Dealing with debt

[user 37446]

Interesting discussion. I vandwelled years ago to pay off around eight grand in credit card debt; best damned decision I could have made.  I agree that in general welching on one's debt obligations is wrong. BUT, there is such a thing as usury, and there are situations where defaulting on debt might be morally justifiable and legally supported. For example, when a sophisticated banker takes advantage of an unsophisticated person, to the extent that the debtor doesn't even understand the terms they are agreeing to, an argument for default can be made. Sure, one can say the debtor had an obligation to be informed... but the lender too is not without obligations and can/should also be held to account. Trouble is, the big banks have so corrupted the system so as to not be held to account, ever, well then you have the mess we have now. As for dealing with debt, I like Larry Winget's philosophy... to paraphrase, unless blood is involved, don't use debt to purchase things.

I don't believe that "banks" or financial institutions lose much of anything really, they just pass those "bad debt/uncollectable" amounts/accounts onto others via increased service fees, lobbying for and taking government bailouts or financial wizardry on their corporate taxes.  

Whereas if you or I tried that, well, it isn't so pretty.

 

[user 13081]

So just an update. I did decide to file for bankruptcy and am going through the process now. I think it is the best move to make and hopefully all goes well with it. Thanks for all the replies and advice.

Paul

 

[ArtW]

well, luck to you

 

[bullfrog]

Be sure you get everything done to make it go smoothly and best wishes with your new start.

 

[frater secessus]

Good luck brother. May the fresh start be a new path for you.

 

[wagoneer]

If'n' I kent effort it I wak away

 

[IanC]

Credit card companies know (and they are experts at collecting data) that sooner or later most people will pay a bill late, and when that happens the 0% will suddenly become 29%. Financial institutions are based on people screwing up. The biggest profit for banks is overdraft charges. Long term care insurance is all based on the hope that people will, at some point not pay their premium (and lose the money they've put in so far) If everyone who bought term life or long term care collected, it wouldn't be feasible. Same with your 0% card.

I haven't had a cc in about 13 years now. Paying cash beats all.

 

[slynne]

Good Luck!

 

[steamjam1]

A good 75% of the junk mail I get in my PO box is credit card offers now. I tear them all up, or use them as camp fire kindling.

 

[sreesekelley]

debt comes in three forms:
secured, eg; mortgage, car loan
default on the debt and the house is foreclosed or the car repossessed

unsecured:
credit cards, medical bills

other:
student loan debt, tax debt, child supoort

bankruptcy is just another term that defines the procedures and laws that govern a breach of contract. You breach the contract and you are in default. The creditor then sues you in civil court and obtains a judgement. Then they will attempt to enforce the judgement.

The laws are complex and vary from state to state. Federal law allows certain assets up to a certain dollar amount to be shielded from the bankruptcy. Some states don't use the federal laws and have their own set of rules.

There are also income limitations that determine what form of bankruptcy you can file. Too much money and Chapter 13 might be your only option, which is basically a court supervised repayment plan that pays back a portion of your unsecured debt.

Chapter 7 will discharge all debt except in most cases a house and car can be exempt because of the dollar amount that is exempt.

Most federal income and pensions are exempt from garnishment so even with a valid lien that can't be touched. social security, civil service pensions VA disability are included in this list. They are considered 'judgement proof'.

a certain dollar amount of clothing, tools, household goods etc are also exempt as is a certain amount of equity in your home and auto.

For secured debt you could sign a reaffirmation agreement and continue on with the debt and keep the asset after the bankruptcy is finalized.

unsecured debt is discharged and wiped out.

Some people feel tremendous stigma and with rare occasions choose bankruptcy as a last resort.

Stigma is subjective and stem from how you were raised or religion. 'neither a borrower nor lender be' sound like a familiar phrase?

Simply put it is a simple breach of contract. Happens all the time in business. Unforseen issues prevent performance on the contract, unexpected medical bills render a living budget moot, credit card companies change interest rates and altered the terms of your original contract. Most people don't get head over heels into debt over night, they slide into it slowly like quicksand and at some point the changes to the original contract make compliance impossible.

The process gives you a fresh start and there are requirements for credit counseling before and budget counseling afterwards.

Like it or abhor it, it is a part of our capitalistic economy and all costs have been factored in and collected regardless if a million people file or none do. The banks and credit card companies still make money.

My personal opinion is that there are actuaries who know who will end up filing and have the number crunching down to an art form. if you can not pay off your debt and save a rainy day fund in five years a fresh start may be your best option. pay no attention to the stigma, it is invented to coerce you to play the game for as long as you are able.

Anyone's first step should be to do an initial consultation with an atty . You will fill out a dozen pages of paperwork that detail your current situation and they will advise you of your best option. The best option may not be bankruptcy. it may be letters written to debt holders bargain for relief from high interest rates, principal reduction or advice to do nothing because you are 'judgement proof'

After a bankruptcy discharge you can obtain a secured credit card immedately. it is secured by money in an account and if you don't pay they take the money. You can typically buy a house after two years. You could buy an automobile anytime thru either in house financing or a sub prime loan which is expensive but it's doable.

A first step would be to educate yourself. an Atty will help you look at where you are and where you could be in six months or three to five years.