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.