There's no shame in BK

[onwards]

freefall, I hope you're not advocating declaring BK "even if you're basically doing OK", just to dump debt you no longer feel like paying. It should always be your last resort, after you've sold everything you can, tried to find another job, and tried to work with your creditors.

BK is not without consequences, and as has been pointed out, EVERYBODY pays. There's no shame in BK, but it's not something I'd be bragging about, either. It is NOT "good news" to go bankrupt. The gloating tone of your post is, frankly, a little strange. Maybe I'm reading it wrong.

On this point, I agree with OP, and am baffled by your post. But you might be right regarding what "doing OK" means. For me it means the following.

If you are in a position where you are balance-sheet insolvent, not yet cashflow insolvent, but headed that way - that is, your liabilities far exceed your assets (negative net worth) but you can still make payments for a while - and you can qualify for a chapter 7, do it now. Don't wait. No reason to dig yourself a deeper hole. That is the advice you will get from any bankruptcy expert out there.

EDIT to above: this assumes that by filing you will indeed stop bleeding and your cashflow situation will therefore change from headed to cashflow insolvency to "cashflow healthy". If you can't see that happening, then by all means keeps piling on debt and try to find that job, THEN file. Again, this is basic BK advice.

As to the notion of "selling everything" - that's ludicrous. Why would anyone want to do that? bankruptcy laws specifically protect certain assets by definition so they DON'T get sold in a bankruptcy. Why on earth would you advise someone to go ever harder on themselves than the law requires? a BK filing is a rather traumatic event in and of itself - I know, I went through it last year - and that in itself serves as a rather strong deterrent against doing it. But to encourage people to make it even worse than it actually is... I really don't understand why you would say that.

[onwards]

There is no shame in bankruptcy.

Yes, there is. Culturally and societally, and it is ingrained pretty deeply in most of us. Interestingly, once you DO go through a bankruptcy and realize the actual truth of it rather than the myth, the shame does mostly disappear, which is why one-time filers are 30% more likely to file again.

I do agree with you that there SHOULDN'T be shame attached to BK. But to say that it isn't there is, at least IMO, misguided.

If you can file--you should.

I'd like to propose a revision to that. IMO, if you qualify to file, you should seriously consider it as a legitimate strategies. It doesn't always make sense; for example, if your debt is relatively low, it would be better to try and work it out and keep the BK option to when you have a lot of debt to wipe out. I hate it when I hear of people filing Ch7 with less $10K of debt - that's like using your one shot with the elephant gun to kill a rat!

The truth is, there's no shame in bankruptcy. Not today.

It is certainly true that right now, in our current economic environment, a BK has lost much of its emotional teeth. I think it's temporary, so from that perspective, I do agree that filing now will feel a lot less shameful than it was in, say, 2006. There is a certain level of comfort in numbers, and many, many people are doing it.

The only shame I have, if you can call it that, is that I can't tell people the good news.

Why? I've told many people and have even gotten at least two to file themselves that I know of, with several others considering it. I gave them a rundown of good and bad without the BS. I've told all my clients, business partners, and friends, because I felt that they needed to know. Honestly, I have yet to run across anyone who did not easily grasp the decision to file or had a negative response. Heck, one of my clients, a CIO in a large public firm, actually offered on his own volition to give me more hours to help stabilize cashflow - and that would come from a tight budget on his end. That was highly appreciated.

I personally feel no shame about it - it was a business decision for me, and I took advantage of a time period where my cashflow situation deteriorated significantly enough to qualify me for Ch7, which allowed me to improve my personal balance sheet by over $1M. In retrospect I should have probably gotten over my emotions (that shame again) earlier and done it a couple months earlier, saving about $10K, but what the heck, it still worked out well enough.

I have no problem discussing it. Why do you?

I know some people who are so broke they are hounded daily by collectors, but they could never scrape together the 1600 to file through a lawyer. The shame--the only shame is that they can't file.

I agree here, although there are cheaper options, including Pro Se using a paralegal to help with the paperwork. If you're in truly bad straights, BK IS AVAILABLE TO YOU, period.

