an alarming level and in MANY of these cases I do feel that "the easy way out" was taken.

 

[AirForceRocks]

ITA TF.

There are obviously circumstances where there is no other choice, such as the examples you cited. But I'm a firm believer in paying what I owe, no matter how long it might take.

 

[barbeml]

I also agree with Toby'sFriend. I am weary of corporate bankruptcies (declare, screw the creditors, reorganize and go back to business as usual), and people racking up huge debt due to greed and then setting up websites to beg for bail-out money.

Bankruptcy is almost becoming chic in the USA--but having the slate wiped clean just means that everyone you owe does not get paid and someone has to absorb those costs.

Yes, horrible things happen to even the most responsible and hardworking people and sometimes a drastic action like bankruptcy is the only answer.

My advice going forward is to always live a bit BELOW your means, pay credit cards in full every single month and build up an emergency fund to tide you over if a major appliance goes, someone gets ill or a job is lost. One rule of thumb DH and I follow is that as soon as a car is paid off, we keep making the payment into our savings account. Also--PAY YOURSELF FIRST! Set up automatic savings/investment deductions with your bank. It really works.

 

[AirForceRocks]

My advice going forward is to always live a bit BELOW your means, pay credit cards in full every single month and build up an emergency fund to tide you over if a major appliance goes, someone gets ill or a job is lost. One rule of thumb DH and I follow is that as soon as a car is paid off, we keep making the payment into our savings account. Also--PAY YOURSELF FIRST! Set up automatic savings/investment deductions with your bank. It really works.

I couldn't agree more.

 

[Blondie]

Like Snoopy, I also know someone (actually several people) who have filed bankruptcy and now live in very expensive homes and drive brand new BMW's.

Get out your yellow pages and look up lawyers that specialize in bankruptcy. Then go and have a good talk with him/her. You'll need to bring all your financial records including paystubs. A good one will tell you both the pros and cons of filing either a Chapter 7 or Chapter 13, and most offer a free consultation, but from what I've heard their fee for filing can be anywhere from $700 to $2,000.

As previously posted, most people who do a debt reorganizing or "consolidation" go right back out and run their credit cards up again. The spending behavior needs to change. Your best bet is to cut up the cards, maybe only having one for an emergency like a car repair bill.

We cut them all up this summer and pay only by cash/check or debit card. It was the smartest move we ever made. Our last Disney trip in August was a strictly cash trip. It made us think twice about buying lots of expensive souvies that we really didn't need. All our christmas gifts this year---paid by cash. If we can't pay by cash, we don't get it. It's that simple, but let me tell you, it's not an easy transition!

Good luck!

 

[peg2001]

I would definitely go with a non-profit credit counseling service. They will contact all your creditors and stop the phone calls, negotiate relief from fees, and set up a workable payment plan.

I helped my brother through this process years ago after he lost his job and went into debt. The credit counselors were great and handled everything.

As for regaining credit later, there are ways through co-signing loans (as I did for my brother) or credit cards that are backed by a savings account. However, this if for LATER, you are drowning NOW. Get help.

Peggy

 

[Miss Jasmine]

I agree with TF, AFR and the others who have said that you are responsible for your own debt.

I'm sorry that you are in this situation. You really need to talk to your creditors and work on terms of payback. You need to cut up any credit cards you have and throw them away. You need to cut out out the Vacation Fund and put all that money toward paying your debt off. Given the savings rates of today you are much better off paying off your debt than trying to save a small amount of money. I liked Cindy B's idea of "snowballing" it, go with the easiest one to pay off first and work on that. You will feel some real satisfaction with each debt you pay off.

I don't care for the thoughts of, well you can claim bankruptcy but it really doesn't matter cuz you can go out and buy more things, maybe even bigger and better things later. That is not responsible thinking.

Good luck.

Oh and if you are being harassed by collection agencies you always have the option of telling them you only want to deal with matters in writing not over the phone. That puts an end to the phone calls and you always have good backup information.

