The Case for Walking Away

Thank you for this very good article. I encourage everyone here to read the comment below by bankruptcy attorney and trustee Charles Bierbach (charles.bierbach). It's very good advice from someone who has 'seen it all". I posted a short article on my blog about this article and linked to it (http://tinyurl.com/bk-newsweek).

Thanks so much for writing this article. I know we are proud of making it on our own. When so much happens at once it's easy to drown. I'm glad you opened the conversation. Thanks.

Thanks so much for writing this article. So many people are troubled right now and have no other option, drowning really, and have no choice. The tipping point can be so many unpredictable things that happen. Medical expenses, housing, food, etc.

I don't think it takes much for people to feel shame about this regardless. I think it's great to have this hard discussion.

Yes, we the citizens are paying the ultimate price. The President and Government seem to be bailing out all the big companies but what about the American people? Why not bail out the American people? Sign a stimulas package giving each household a set amount. This would be used to pay off their mortages, credit cards, pay other bills or to purchase homes or items. Right now, the American people are tighting their belts and spending and investing less, that isn't helping the economy either. Giving money to automakers and banks is not going to change how their spending or advertising habits. How about helping out the hard working people for a change.

Walk away? How 'bout just shrugging shoulders and waiting for someone to dare punish me for the mistakes and greed of those who we trusted to protect us? Are we going to be asked once again to "give it that old American try", to "pull ourselves up by our bootstraps and put America back to work"? Ho hum. Heard it all before, and here we are right back where we started. We are not "America" anymore; that underdog of courage and hard work that overcomes any of our "illnesses". We are a nation of self-absorbed, greedy, immoral slugs; both politically and societally.

As far as I know, I have done all the country has asked of me over my fifty some years. Now I am told that my future is in jeopardy. Not because of anything I have done, but because a mindset of hedonism has crept into the mainstream and has grabbed everything for themselves. I believe in nothing anymore, everything I hear seems to be a lie, and we faithful citizens are paying the the worst price. Why doesn't the government force the banks to charge zero interest rates on all credit cards? Why doesn't the government pay off our mortgages? Why doesn't the government demand all businesses not to lay off anyone and subsidize the salaries of all employees? Why do we throw more money at the institutions that have fumbled the ball so badly...believe me, we will never see any improvement because of it.

I'll just sit and wait, and wait, and wait....for my spirit can only accomodate that. America used to be so wonderful!

Who knows if we will file or not. We have worked hard to pay off everything but our mortgage and our credit cards(which are huge) We've used my husbands 401k -haven't been to a movie for 5 years -our vehickes are 15 years old etc etc etc. I'm tired.I need a pair of shoes for work.(Last pair was bought with cash from kmart 9-07) I don't care if citibank and chase don't get paid. They got a lifeline paid for by me. Its enough. Chapter 7 here we come.

Thinking of claiming bankruptcy? Passing the headache on to the lender is what caused our current economic crisis. I am a landlord of a house and the previous tennant still owes several months back rent and damages. They may claim bankruptcy and I will be holding the bill to pay the mortgage and repairs. I know that they have lived better than my family for the past year and after claiming bankruptcty, will continue to do so. For all of those mom and pop businesses who will not get paid from deptors (who knowingly over-extended themselves), do not pay your Newsweek bill and see how long it will take Jane Bryant Quinn not to get paid. I'm sure she would not be accepting of the consequences. Debtors - do the right thing, pay your bills.

My husband and I filed Ch 7 in Jul 08 and were forgiven in Oct 08. Hard times indeed. When we were both unemployed and the LTD insurer denied my case while my husband was having to go back to school and start again for a career he had 15 years' experience for, we had to use retirement in order to not go homeless, and we have not been able to afford a new retirement fund since. My husband is apprenticing now in the trades. He graduated school but needs more work hours to be a journeyman and his boss can't find work and is scared too, so my husband is on unemployment and I am on SSDI. It was the downturn in 2008 economy that led to my husband having to collect unemployment (12 weeks in 2008, and 2 weeks in 2009 so far) and that put us over the edge for being able to pay our regular credit card payments. Nothing frivilous on them - medical, auto repair and maintenance for our one car that is 14 years old. I'm 50 and he's 47.

We were current in payments until July and now I have to go to the 3 bureaus to report the bankruptcy, even though the lawyers already did it, because even though they and all the creditors were advised of the bankruptcy, our credit file shows us as delinquent and there have been many inquiries to our credit report by the credit cards we filed on so they could be sure to lower our score as maximally as they could. Even being current in payments, they raised our interest rates because we owed more than 50 percent of the cards' limits - Hey, let's punish those in need.

