Please don't shoot me for posting this, but I was just wondering as I searched the internet for other boards like ours, do people sometimes file bankruptcy out of fear of the unknown. I know there are instances where filing for bankruptcy seems to be the only option, but some posts I've been reading on various message boards, seem to indicate that a lot of people filed, because they were scared they would not be able to pay off their debts. Granted 10 of thousands of dollars in unsecured debt is pretty daunting, but wouldn't it be better to work on widdling the debt down, before you take a step that could really damage your credit if you don't have to? Thoughts????
I agree with you Newcomer....It makes much more sense to just pay debts down... Besides, the Bankruptcy really wrecks your creditworthyness for up to 10 years on your Credit reports....if there is a way for anyone to pay down their Debts and not file Bankruptcy, I plead with them to do themselves a favor, and find a way to pay and stay current instead of filing BK. Looking back, I could have probably found a way to restructure my debt so that it could have been managed without being a crushing load. The main reason I did it was to protect my assets, like my car, which I could not have done without, since it got repossesed and I had to file to get it back from the bank. All I am saying is...If the wolves are not at the door, just rebudget so that you can manage your debt to a point where the debt load is not crushing you. Hope this helps S.
It's hard to second-guess someone's situation just from reading a message board post. There are just too many variables that can't be told that easily. I kind of assume they spoke with a lawyer who advised them appropriately. Who are we to say - especially after the fact? Many times the person has already damaged their credit so badly that bk is preferable to the years of punishment that follow without it. With the current system, it is easier to come back from bk than most of the alternatives. If they haven't already damaged their credit, often they know it is imminent. Also, many times, once a person reaches a certain debt to limit ratio, the CCC's raise their interest rate, because they consider them a higher risk. Then the person is buried beneath the load and has no alternative but CCCS or default. I think an alternative approach would have a better outcome, but then I don't own a credit card company.
I agree with the previous posters, if there is any alternative to bk, use it. That being said, sometimes it is the only way out. Crushing medical bills, divorce, unexpected job loss,etc can create a situation where that's the only reasonable course of action. However, bk has evolved quite a lot since I started my career in 1974. At that time, bk was like committing financial sucide. You literally had nothing left but a few personal items. That has changed an awful lot. Starting in the early 80's, IRA's and Sep. plans came into being and later, 401K's. All the money in a Sep or 401K is exempt from creditor seizure. An IRA {not Roth} will vary by state but most give favorable to quite liberal treatment of IRA's in BK. Then, states begin to raise the amount of equity in a home that a petioner can keep in Bk. Again, it's that pesky state thing but 5 states allow you to keep all the equity and others are pretty generous. And, most states allow you to keep the cash value of whole life insurance as well as protect annuities. I won't even get into real estate cramdowns in the 80's and the ability to strip away second mortgages from homes and place them in unsecured status. Bottom line, unless you hit a real bad patch of luck, chances are you didn't come out of bk flat broke. I know lawyers who say 6 figure IRA's are rountine. If the petioner is late 40's or holder and has a good job with a large company, chances are they are along way from broke. The trick is, they managed to keep assets in an exempt postion and keep liabilities in an unsecured position. So, sometimes it's not fear that plays a part in bk it's actually an understanding of how the system works . It's using knowledge to your advantage. All in all, an interesting topic.
One of the Quirks is the system over charges those who can least afford it which causes forced BK. The Credit Ind. Sets people up for a fall,kicks them whwn thet are down then trashes them financially:!
