Saturday, April 23, 2005

Bk Follow-Up



Thanks to everyone for taking the time to comment on the Newsweek article blog entry from a few days earlier. Thanks especially to Teri for providing the "views from real life," as these present a side which I cannot.

My point here is not to suggest that fresh-start, Chapter 7 bankruptcies are uncalled for. They are a necessity in our system, and should be the first option in certain (limited) situations.

I am tired of scanning bk filings and seeing $300 and $400 cell-phone bills listed as monthly expenses ... multiple $300 past-due Barbie book club dues listed in debts ... $3-10k "personal loans for Christas gifts" listed in debts ... and $120 cable TV bills in monthly expenses ... all examples of items listed by Chapter 7 filers, either as debts listed to be dismissed or as monthly expenses listed for the purpose of showing why the petitioners cannot reasonably repay any portion of their debts. I see items like these again and again. The fact that people continually run out of sense before they run out of money tells me that our system is in dire need of an overhaul. If we start with the consumer side of the bankruptcy system, then so be it. We all have at least some control over our finances. And we elected the people who are signing this into law.

I don't wish to see the lenders walk away scot-free in all this. They want to loan money to horrible credit risks and charge exorbitant rates, and yet also make sure they don't lose that same money when those same horrible credit risks finally collapse under the weight of their liabilities. It's a ridiculous assertion. But it's what you get when you have the politicians in the pockets of the bankers. The kids with the connections are the ones who get to put their hands in the candy jar again and again and again.

I might add that the number of people out there who could withstand 13 months of unemployment, and NOT end up in bankruptcy, is probaby pretty miniscule. Most of us can only hope we never have to try.

Out of curiosity, I went through my monthly expenses (via Excel spending plan) this evening. I asked the question, "Could I make it if my income were suddenly cut in half?"

The answer is yes. It would be difficult, but realistic and doable. For now.

My savings rate would plummet, obviously. And there would be room for absolutely NO extras in the monthly budget. Categorized spending for items like "groceries" and "household items" would need some trimming. But I could keep up with necessary expenses, at least, without having to burn through my savings. I could accomplish this ONLY because I am nearly debt-free (other than mortgage), and because I have kept my monthly obligations to a minimum.

Honestly, I was only somewhat glad to discover this. My mind naturally looks beyond this "good news," and wonders "Where might problems arise?"

Well, were I to lose my income entirely, my current cash savings wouldn't cover much more than 3 months' base expenses. I'd be relying entirely too much on good fortune — no auto meltdowns, for instance, and no home-repair emergencies. Those things happen, and the credit-card debt probably comes back. And then there'd be the unexpected kid expenses . . ..

It's an interesting exercise in financial self-evaluation, to be sure. The numbers tell me for certain that I need more savings, but I knew that going in.

No one ever said it was going to be easy.

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— Posted by Michael @ 12:13 AM








3 Comments:
 

I for one agree that people filing for bankruptcy should NOT be able to get away so easily.

If you buy something with someone else's money, you have an obligation to pay them back. The creditors look like the bad guys when they come looking for their money. The real cheat is the person who never paid their debts.

There are some special cases which should be able to file for bankruptcy (People with huge, unexpected medial expenses etc.)...but not the over-spender.

-Neville

 

There's another comment I'd like to add. You may not have ever had the government figure your income but it goes something like this: you have x number of bills to pay each month. Therefore you have enough income to cover those bills. This is how they figure your income for food stamps. It doesn't matter at all that you may not be able to ACTUALLY pay those bills. And, from what I understand, this is how the bankruptcy bill figures your income to decide how much you can pay back.

I have a friend who was out of work the same time as me, but who didn't go through bankruptcy. They wrote her debts off. She had to sell her house and still isn't working. And she had the same issue. She couldn't pay her bills because she didn't have a job.

I know there are people out there who file bankruptcy, charge to the max and file again. I don't have a problem with those people paying something back. There needs to be protection for those who simply can't pay due to the unexpected. No matter how prudent you are, we all have finite resources.

 

let me shoot off my mouth one more time ;) When Montgomery Ward filed for bankruptcy, I saw a news program from Chicago about it. They took money from people for appliances right up to the day they filed. They didn't have to give a penny of that back either. Those folks were just SOL. I'd like to see some work on reforming bankruptcy for businesses as well. They should not be able to take money for goods they have no intention of delivering.

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


100%

Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]

100%

Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]