Frankly, we're lucky to have a roof over our heads and food to eat. There needs to be a better way of getting the bankrtupcy on the credit reports and not letting the credit card companies eak their revenge in critical times on struggling humans.

We filed in Jul 08 and were forgiven in Oct 08. In 2003, both unemployed and out of cash, we used up all 401K and other retirement just to stay alive and in our apartment; it was either that or go out on the streets. I'm on disability now and we still have enough medical expenses to keep us from being able to save much. I'll be 50 this year and my husband is 46. Right now he's on unemployment due to the economy. He's in the trades and his boss is scared, isn't even bidding jobs. My husband is on permanent medication. None of our credit card expenses were frivilous. We have no assets; we rent, don't own, our home and our car is 14 years old (and is part of the credit card debt for which we filed.) And the reality is, we are doing better than a lot of other people in the US.

cc

Thanks for this article. I've been unemployed for several months, and being the major breadwinner and health insurance provider, this has hurt our finances majorly. My husband and I paid our own way thorugh college. We've not lived lashishly, but looking back now, I wish I had saved more. If a job doesn't happen for me soon, we'll probably end up doing this. My question is this: more and more employers now check credit scores before hiring someone (just like drug tests and criminal background checks). With the large amount of people hurting right now (unemployed, bankrupt, being foreclosed upon), will employers start to have a more lenient stand on having a good credit score before making a hire? I'm a college-educated professional, but not in positions that manage/handle money directly. However, I know that credit is considered now by many corporations to sort of take a person's ethical pulse before hiring them in order to avoid risk. I can't imagine how bad it will hurt if I am turned down for a marketing job based on my current financial hardship.

I pretty much almost had a nervous breakdown last week after feeling the weight of the world and wallowing in self pity. I went to church this past Sunday for the first time in many years, just looking for a message of hope. I found it. The minister said in times like these, it is natural to go into survival mode and put yourself in front of all other people who are also struggling as much, or maybe more, than you are. God doesn't want us to turn on each other. This helped me realize that I was being mentally selfish, so this week, in addition to looking for jobs, I've also been volunteering. It's helped my mind tremendously to keep myself busy so that I don't end up feeling sorry for myself. It's also helped me feel like I'm using my God-given talents to help an organization that helps people in worse need than me.

In case there are others reading this that are in a dark place, I wanted to share that with you. Get out of your house. Take a walk. Volunteer. Do something to get your mind off of your situation. And keep the faith. There are better days ahead for us all.

I owned a business - several actually - for the past four years. Times were looking good in the mortgage and land development arenas, so we did what any successful person would have done. We hired 36 people, opened an office, bought land, trained our people to be the best commercial loan officers in the business, mortgaged our own homes to finance our business and fed the economy. We gave to charities and helped on Oprah's Big Give.

Four years later we have had to lay off all of our people and shut our doors. Lenders (we were a broker) were no longer closing deals and accepting loan submissions. We had one company write us a check for a large loan fee that represented several months of work, and then file Chapter 11 on us. We got Home Equity loans (my business partner and I) to make payroll as long as we could. We had two partners defraud us on two pieces of land. We developed 58 residential building lots which have sat for 18 months with not a single offer. We had four different buyers on a 165 unit piece of property who all fell thru because they couldn't get loans. We are carrying millions of dollars in business debt and hundreds of thousands in personal debt.

In any other economic situation people would have called us geniuses. We were living the American Capitalist Dream. So, all of you Holier-Than-Thou people who think that those of us who risked everything for something better; you have no right to speak! I WAS YOUR EMPLOYER! WITHOUT PEOPLE LIKE ME YOU WOULD SIT IN YOUR DOUBLE-WIDE AND FEED OFF OF THE WELFARE SYSTEM.

Karma has a way of coming back and biting you. If you never find yourself struggling with a decision like this then you are indeed blessed and lucky. Don't think for a minute that you have avoided tough times because you are somehow smarter than the rest of us. The only reason you may thrive is because of people like me who dare to dream and who risk it all for the hope of a better life. I have NEVER seen a movie made nor a book written about a person who decided that mediocrity was the pathway to heaven.

Thank you Ms. Quinn for your article. And thank most of you who understand that it is a blessing that you are not one of the unfortunate ones who are facing total financial ruin and that it could happen to anyone under different circumstances. Passing Judgement is a dangerous business. Karma may be listening....

