Greetings Hawkeye:
Do you borrow your screen name from my favorite character in M*A*S*H?
A great nickname and an excellent question because there are many
reasons not to file for bankruptcy. Besides damaging a credit record,
what bankruptcy really damages is a person's future financial
credibility.
An article from USA Today by Sandra Block
(http://www.usatoday.com/money/perfi/columnist/block/2001-05-08-block.htm)
reveals this consequences of filing: "You'll pay a lot more for
credit. There are creditors who are willing to lend you money after
you've filed for bankruptcy, but you'll pay dearly, says Nancy
Deevers, education director of the Consumer Credit Counseling Service
of Northeastern Ohio."
I can personally attest to this because during a recent large
purchase, I was able to negotiate a very low interest rate because my
credit history was unblemished. Few or no blemishes on a credit
record translate trustworthiness to a lending institution and give you
negotiating power for future purchases on a home or vehicle.
The article then cites that the amount of future credit potential is
severly tarnished. "Those juicy offers for cards with a $100,000
credit limit aren't extended to people who have filed for bankruptcy,"
wrote Block. "Early on, you may have to settle for a secured credit
card, which is a card backed by money you deposit in a savings
account."
Also, in the small print of those "secured card" advertisements, you
may glimpse other offers "You may qualify for our special unsecured
Card!" and in that fine print will be "special interest rates" of 18%
to 22% - *very* excessive if you ever carry the balance forward from
month to month.
Also, the avenues of some mega stores' "zero% interest for 18 months"
or the like, will be closed to you. Those offers are very sweet if
you want to purchase big ticket home items like appliances, computers,
home theater, etc.
A friend of mine recently purchased a new computer with an in-store
card. She applied for the card on site at Best Buy and then charged
the computer at no interest for 24 months. She will pay it off long
before it's due although Best Buy only asks for 2% of the purchase
price as the required monthly payment.
My friend is paying $80 a month to pay it off well before the
expiration - upon expiration of her free interest time, if she has any
balance due (even $1), then all the interest *and* a penalty interest
would be owed by her. The figure she would have to pay *then* would
be over $250, just in interest and comes to approx. 27% of the
purchase price of the computer. With her method, she is using Best
Buy's money, not her own, to buy her computer now.
Brock also speaks of the bankruptcy tarnishing your credit record as I
mentioned earlier but she also adds the problems one could encounter
from potential employers. "Some employers routinely review job
applicants' credit records, which is legal as long as they disclose it
to you, says Catherine Williams, president of Consumer Credit
Counseling Services of Greater Chicago. A bankruptcy filing could
influence whether or not you get a job, she says."
Then, there are the personal emotions to consider. Filing for
bankruptcy does not mean personal failure in everything but many
people interpret it that way. Also, some people file for bankruptcy
as an "easy way out" of a financial bind while some may have to file
because of a loved one's medical expenses or other legitimate reason.
There are genuine filings and lazy filings. Either can do damage to a
person's self worth either justly or unjustly.
*************
One man's approach to bankruptcy and recovering from it with his honor
intact is evidenced by the personal experience of national talk show
host, Dave Ramsey. Ramsey was a real estate speculator who made and
lost millions before he was 30 years old.
"At the age of 26, having amassed a four million dollar real estate
portfolio, his fortunes dramatically changed and he lost everything in
a financial free fall that ended in bankruptcy," wrote Jason Zasky in
Failure magazine's interview with Ramsey.
The interview begins with Ramsey stating "The knowledge level that you
need for wealth building is somewhere around seventh-grade math. It's
not hard to add and subtract and to understand that if you spend more
than you make you're going to be broke all your life and deeply in
debt. It's about controlling the character in the mirror. He or she is
the problem."
The entire interview is a very interesting read and is located at
http://www.failuremag.com/arch_business_daveramsey.html
I believe Ramsey also paid back most or all the money he owed his
creditors and then he began rebuilding his personal wealth by changing
the way he viewed money. I've read his book, Financial Peace, and he
offers stellar advice in its pages. A natural businessman, he changed
his perceptions and changed his life. He shares his experience on his
Financial Peace radio show and at seminars of the same name. Now he
loathes owing money. "Pay cash" is a personal mantra of Ramsey's.
**************
There are alternatives to bankruptcy. Michael T Killian at About.com
(http://credit.about.com/library/weekly/aa062802a.htm - beware of a
pop-up) offers a few good articles on the subject:
Before Bankruptcy...What You Should Know
http://credit.about.com/library/weekly/aa120701a.htm
Bankruptcy Basics
http://credit.about.com/library/weekly/aa090701a.htm
Changes to the Bankruptcy Law
http://credit.about.com/library/weekly/aa040601a.htm
In the main article at
http://credit.about.com/library/weekly/aa062802a.htm he gives these
reasons to avoid bankruptcy:
"Previous Bankruptcy - Most people know you cannot file bankruptcy
again within a reasonable time of a previous filing. The number of
years is 6. But did you know the six years is from the date of filing
and not the date of discharge?
"Co-Debtors - If your debt is discharged, creditors will go after
anyone you co-signed a loan with. So if you and your spouse jointly
own something, you may want to co-enter bankruptcy with that spouse.
"You Can Repay - If a Chapter 7 judge decides you could repay your
debts over the next 3-5 years, the court could rule not to discharge
it or to have you file under Chapter 13.
"Fraud - A judge could dismiss a bankruptcy if it can be proven you
very recently ran up debt knowing you would declare bankruptcy (i.e. a
vacation charged to your card in the last 60 days), or you unloaded
assets to a friend, or you have concealed assets or liabilities."
***************
Should you require clarification of any infomation or links I have
provided, please request it and I will be happy to respond.
SEARCH STRATEGY:
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dave ramsey web site
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