In my case since it was more of a choice I spent quite a bit on an excellent lawyer, but I got what I paid for and my rather complex case (which included intellectual property in the form of a patent I own and a couple other weirdnesses) flew through seamlessly. But I actually had something to protect :-)

And as for the morality or ethics of it:

That's the rub, isn't it? the shame comes from being told it's shameful. Most of us feel it, but in the end, personal BK IS the biggest safety net the US offers its citizens. Other countries have other structures, including social programs, but we don't. Rather, we have a streamlines personal BK process. And it works.

My main advice is this: think of BK as another option to handling your finances. If you qualify for it, then consider it. And it IS your safety net. So treat it as such.

[MSbklawyer]

I'm probably as pro-debtor as they come from a philosophical standpoint. Credit card companies and payday lenders in particular really do try to put people into a debt trap. What other conclusion could you come to when they dangle 5-figure lines of credit in front of people who are barely getting their rent and utilities paid? Or charge 1500 % interest on a $250, two week loan? If shame is to be found anywhere, it ought to be there. Student loans are a whole other sermon.

That being said, I agree that there is nothing to be ashamed of in bankruptcy if the debtor is genuinely washed up financially or in a debt trap that he can never hope to dig out of without impoverishing himself and his family; "Honest but unfortunate debtors" to use the language of the caselaw. I see it as sort of on par with going on public assistance: It's there for people who genuinely need it, and there's no shame in having tried but failed. But bankruptcy is not something one wants to aspire to either. Quite the contrary.

By the way, the notion that people were filing bankruptcy just to shed debt that could have been repaid without serious hardship is what got us the 2005 BAPCPA amendments.

[ohiogal]

On this point, I agree with OP, and am baffled by your post. But you might be right regarding what "doing OK" means. For me it means the following.

I'm sorry if I was unclear. I think our definitions of "doing OK" differ. My interpretation of "doing OK" is: you have enough money to pay your debts, you just don't have much left over. If your liabilities exceed your assets, you're not doing OK. You're doing really bad. Maybe the OP should have been more clear about what "doing OK" means.

As to the notion of "selling everything" - that's ludicrous. Why would anyone want to do that?

I didn't say "selling everything." I said, "selling everything YOU CAN." I wanted to do that - and I DID do that - because I was raised with the notion that you take responsibility for your actions, and when you make a promise you keep it. When I realized I was in trouble the first thing I did was sell off a bunch of stuff I didn't need, so I could repay my debts. For me it was a matter of honor, and I'm not sorry I did it. When I reached a point where I'd sold everything I could, talked to the CC companies, and tried to find another job, and I still couldn't make ends meet, that's when I knew I had to file. There were simply no other options available.

But to encourage people to make it even worse than it actually is... I really don't understand why you would say that.

I wasn't saying that. If taking the other options makes things worse, then of course don't do it. But I was able to stay afloat longer with the money I made selling things that I didn't need and probably shouldn't have bought in the first place. I felt a lot better about filing because I knew I'd done everything I could to avoid it - it really was a last-resort option.

And I don't miss the stuff I sold, not one bit. YMMV.

[Brazzy]

Credit card companies and payday lenders in particular really do try to put people into a debt trap.

The thing is that tactics is no secret. Everyone knows it but they still go for it.

When it comes to this stuff I'm as middle of the road as it gets. I personally feel that the lenders are jackasses for giving the credit, but the people cannot be blameless in using it. Despite being very middle of the road I do come off as a pro creditor nut job whenever I'm on this site.

[helpmeout]

The thing is that tactics is no secret. Everyone knows it but they still go for it.

When it comes to this stuff I'm as middle of the road as it gets. I personally feel that the lenders are jackasses for giving the credit, but the people cannot be blameless in using it. Despite being very middle of the road I do come off as a pro creditor nut job whenever I'm on this site.

That is because, no matter how much you say you are middle of the road, you are very much pro-creditor. It comes across very clearly in your posts.

[MSbklawyer]

The thing is that tactics is no secret. Everyone knows it but they still go for it.

You might be surprised at the level of ignorance in the world. A $25,000 credit limit gives some people an illusion of wealth. More than you might think. I'm not suggesting that people who live beyond their means on credit cards are blameless. But who, as between John Q. Citizen making $40K per year barely making ends meet, and Chase Manhattan, is the more financially sophisticated party? Who, between them, should better know that if John gets into $10K of debt bearing interest at 21%, that he has no realistic hope whatsoever of digging out? At least not while keeping his mortgage current and feeding his kids. That's why I think the bulk of the blame, but certainly not all, goes to the lender.