I owned a business - several actually - for the past four years. Times were looking good in the mortgage and land development arenas, so we did what any successful person would have done. We hired 36 people, opened an office, bought land, trained our people to be the best commercial loan officers in the business, mortgaged our own homes to finance our business and fed the economy. We gave to charities and helped on Oprah's Big Give.

Four years later we have had to lay off all of our people and shut our doors. Lenders (we were a broker) were no longer closing deals and accepting loan submissions. We had one company write us a check for a large loan fee and then file Chapter 11 on us. We got Home Equity loans (my business partner and I) to make payroll as long as we could. We had two partners defraud us on two pieces of land. We developed 58 residential building lots which have sat for 18 months with not a single offer. We had four different buyers on a 165 unit piece of property who all fell thru because they couldn't get loans. We are carrying millions of dollars in business debt and hundreds of thousands in personal debt.

In any other economic situation people would have called geniuses. We were living the American Capitalist Dream. So, all of you Holier-Than-Thou people who think that those of us who risked something for something better; you have no right to speak. I WAS YOUR EMPLOYER! WITHOUT PEOPLE LIKE ME YOU WOULD SIT IN YOUR DOUBLE-WIDE AND FEED OFF OF THE WELFARE SYSTEM.

Karma has a way of coming back and biting you. If you never find yourself struggling with a decision like this then you are indeed blessed and lucky. Don't think for a minute that you have avoided tough times because you are somehow smarter than the rest of us. The only reason you may thrive is because of people like me who dare to dream and who risk it all for the hope of a better life. I have NEVER seen a movie made about a person who decided that mediocrity was the path to heaven.

Thank you Ms. Quinn for your article.

I am a legal assistant in Texas and found your article so refreshing! We are able to help families and individuals just as you described obtain the relief that is available to them under the US Bankruptcy code. Everyday we see these people who believe they have reached the proverbial bottom, leave our office knowing they are on the road to a fresh start instead. Many times they wish they had come to see us earlier. Thank you for publishing an article that may help remove some of the stigma from a process that can help so many struggling American!

Dear Jane (et al);

II am not a Banker, Lawyer or Investment Advisor, but I have been known to think "outside the box." And this is what I think! Congress should direct the IRS to allow Americans with sufficient savings in their 401(k)s (or other exempt accounts) to withdraw tax free to pay-off the mortgage (not a penny more) of their primary (and only their primary) residence. If this is not a WIN-WIN-WIN, please tell me why, Jane!

The Lender gets their cash, averting Foreclosure, and now we don't have to give them our Billions "tax free.". The Homeowner becomes the actual "owner" of the real estate, which now becomes a source of Income (possibly taxable), if necessary, vis-a-vis a Reverse Mortgage or Line-of-Credit, depending on one's short/long term individual necessity. And, finally, the Government averts an Economic disaster by keeping millions of taxpayers in their happy little homes. Exempt savings is transformed into exempt Capital Gains...Voila! So...who loses? Wall Street? Maybe they deserve to lose! If the Gov wants to be "chintzy" about it, they could deduct the withdrawal from my future capital gain when the house is sold if need be.

Granted, this is not a "one size fits all" plan, but there are many Americans (yes, including me) out here whose "***" would be saved by such a plan. I've got enough cash on hand to keep the family clean, clothed, warm and fed, for the year it may take me to find another job, so why do I have to lose the roof over my head? If I could make my $1,600/month mortgage (15 year) go away, keep my family stabile and secure, and use my equity if necessary to weather the uncertainty of the present economy, why should I not be permitted to do so? To paraphrase G.DUBYA.B, "its my money."

You state "IRA' and 401(k)s are largely protected in bankruptcy, as is..." Does "largely" mean completely? Please explain. Also, does it ever make sense to withdraw from your 401(k) to pay off your mortgage? If you have enough cash saved to keep you warm, clean, clothed, and fed until you find another job, why not use savings to keep a roof over your head, rather than lose all your equity. Why risk your savings in this market, if you can keep your home and the stability it provides. In fact, I can think of no better way to reduce Foreclosures than for the Congress to direct the IRS to allow those Americans with enough 401(k) savings to withdraw sufficient funds (not a penny more) to pay off the mortgage on their "primary reidence" only. Furthermore, those in dire need of additional income (albeit taxable) to live and pay bills could pursue a "reverse mortgage." If this scenario isn't a WIN/WIN/WIN, please tell me whyJane!
P.S.:Love your hair.

