The Case for Walking Away

For those of you who have made wise financial decisions and/or never experienced a financial hardship requiring you to consider bankruptcy, I am happy for you!! You have obviously never been in a situation where you need to make a choice between saving your family's home vs. paying huge credit card and medical bills. Unfortunately, that is the position I find myself in. Between credit cards and medical bills, my wife and I owe over $80,000!! With my wife unable to work for quite some time due to medical conditions the debts have been mounting fast. We have found ourselves using credit (unavoidably) to pay for utilities, groceries, etc in order to keep up our mortgage payments. Should we keep paying the credit card companies or pay our mortgage to stay in our house? What would you do, if you had to choose?? Yes, we agreed to the credit card companies terms when we signed up for the cards, but then they can come along and change the terms (to their advantage, of course) whenever they feel like it!! Miss a payment and they will surely raise your interest rate (although you don't have to miss a payment, they can raise them whenever they want to, for any reason)...then the other card companies raise your rates...then your balances grow much faster...then they start reducing your credit limits, which causes you to go over the limits...then they tack on outrageous overlimit fees and late charges. It very quickly gets out of hand!!
Long story, but the bottom line is that we have to choose between saving our home vs. keeping up the credit card payments. In my view, my family having a home is more important than continuing to feed money to the credit card companies (believe me, at 29.99% interest, they have made plenty off of us already). For this reason, we are filing Chapter 7 bankruptcy to get a fresh start, save our home and move on with our lives. The way I see it, that is why the bankruptcy laws exist and it is my right as an American to take advantage of this in our desperate situation. If we were not at the point where we could lose our home, I would suck it up and try to pay off our debts. In our case, that is just not possible.
To those of you who are not in this situation, I say you should thank your lucky stars (or your God or whatever you worship) that it has not happened to you. Chances are a friend, neighbor or someone in your family is in a financial crisis after experiencing medical problems, losing a job or some other unfortunate circumstance.
Don't be so quick to judge, you could be next!!

to ritikoe1... why in God's name do you expect the average 'man on the street' to support you??? If you end up "homeless and penniless" (note spelling), it is due to your own situation and choices. Go ahead and use the BK laws as they apply, but please don't hold the rest of us responsible for your debt.... we are already absorbing your financial failure through taxes, higher interest and fees, etc. Don't pick my pocket too! Remember, it's those "greedy bastards of Wall Street" (note spelling), that allowed you easy access to credit and financing over your head, so that you could ride the wave until this crash... Put the bottle down and pick your self up off the ground!

This was a welcoming article. We are totally boke! I never thought I'd udder those words so easily, but after three years of constant struggle I think we have come to the point of now return! As credit limits increased, home taxes and everyday expenses kept rising, we have found all our incoming income goes straight out to creditors leaving us no choice but to put all gas and grocerys on another cc. We've kept our house payment s up, but can no longer afford our newly and fastly increaseing monthly payments to debitors. We really wanted to save or credit, but can we? Our creidt is maxed out as is, is it the best thing to start over, file and straighten up over the next 7 years? We have over 100K in credit card debt, we don't live lavishly or treat our kids to every desire, we had funerals to pay for, helped family members in need (completly BAD DEPT) and have tried out way to many "Get Rich" business oppurtunities! Anyone out there with the wisdom we need????

Thanks Jane for the food for thought. I own my home and have 1 piece of rental property which is occupied. However...I lost my job 2 moths ago and have been living off of saviings which should last 4-5 more months. I have no other debt, but I'll consider bankruptcy as an option, just so I don't have to blow through my savings and be in a real bind later.

The pro/con arguments are very compelling, but both are ultimately unsatisfying. Those that argue for bankruptcy generally cite abuse by others (banks, CEOs, credit card companies, etc???) as a justification for their unfortunate personal situations; ???the big guys get away with everything, so why do I have to play by the rules and get stiffed?????? On the other hand, the majority of the blogs scorning those that filed for bankruptcy lack empathy; ???I don???t care about your situation??? I can do it, why can???t you????
Two wrongs do not make a right ??? it is a hollow justification to use the crimes others commit to justify personal decisions. However, there is a compelling argument that large lenders who acted irresponsibly have placed the market as a whole in jeopardy and should likewise be held to account. I believe the decision to file for bankruptcy should be a final resort, but I also believe that large lenders should be liable for the their part in this crisis; the overall unwillingness to negotiate with those in need makes them an industry that lacks empathy.
Ultimately there were selfish decisions and errors made by both consumers and lenders; somewhere there is a middle ground that can be found if everyone admits responsibility (as opposed to blame shifting and denials) and uses that as a basis for settling debt. As a nation, we are only as good as our actions ??? we pay our debts, but we help those in need, too.