 

[Michelina]

My husband (fiancee at the time) and I were in this same situation 5 years ago. He had racked up over $25,000 in debt during college with all of those credit cards that companies like to give to clueless college kids. We were 2-3 payments behind, all of the interest rates got raised and with the over-the-limit fees and late charges we couldnt begin to make the montly minimum payments.
He really thought about bankruptcy but finally decided that if he made all of the charges he should pay them off. For us it just seemed immoral to get them written off. I know that other people have different situations and I honestly don't judge them for declaring BK (unless they are truly trying to play the system).
We contacted an accredited credit counseling service called Creditguard of America. They contacted all of the creditors who immediately stopped calling. Most of them dropped the interest rates completely, a few had 4-5% rates and one only dropped to 10%. Only American Express wouldn't negotiate at all. We started our pay-off plan with 14! cards and now only have 2 left. We will finally be done in June.
I just wanted people to know that credit counseling wont ruin your financial life. True, those first 2 or 3 years he probably wouldnt have been able to get a credit card to save his life but last July we bought a brand new car with a great interest rate from the bank and we're plannng to buy our first home later this year. If you really do want to pay the debt counseling can be a great option. It may seem like a looong time but there will be a light at the end of the tunnel!
Sorry for the long post...

 

[Blondie]

Roll your change if you haven't already. I'm always surprised that I find an extra $40 or $50 after I've done that.

We bought one of those tall tootsie roll type piggy banks a few years ago, I think we got it at either Target or Walmart. Anyway, everytime we had accumulated a few pennies, we'd slip them in.

We cashed them in right before our WDW trip in August and we had $87 in pennies! We used one of those Coin Star machines you see in grocery stores.

 

[kdibattista]

First off...

While in the process of trying to buy a house, I came across these very helpful, very informative sites to help us deal with some issues we had from years ago:

www.creditboards.com
www.creditnet.com
www.creditreportrights.com

Check them out... they are full of great information.

 

[Beauty]

I don't agree that its immoral to file bankruptcy.....I have worked in the loan business for almost my entire adult life. I have seen many people get in over their heads. More importantly than ruining their credit, it ruins their lifes. Everyone makes financial mistakes, some worse than others. I have seen grown men sit down in our office and cry their eyes out. I have seen men who haven't slept in months worried about what they are going to do and where they are going to turn. Should they have thought about this before going into debt and letting things get out of hand? Of course they should have but if you show me one person who has never made mistakes in their life I'll show you a person that is lying.

My honest opinion on this....when I see adults so worried about finances that they are literally making themself sick with worry then I say RUN to the lawyer and take Bankruptcy. Nothing, including credit is worth ruining your health, marriage and family. People who live high on the hog like Snoops was talking about and just take bankruptcy as a easy way out are totally different, I won't call them immoral because thats not for me to judge but I will say its wrong. But to save a family, a marriage, and your own health from mistakes you know you made and regret then yes take Bankruptcy. Also once its taken don't worry about it, don't look back, enjoy life and try your best to learn from the financial mistakes so you don't get there again.
Oh and don't ever look down on yourself for doing what you had to do to save your own family, because NOTHING is more important than family and happiness.

 

[snoopy]

I totally agree with you Beth. I really do feel for people who get theirselves in a bind, regardless of how it happens. I got myself in credit card debt exactly one time, and luckily for me it was back before they gave me much of a credit limit. Even so, it was hell to pay back with interest. I can understand why someone would file bankruptcy when they see no end in sight, regardless of what their reasons for debt were. A second bankruptcy is another story in my mind, but everyone deserves a 2nd chance imo.

 

[Crankyshank]

I wouldn't file bankruptcy. My best friend did 10yrs ago and is still having problems getting loans and credit cards because his credit is wiped clean and no credit is often worse than bad credit.

My husband was laid off recently and although he rebounded quickly and found a job, it's making $15,000 less a year than before and we're struggling with medical bills, lots of credit card debt, and a house. But we're making it through with hard work and cutting corners.

If you're able to work extra jobs, even if it's flipping burgers at Sonic, then do it . You've gotten some excellent advice here and you'd be smart to follow it and avoid bankruptcy at all cost.

