The Case for Walking Away

Having just filed for Bankruptcy, after 4 years of trying to survive, making the min payments and stealing from Paul to pay Peter, I must say that I feel much better. I don't by any means feel fantastic, but I can catch a few ZZZs at night. My husband lost his job after a terrible job related injury which still keeps him out of work. I just didn't make the money he did. We had 2 cars that were paid for and sold one, we had our house that was worth less then we owed and I had somehow kept us afloat using our credit cards. We sold our TVs, furniture and other household items. We still have a huge amount of student loans that we are paying back, but my husband can no longer do the job he went to school for. I am truly embarrassed and dissapointed in myself that I couldn't pay these debts. To those of you who don't like the sound of bankruptcy, wait until something tramatic happens in your life and you need this so you can breathe again. Don't judge others when you haven't walked in their shoes. And please understand that the majority of us "loosers" and "deadbeats" are the people who live next door or work next to you.

To the poster mentioning inflated gas prices - my thought on this is that G-Dubs and his motley crew are solely responsible for this. Purposely ignoring anything to do with alternative feuls and TWICE going to war in an oil rich country that is still reaping heaps of free money from us to rebuild (with the help of Haliburton). The thinking here is that they needed to "Get what they can while they are still in office" before they are finally booted out. Well...they did...and now that they are on the way out, gas is back to reality pricing. They got it while they could at our expense.

As for corrupt mortgage companies, my spouse worked for Ameriquest briefly and got out because they kept asking her to forge documents, fake employment histories and sign other people's names. They were the first one's goine bust. I worked for a mortgage office too but against all advice, I saw more and more go with adjustable rates that were only 1/2% higher rate...but stupid people didn't think about the future....only cheap cheap cheap now...take chance later. Crapping out now, they ask for a bailout...and many I saw pay off high bills only came back a year later to refi again with those same bills hoping for even more breaks. Sheesh....why should my home value go down when I got a 5.25% fixed when I put 25% down?

Granted, not everybody falls into the idiot category, but nearly 80% of those I strongly advised NOT to take an ARM loan did just that anyway. I saw one doctor pay off $200K bills with 2 refinances totalling 2.5Million...to only come back the next year with a LOWER fico because (again, against my advice) he let his wife run up bills and then failed to pay them on time too. He's out of both homes now so there's some great property on Lake George, NY for cheap due to his incompetency. I'm glad he's not MY doc.

Come on people do you really think everything has been tried, are to many harnessed and spiritually broken or what? Get up and fight! I say we give a huge tax break now to all people that can show they are broke and up side down in a mortgage just the opposite as it currently is for a few years to even the keel. It might not be the whole answer but nothing ever is and certainly is better than bankruptcy for the economy. Get it right.

I have practiced Bankruptcy law for more than 25 years and it is essentially arrogant nonsense to label bankruptcy filers as "deadbeats". The American Bankruptcy Institute (non-profit research organization) points out that some 52% of all personal bankruptcies are caused by medical catastrophes and another huge percentage is directly related to non-fault loss of a job. In all my years if practice I've encountered only one abuser of the system for certain and one other who probably was. All the rest were people who would have preferred to take poison rather than bankruptcy. They were honest and hardworking people who fell on hard times.