OK, go pay your bills...BUT, before you you do.....click this link and see what these CRIMINALS, ARE SPENDING YOUR $700 BILLION BAIL OUT MONEY ON.

Then tell me I shoudl fell REMORSE, for filing BK??? STICK IT TO THEM EVERYONE, IT'S THE ONLY THING THEY UNDERSTAND!!!

http://articles.moneycentral.msn.com/Investing/CompanyFocus/the-10-worst-bailout-boondoggles-slides.aspx

I work for a large midwest law firm that represents banks in foreclosures and I deal specifically with people losing their homes and who file for chapter 7 bankruptcy. Each day I see 35 or more files, and yes I do agree that some people do not deserve to have their debt whipped out.

If you live in the midwest, and make less than $60,000 you shouldn't have a $300,000 home and a BMW, its no wonder you are filing. Thanks to you I have a job. Also thanks to the people that have 4 mortgages, interest rates of 16.980% or bought your house for thousands of dollars more than it was ever worth. I look at you and shake my head everyday, and being a recent college grad, I also get to thank you for helping to ruin the financial future for my generation.

And yes, who was that person in the bank that thought it would be a good idea to give someone a $250,000 fourth mortgage on a house that was worth only $230,000? There are plenty of people to blame here, but it gets exhausting keeping them straight.

On the other hand, these types of people are less than half of what I see. Bad things happen to good people, and sometimes there is nothing you can do to save your finances. Many that I see involve divorce or medical bills or both. They are why there is Chapter 7, for those people who deserve a second chance and who can have a life when their isn't much left to life for or a future at all. These are people who have $50,000 mortgages, paid them for 10 years and now they are in trouble, because of something beyond their control, what else can they do?

I work for a large midwest law firm that represents banks in foreclosures and deal only with Chapter 7 bankruptcy. Everyday I see 30 or more people who are losing their home and have filed for bankruptcy, and yes some of them do deserve it.

If you are a laborer and your wife is a waitress, chances are you don't make enough in the midwest to own a $300,000 home and a BMW and that is a big reason why I have a job, so thanks. There are also people who have 4 mortgages and bought their house for hundreds of thousands more than it was ever worth or have an interest rate at 16.98% or only paid one month of their mortgage but those are actually fairly rare.

However, I see an equal if not greater number of people who use filing for bankruptcy what it is there for. Sometimes bad things happen to good people, and there is nothing they can do about it but start over. Most are divorced or have medical bills and for them bankruptcy is a good idea and may be their only hope.

So from my perspective, the article is a good idea for good people, and I myself have advised some of those I know to do the same thing or to just walk away from their home. But like any system it can, and has been, corrupted by those who take advantage, but it is in place for a good reason.

Personally, I am a recent college grad with no debt but limited student loans (possible by not going to a private school, which is completely not necessary) and will be buying a house within the year with at least 10% down. I shop at goodwill where I get name brand clothing and rarely buy things period. It's a shame that Americans feel that spending money is a part of life but, to each his own. Thanks to a lot of them, I have a secure job in an otherwise shaky job market.

"Normally I'd say suck it up, cut spending and repay your debt. "

This is an admission that things in America are not NORMAL anymore? And the advice is not to be NORMAL and pay your bills responsibly, but to steal instead?
It seems to me that America in general needs to establish some credit again in a hurry. How will encouraging people to be deadbeats help that along? The author advises people to "hold on to assets while you still have them." But if those assets were borrowed to begin with, we are really condoning theft, aren't we? WIth most Americans having negative net worth, this advice amounts to a rallying cry to grab what you can, while you can.

I am not sure who SAI CHAI is or where that person is from, but people in other countries are watching this closely. Can average American people be trusted to follow basic morality and just simply keep their word? It appears less and less likely.

Rather than BK what about a consumer rebellion, known as a class action suit against the consumer credit providers and agencies, along with their lobbyist who have pursuaded Congress to let usurious interest rates anywhere from 20-30% and even higher 1000% and more on overdraft protection, ruin the credit of mislead and mistreated borrowers. Sounds like a sub prime mortgage mess, doesn't it with the lenders being protected and the Asses Backed Securities being sheilded from view through FED purchases of corrupted securities.

Ms. Warren, all that needs be done is for the Feds to treat consumer debt just like the subprime and Alt A mortgages, and they are doing just that by allowing financial institutions to pledge Asset backed securities full of student, auto and credit card debt for new loans. However that collateral is impaired and should be discounted not only to the FI's but to the borrower. The economy has shrunk by close to 30% all debt created and taken should be treated the same, to adjust the balance between income and debt. Unfortunately the loan lobby is paid way to much to let that happen, so you are probably right in the advice, however if the politician want to scores some public points, trashing the greed of the consumer credit lenders and the consumer credit agencies and flawed to the their benefit FICO models should be investigated and trashed. Maybe a "Class action Suit" may be in the wings.