 

[Beauty]

If you're able to work extra jobs, even if it's flipping burgers at Sonic, then do it . You've gotten some excellent advice here and you'd be smart to follow it and avoid bankruptcy at all cost.

Sorry I don't agree with that either. If extra jobs takes you away from your family then you shouldn't get them. If working a second job for 6 months or so will get you out of financial problems then maybe....but to work all the time and have no time for your spouse and children is going to make things so much worse. Financial problems are the major cause of divorce and separation and there is way to much of that in the world today. When you marry someone its supposed to be forever, but so many times it isn't because one spouse isn't there enough, or one spouse is too worried about finances. Nope take bankruptcy and be there for your family.

Besides its so much better living on a cash basis for a while. Doing and getting only what you can save and pay cash for. And you can always get more credit. I have a friend who declared bankruptcy with her husband.....oh probably 6 years or so ago and it was the best thing they ever did. With the clean slate they started over, paid everything on time and just bought a house. Learn from your mistakes but don't be ashamed that you made them.

Back when DH and I were first married we got into some Credit Card debt. Without making another long story it almost caused our separation and divorce. I can remember like yesterday the night we broke down, both of us crying because we were young, had a baby, had money problems and had no idea what to do next. That night we swore to each other that we would NEVER fight about money again....that was 10 years ago and we have never fought about money since. We cut the credit cards up, paid what we could and finally got to a nice comfortable place in life...where we are now. However, there were many times over the years when a bill had to be late....we would just laugh and say OH WELL it will get paid when we can pay it....and it did. Sorry but there is just simply no way I'm going to let money take control of my life. I will go back to that little apartment tomorrow if thats what it takes to survive. I could care less as long as my family is happy and as long as we are together we are happy.

 

[darlene9947]

swea_pea1, I would love to hear your ideas on cheap meals. Dining out every weekend is where I get into trouble
Thanks.

 

[Mskanga]

People filing chapter 7 get a clean slate , but they get to keep nothing ( unless the creditor decides not to reposses )
People with assets must file chapter 13 , they must have a job and pay back the creditors through a court appointed trustee.
Financial situations happen for many reasons, and nobody should ever say this is not going to happen to me, I have seen big towers fall.

 

[Mishetta]

Oh Beth, your posts were so sweet. It is true though that nothing is more important than your family.

Learn from your mistakes & move on.....

 

[Bojangles]

Originally posted by Beauty
If extra jobs takes you away from your family then you shouldn't get them.

IMHO, that is very bad advice. You have an obligation to pay for the things you bought on those credit cards. It sounds like you ran up store credit cards and gas cards and those tend to have some very high interest rates. If you declare bankruptsy, you will not be able to get a mortgage for years and when you do, you will be paying much higher interest than people with clean credit reports. Same goes with any credit cards or car loans. Seek some professional credit advice too. They can help get the interest rate lowered on some of your cards and work out some kind of payment plan.


Also, taking an expensive WDW vacation would not be the responsible thing to do until your debt is under control.

 

[jkovick]

Bankruptcy DOES NOT give a person a clean slate. It makes creditors unable to collect on the owed debts but it does not magically make that debt go away. You still owe that money. Everywhere that you include in bankruptcy is not going to do business with you-- ever. By having your debt "charged off" you cost every single person that deals with those same companies. About 3 years ago Credit Counseling was ommitted from the Credit Scoring equation. Credit Counseling will NEVER be as negative to a person's credit as bankruptcy is. Please consider Credit Counseling as your best option.

 

[Cindy B]

Originally posted by darlene9947
swea_pea1, I would love to hear your ideas on cheap meals. Dining out every weekend is where I get into trouble
Thanks.

I have done so many inexpensive meals its incredibly rewarding.

I found a great article called Dinner on a Dollar, and that is what it was.. dinners for four that would cost $1 a piece!

(No, we aren't talking 2 cans of chef boyardee either)


As for a second job, do what you need to do. If you need to do it, do it. There was a time when both of us (2 adults, pre kids) both worked two jobs.

I recentely worked 3-4 jobs, and was able to bring my children to all of them (nannying, wokring at a health club, being a party coordinator for a party center, teaching camp), and not take away from family time.