I had re-bought my home after my divorce five years ago as an investment - and the bank did too. They gave me the loan knowing the value of the home exceeded the loan so there was very little risk if for some reason I could not pay my mortgage. The 'Plan' was to spend money updating, get it on the market, take the profit and move on. Everyone now knows that due to shady lending practices by the banking industry, my efforts were in vain. I feel cheated and I feel like a victim these days and I did the RIGHT things. I have never missed a mortgage payment since the divorce.

I cannot sustain this and feel that the banks aren't capable of dealing with what is happening. They do not have a solid business model that aimicably works for us all. My tax money was earmarked and partially distributed to the Banking Industry to then trickle down to help me. It has not. Banks have instead chosen to sit on the money and elevate lending criteria. Knee-jerk and over-the-top reaction is typically American but that doesn't make it right. Punishing the borrowers for the demise of the mightly financial empire is not only ridiculous but is being ACCEPTED by the current Administration. Trickle Down Econ will not work for the here and now - it takes a decade or more and no one has that kind of time.

It's simple: either the bank renegotiates my loan with a fair market adjustment for loss of value and/or interest rate drop or they can own another home. I literally have health problems associated with constant worry of losing all I have worked for just to keep a sinking ship afloat. No more. I know the current 'credit score bashing' I will endure if I foreclose but I am renting my own home RIGHT NOW as Jane says here so what is so bad about renting somewhere more affordable for a few more years? Congress is predicting another 14% home value drop over the next TWO YEARS. It will take another five or so to break even. Cling to a sinking ship for 7 years and HOPE I can sell later? No way. I need my tax money sent to me not the bank. A Mortgage Stamp (like a food stamp) that can only be used to pay down mortgage debt. Win-win. Easy. DO IT and do it NOW.

I just want to say it is possible to still feel sympathy for people in bad situations even if you yourself have "avoided" the same bad situation by hard work and discipline. My husband and I paid off THIRTY GRAND of debt we racked up, all on our own-- in the first two years of our marriage by getting second jobs and working *constantly*. I think I feel such empathy for these people considering bankruptcy because I *know* how hard it is. We gave up everything-- buying things, buying clothes, nights out, almost everything-- and it STILL took two years. I had to put my college career on hold. We didn't pick out our wedding photos for over two years--because the task was just that big, and we didn't have time for it while working to get out of debt. We had bought a house just a few months before our wedding, and we lived with the inside of our house having spackling exposed, no paint on the walls, and various half-finished projects for over two years. We literally looked at spackling for two years because we didn't have time to finish sanding it and paint the walls. I'm not trying to say look at us, we are soooo great, but looking back, we really did do quite a lot. We never went hungry, and not trying to exaggerate, but in those first few desperate months after the day we realized, "hey, we won't be able to pay all our bills this month unless we do something"--I skipped meals at work to save even five dollars. I know he did, too. If we forgot to pack a lunch or dinner, or a breakfast, as the case may be-- we went without buying even a burger from McDonalds. We were *that* poor--even five dollars mattered.

I'm just sad but not surprised to see so much animosity, so many people taking the hard line, "If I can work my way out of my own personal mess, why can't you?". From my own experience, I think I am able to feel for the less fortunate precisely *because* we DID work our way out of it. We know how hard it was. We'll always be marked by the experience, but we are trying to take the residual anxiety about money left by our time spent getting out of debt and turn it into a positive; always having savings and open credit, keeping our good habits, and things like that. We don't want to turn into misers, but after going through this experience, it's a hard balance to strike. I feel that being empathetic, and being encouraging, to those in the same situation now is the only thing we have a right to feel. We can't join those saying, "We never got into money trouble; this is a mess of your own making," because we DID get into trouble, and it was 100% of our own making. But we did get out of it--and not from a lottery or a loan or any government bailout, but through our own hard work. We're proud of ourselves, so proud--but we are humbled, too. Maybe the people judging others so harshly should take what they consider to be their trump card--the fact that they never got into a mess in the first place--and use it inst

I am attorney in Pennsylvania who represents debtors and creditors, and also a Chapter 7 Bankruptcy Trustee. My constant advice to my clients and to debtors who appear in front of me at Meetings of Creditors, is "think with your wallet." No asset is worth keeping if you cannot own it in a reasonable time. If you mortgage payments do not reduce principal in time for you to acquire real equity in your home, renting is cheaper and better. High payments on vehicles that depreciate faster than the debt is not a wise financial decision. Borrowing from exempt assets, like retirement accounts and exemptable equity in your home, is a step backward. Get good legal advice about bankruptcy before you cash in everything you own, or before you throw good money after bad.