[freefall]

But to encourage people to make it even worse than it actually is... I really don't understand why you would say that.

Call me paranoid, but I think I can venture a guess: Not everyone in a bankruptcy forum is on the filing side. Some may be on the creditor side. Of course, I could be wrong about that.

So, I'll venture a second guess; it's the result of an ethical fallacy: If something is good for one person in one instance, it must be good for all people in all instances. "Good" is inflexible. So, there is no difference between defaulting on an impersonal corporation and defaulting on your grandmother who lent you her social security check.

Of course, I don't agree with that.

[freefall]

I tend to agree with MSBKLawyer--actually, I do completely. The debt we filed on was very old. And we were good Americans during the years we were racking it up. We bought and bought and saved nothing, and helped inflate the bubble in every way we could. We lived high on the hog, so to speak. One banker asked us when we came in for a loan how we could have so much debt given the yearly income we had. We just shrugged our shoulders--we both turned twenty in the eighties. What can we say?

Except for this: From Regan through George Bush II we were good Americans. We spent for our country. Once we were even out of debt, but we racked it back up, if you include the finally tally, I suppose we BK'd over a hundred grand. 80K in CC alone. And we racked that up while spending 70K a year between two people. We deserve an American Medal of some sort.

It's only now that inflating the bubble is seen as bad. It reminds me of going TDY to Saudi in the AF back in the mid 80's. Saddam Hussein was our ally then. We gave him AWACS info. Iraq was good. Spending in the 90's and 2000 aughts was good. The bubble was there to save us all. Every home owner was going to be a millionaire. Every 401K would inflate indefinitely. Heck, we were going to end Social Security so we could all invest in the stock market.

I did my part as an American and my conscience was clear. Why should we have had to suffer when I lost my job?

Now I have a job that pays just as much as it did then, and we have no debt. We are spending again. Nice resteraunts, art supplies, books from Barnes and Noble, buying DVDs instead of renting them. Heck, we're going to spend 3000 bucks at Home Depot over the next month building a fence in our yard. We can do all that and save and never go a penny in debt because we aren't making any debt payments. And we never screwed one "person" out of anything we ever owed them. If you own stock in B of A or Discover, we didn't even take a penny from you.

You see: I am a good American. I am a moral American.

[Brazzy]

That is because, no matter how much you say you are middle of the road, you are very much pro-creditor. It comes across very clearly in your posts.

No, Im only pro creditor here where people a lot of people are extreme in pointing the finger at the banks. If a person with a middle of the road political view went to a democratic forum they would be viewed as a republican nut job. I agree with MSBK lawyer in that the blame is shared. As to the percent I disagree as I'm more 50/50. The catch is that there is no one here who is pro creditor. When I was 17 I was given a credit card with a $1000 limit. Pretty stupid on the creditors part. Guess what? I knew what they were up to. This isnt 1928 where people dont know. There are endless places to find information, to find the truth. Everyone knows someone who got in over their head. I realized that nothing in life is free, and if someone is trying to give something away there is a catch. Now silly me I used that credit card. However, I dont look down on the creditors, I look down on myself. I knew the consequences of my actions and I ignored it. Now a person with a true pro-creditor view would not be on a forum giving information to people to help them with short sales, repossession, student loans, etc. A true pro creditor person would not be here at all because they believe that its every man for them self. Same rules for everyone, F em let em suffer. I dont see it that way. People are taken advantage of all too commonly, and thats not fair. On a near constant basis people call my office with the same questions you guys post here and that is why I like this forum. Here is a group of people who are looking to figure things out and get an understanding on their own. To me, personally that is awesome.

What I dont like is that there is no one here to give an opposing point of view. That leaves me to play the devil's advocate. I understand policy and procedure for most major banks and i figure sharing it would give people a better understanding. The view on the forum is VERY extreme. People talk about creditors as if they were Gods waiting the opportunity to smite every person on earth every waking moment. That they are pure evil and do no good to society. That they devour children and feed on dreams and happiness of others (for exaggeration of course). I also have seen people compare themselves to slaves, victims of crime, and cancer patients (yeah that one caught me off guard too) in which I do not agree. There is no comparison as a person in any one of those situations had NO choice. That is a bit extreme. I understand that people can be naive, people can be irresponsible, people can just be dumb. Not everyone falls victim to the trap. However, I do acknowledge that it is a trap. People do still view credit as a source of income to live the way they want to live.