I've known couples that purposely abused the system. Ran up bills, lived like royalty and then filed bankruptcy as a financial plan...BUT they were the exception. As Quinn notes, usually cutting spending and repaying your debt is the best advice. It's also the plan I've lived by up to this point. But being one who got into a small townhouse (purposely being conservative on my purchase to avoid this situation), I'm now behind the 8 ball for what I suspect is a common scenario.
1) Got into an ARM (first time homebuyer), hoping that after a few years when the ARM kicked in, that I'd have 10-15K in increased value towards moving into a small ranch. As it worked out, the values dropped and can't sell the place and meanwhile the mortgage jumped by $300 a month (actually $625, counting taxes but I had anticipated that jump)
2) Because of the economy, many have lost jobs or in my case, have lost a good percentage of income due to reduced income or hours..
3) When my income dropped (first time in 18 years at this job) and my mortgage jumped, along with taxes, I went from a healthy situation to a situation I haven't been in years. Less income than bills..After a few months, I saw where it was going..I cut spending to the bone, but still was well short of paying my bills. I resorted to paying with credit cards and dipping into my 401 K to keep my house. Now, the 401 K is decimated, the credit card companies jacked the rates so I'll never be able to pay them off and I can't refinance because my credit has taken a hit for the first time. I'm not a victim here, I take responsibility for not having a more solid financial plan. It's not the governments fault, it's not one political party or the other (although the bailout of the banks is wrong solution). I made my bed but I DO believe the bankruptcy laws are there for a reason.

To those that have the income and have avoided this scenario, congratulations. I hope for your continued success.
But for those that have similar tales as mine, bankruptcy is beginning to look like the only way back to even.
I still haven't filed, but it's looking more probable as a last resort.

Also, I've learned a lot from this as far as living within my means. I've never been a spendthrift, but I've changed my attitude towards spending and saving. I WON'T allow myself to be this financially vulnerable again..

In response to haliavarto. I am proud of you to be able to make a comback after your troubles of the past. It takes a focused person to make a change in thier character and reprioritse their needs. What you need to know is that what you did is not the norn and most people seek bankruptcy protection for the wrong reasons. I noticed in your second posting that you mentioned the word "Resposible" 4 times so obviously you know what it takes to avoid bankruptcy in most cases. Just for the record I cannot walk on water and in fact breathe the same air as you do.
Good work and prosperity to you in the future.

According to the American Bankruptcy Institute, some 52
% of alll personal bankruptcies are due to medical expenses and these people CLEARLY are not "deadbeats". Another large percentage have lost jobs through no faullt of their own. You can expect many more of these in the present economy. I have practiced bankruptcy law for some 26 years and in all that time I've encountered only one person who was abusing the system and one more that I had a lot of doubts about. All of the hundreds of others were people who were not at fault in any real manner.

Let's not forget that there is a substantial amount of blame that should be placed on the lenders. While I have always leaved well within my means and saved I know not everyone has the willpower or ability to realize their own limitations for themselves. There is a general lack of sound financial education in our junior high and high schools. Too many people believe that if the banks tell them that they can afford something...they can. And the lenders keep lending. It is a horrible cycle that ends with shattered lives. I encourage everyone to live modestly and be proud of not what you drive or where you live. Be proud of who you are and your family. It is time for America to start over. For those of us who have done the right thing, we have to take this opportunity to educate those who haven't, not chastize them.

yes this will be the norn now, live beyond your means as long as you can, take what you can from others and do it all over again, it will get easier every time

If those who claim bankruptcy changed their lives, why don't you take some of that new responsibility you learned, as well as your new cars and homes you bought, and give something back to society. We paid for your first mistakes, now you pay us back and give to a worthy charity. Once you do this, you have the right to claim BK is a good path.

yes this will be the norn now, live beyond your means as long as you can, take what you can from others and do it all over again, it will get easier every time

Filing bankruptcy has made all the difference in the world! I filed back early in 2006 and have been very intelligent in my subsequent financial decisions, and have since been able to buy a car and a home. Diving back into debt? Not exactly - I've managed to turn a six-year car note into one that will be paid off only two and a half years after acquiring it. Credit cards are paid in a responsible manner and usually I carry no balance at all from month to month. Having a second chance at financial responsibility has made my life much better that I do not have to worry about providing for my new family while still paying for the mistakes I made in my early 20s. If it's shirking my responsibility, then I'll proudly shirk all day long! It gives me a chance to live responsibly and maybe hope to attain the super moral superiority lkinco5 has, maybe I can walk on the water of his/her responsibility one day too!

