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Tanlander's avatar

Personal bankrupcy: Worst decision ever or best thing you could've done.

Asked by Tanlander (71 points ) December 16th, 2010

I’ve known a few people to declare bankrupt. It wasn’t the end of the world. Being up to and beyond your eyeballs in crushing debt with outrageous interest sure feels like the end of the world.

Perhaps not being able to pay means being able to be someone else by starting fresh. Or, maybe it’s a nightmare of court hearings and lectures by officious bureaucrats and petty officers whilst a black mark tarnishes your credit history.

Thoughts?

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13 Answers

YARNLADY's avatar

My son had to declare bankruptcy when he gave his wife of a few weeks the power of attorney before he shipped out on an aircraft carrier. She proceeded to run up tens of thousands of dollars of debt and then disappeared,, taking everything they owned, except his car, which she stopped making payments on and it was repossessed, and stopping payments on their lease, which resulted in a default.

His bankruptcy judgment was entered, and it cleared out all his debts, leaving him destitute, but owing nothing. As the years passed, it has not had much of a problem with his debt, he has built up a new credit rating, and is doing as well as can be expected.

Tanlander's avatar

Wow. She really ripped him off. Sorry to hear it.

However, in answer to my question it would appear bankruptcy was a good thing for him in terms of finding a solution.

anartist's avatar

It would be very much harder for an older person of modest means since the possibility of developing a lucrative career path and recovering from losses are far more difficult [and would be made even more difficult by a bankruptcy] and the cloud of bankruptcy might be with one as long as one lives.

Bankruptcy rulings also include stiff measures if one ever falls behind again for any reason. One late mortgage payment and one could lose one’s house. And one could never refinance to lower interest rates or get low interest credit card offers. Some employers will refuse one if a bankruptcy has been filed. It is in some ways not dissimilar to problems ex-convicts face. Avoid it, especially if you are older.

After an absolutely lethal lawsuit I had to consider it but thank whatever there is to thank, I didn’t and am stabilizing without it and my credit record remains spotless.

Tanlander's avatar

I see. A good answer. Thank you. The ‘stiff measures’ is the bit I needed to hear. There’s plenty of copy out there telling you to beware but with little reason given as to why with detail.

marinelife's avatar

Many people who declare bankruptcy do so because of medical expenses.

john65pennington's avatar

This is exactly what i have been trying to tell people on Answerbag and Fluther for years. that, plastic credit will ruin your lives. its so easy to bring out a credit card, sign your name, and be gone. this will give you a power-feeling for a while. then comes time to pay what you have bought and whamo….......not enough money to live and pay for the plastic credit cards you have used.

Bankruptcy is not fun. a friend of mine declared bankruptcy and it has devastated him and his credit worthiness. his life will never be the same. he declared a Chapter 13 and paid it off as required by the court. the aftermath has been a nightmare for him. it will take 10 years before creditors will even talk to him.

This is a serious decision to make. some people have a choice, some do not.

Doppelganger19's avatar

Many years ago I had to do it—at least, I thought I had to do it—and though I don’t regret it today, I’ll never forget what a dreadful experience it was.

Reply offline if you’re interested in more detail.

wundayatta's avatar

@john65pennington Anyone with two ounces… ok three ounces of self-control can handle a credit card just fine.

@Doppelganger19 What was dreadful about the experience?

Sweetpea's avatar

I can’t say from personal experience. I feel for people who lose everything because of medical expenses or other things out of their control…it just isn’t right. However, on the flip side of the coin, I have also seen people live way beyond their means, buying whatever they fancy, including expensive vehicles, vacations, expensive meals out, clothing and anything else they thought they deserved, and then file bankruptcy.
I always hate the idea of people spending money they don’t have. Someone has to pay for it, often the general public in higher prices. I do believe it should be the very last resort, and I do prefer the one with a payback plan, vs writing it all off.

Tanlander's avatar

I think the medical expenses issue is interesting. There’s payments to doctors and then there’s the extra time and care you need to devote to a loved one which reduces your ability to earn on an uncontrolled basis. Consequently even three ounces of self-control may not suffice to ward off credit card debt.

Coloma's avatar

I have never filed BR, but have known people that have.

Getting into a financial predicament due to unforseen hardship is one thing, but, I have known of plenty that pre-meditatedly go for the bankruptcy while proceeding to charge their way into getting as much ‘stuff’ as they can beforehand.

Dispicible.

Tanlander's avatar

But surely these would be assets they’d need to sell off if they declared bankruptcy?

Naked_Whale_Tamer's avatar

@john65pennington wrote:

“plastic credit will ruin your lives”

I beg to differ. Plastic is wonderful and I use my credit cards for just about every purchase above a few dollars.

* No standing in line handing cash to a cashier and then count your change and many cashiers have a lot of trouble doing arithmetic when there’s no read-out on some device.

* Bad item? I can dispute the charge. With debit card or cash, I’m outta luck. Once I disputed a charge over $5,000 and the bank took my side. I dispute charges anywhere from 1 to 3 times each year and each time the bank has dropped the charge (and the recalcitrant merchant is dinged $50 by the bank).

* Some items are much less expensive on-line so I’ve saved a lot of money by using plastic. Some items are simply not available in my area so I have to buy from somewhere else in the country or from Europe.

* Sometimes I have to make an immediate payment and the only solution is to use a credit card. Sending in a check or making an electronic payment would take days. God bless plastic for saving me from a lot of potential grief and actually saved me money.

I carry just enough cash so that if the machines go down for any reason, I can still pay the bill. Along the same wise, I carry enough cash in the car so that if there are any problems with the credit cards or machines, I could still fill up my gas tank, pay tolls and make it home.

There’s a potential for negative consequences from using an item or service, to wit:

* Tens of thousands of people die each any every year in the USA from car accidents but most people still continue to drive. Wiki link to statistics.
* I use kitchen knives to prepare food but I could cut my finger off.
* I use power tools which could cause serious injuries or even kill me.
* Nearly 1,000 people die from bicycle accidents each year in the USA and more than 500,000 people are admitted into the emergency room due to bicycle accidents edu link but I, and millions of other Americans still bicycle.
* Stairs are a potential death trap. 12,000 people die using staircases, one-half of these deaths occur in a home. (link) Imagine if each year if 12,000 bodies were piled onto a heap – that’s about 4 “Twin Towers” deaths each and every year from stair cases alone.

I won’t even mention guns.

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