I filed bankruptcy in 2006 and now have very good credit, have bought two cars, and own my own home! Learning how to manage my money responsibly after getting a second chance has made all the difference in the world. It is a huge load off my shoulders knowing that I do not have to try to support my family with that mess eating away at every minute of my working day .To the self-righteous commenter about personal responsibility and what's wrong with our country ad infinitum, you need to realize that not everyone is as morally superior as you, and a second chance will give them the opportunity to at least strive to the high levels you have attained and one day we too might even be able to walk on the water of your "personal responsibility."

In regard to the posting by ljinc05, I am very happy for you that both your priorities and finances are in order. Unfortunately, not all of us who may need to seek bankruptcy are living beyond our means or seeking to "get out of our responsibiities." I was married to a lawyer who now makes at least 3 times what I make as a social worker, and who has not assumed any responsibility for the debts we accrued together. Fortunately we are now divorced, but not before I was left with a mountain of debt and 25% of the income I had been living on. I am now remarried and have a small child. Both my husband and I work opposite schedules of each other so that we do not have to pay for child care. We rent a very modest apartment, share a station wagon and do not have cable. Still, the debt that has plagued me since my divorce has neither disappeared nor has my financial situation improved, and making ends meet to keep the very basics in utilities turned on and food in the house has become increasingly difficult. So while I can respect your views on those who choose to spend their money on instant gratification rather than saving, I hope that you do not get lonely up there on your pedastal. Congratulations on your success, and I hope you never have to compromise your lofty principles to feed your children.

This is by far the most stupid financial plan I have heard during the present financial crisis. Living high on the hog on credit cards does not work and affects every single one of us as recently seen with the banking bailouts paid for by tax dollars. Does this lady live un the US or does she have any clue at all what is going on ? Her advise is nothing short of dangerous and mis-informed - frankly I am stunned by it - with professional advice like this for millions to read and consider its no wonder at all we are in very deep trouble.

Truth is bitter !!

To those of you who have had catastophic unforseen health problems, you or your husband or children, I think should have a legitimate government sponsored bailout. You did get in a predicament through no fault of your own if you had reasonable health insurance before the bad health problem started. (remember to figure health insurance in your budget expenses BEFORE this happens to you) You should be able to qualify for Medicaid or something similiar. My mother was able to keep her home and automobile after such an event, although her savings were cleaned out down to 2K by the state. Of course the state will get the home when mom dies, not my family, but so goes life.

Has anyone that is reading this post ever filed bankruptcy on past IRS debt? If so, which chapter and were there any particular stipulations?

I am amazed to see bankruptcy encouraged in this article; although I feel this is straight talk. My husband and I recently filed a Chapter 7, as a last resort. We have our own story as everyone does, tried every last thing we could think of before making the appointment, like whipped puppies. We never gave up until I lost my job and the companies would not work with us on lowering our payments. Our mortgage company would reduce our interest and principle only because they were told to by the government, but not lower our payments, not really helping us stay in our home. Our auto loan (though AIG) wouldn't return our calls to work with us. Meanwhile, AIG is partying it up with their bailout money from the government, money we have to pay back in taxes. So, yes, as awful as it looks on our credit report and in our conscience, we filed bankruptcy. Jobs that were once $12 to $14 per hour are now $8 to $9 per hour. We are trying to save our home / our retirement. We had awesome credit 2 years ago. We bought into a subprime loan thinking we could refinance in 2 years. We were lied to by the banks. Now the banks are being bailed out. And we have to pay it back in taxes. Our system is broke. I didn't go to school for 10+ years to get off welfare, just to be smacked down by thiefs who can justify their wrongs on paper, or conveniently sell to someone else and run with the money. We are mad as hell. TI guess we could think of this as our way of fighting back. We are probably going to end up on the street anyway after playing by the rules, when the banks don't play by the rules, because we can't hold out as long as they can. We're broke. Just for the record. The inflated gas prices is what sucked any income we had saved into extinction. I should've minored in economics.