If a person files Bk its up to them as to whether or not they feel shame. Personally I know I would. Life is a struggle, but I figured that out a long time ago and I would have no one to blame but myself. In schools nowadays kids are taught about credit. To the extent necessary? Probably not, but the parents need to step up as well. Ether way its not up for me to decide. Understand that I am not here to defend banks. At the same time I am not going to let people bash them for the wrong reasons. If you want to bash them its fine, there is plenty of stuff to bash them for. However, people here tend to make up reasons out of thin air and totally dismiss the fact there were decisions made somewhere in the past that everyone regrets. So far I am hoping that letting people have some understanding as to how the flip side of this coin works has helped. Either way, like it or not the economy is a shit hole and we are all in this together.

[backtoschool]

In my opinion, it is never good to feel shame. Shame is a pointless emotion that keeps one from moving on with life and effecting positive change.

I agree with MSBklawyer for the most part in regards to the banks being partially at fault for overlending to underqualified applicants. And I also agree from personal experience, that a large credit limit can create a false sense of security and wealth that can lead to overspending.

What I don't agree with, is that certain bankrupt people are somehow morally superior to others because they held onto their debt longer before filing, sold their used tennis shoes on ebay to try to pay off some of their debt, became bankrupt due to illness, had business debt instead of personal debt, etc. Bankruptcy is a great leveler. My insolvency is neither better nor worse than anybody else's. There is no moral hierarchy of insolvency.

[ohiogal]

Call me paranoid, but I think I can venture a guess: Not everyone in a bankruptcy forum is on the filing side. Some may be on the creditor side. Of course, I could be wrong about that.

If you're talking about me, freefall, you are wrong. Filed in March, 341 in May, expect to be discharged in July. Just wanted to clear that up.

And, as stated before, I didn't mean to encourage anybody to make things worse on themselves by selling stuff. It's just, that helped me out. And it's a great way to clear space in your basement!

ETA backtoschool, whose eyes are those in your avatar? They look familiar...

[onwards]

However, I dont look down on the creditors, I look down on myself. I knew the consequences of my actions and I ignored it.

Maybe I misunderstand you, but this sounds like the extreme opposite end of the "woe be me, I'm a victim" position you espouse against (and rightly so, by the way).

Thing is, the VAST MAJORITY of people who get into credit card trouble didn't go out with the intent to swindle banks. More plausibly, people get some credit, use it reasonably wisely, get some more, maybe make a "feel good" purchase and even pay it back, and over years it loads up without them really realizing it. They can handle it just fine because income is growing too. But then 2008 happens, and they are literally destroyed over night. What SHOULD they do?

Personally, I don't think they should slave themselves, and deprive themselves of every possible shred of enjoyment in life, just so they could "honor their debt". That debt was provided and accrued in good faith by BOTH sides. The disaster we have been going through was unexpected by BOTH sides. But its results are far more damaging to each little guy than they are to the big guys in the middle in the aggregate - more so since as a society we have decided to use the little guy's tax receipts to help the big guys survive and continue what is, in truth, a virtuous cycle (yes, lending is not a bad thing IMO and much of our elevated life style in the US is based on that).

That's where most cases are. I lost 65% of my income almost overnight; then the value of all my assets across the board plummeted - no asset class was protected, really, and I was too heavily into real estate (but who wasn't?). At some I hit the means threshold for restructuring my finances (which is what BK is) and did it. Can you really blame me for it? or, for that matter, the lender? we both entered our transaction in very different times and with very different expectations. That's the nature of the risk in lending after all - that expectations are not born out.

[onwards]

And, as stated before, I didn't mean to encourage anybody to make things worse on themselves by selling stuff. It's just, that helped me out. And it's a great way to clear space in your basement!

It does clear up the basement, but dear god, why not file and THEN sell this stuff and raise some cash for living expenses? unless it's worth lots of money most likely it is protected under BK statures. God knows it's hard enough to get credit these days with a GOOD history, let alone with a BK on you record.

[epiphany]

If a person files Bk its up to them as to whether or not they feel shame. Personally I know I would. Life is a struggle, but I figured that out a long time ago and I would have no one to blame but myself.

Shame is a worthless emotion and shame can easily turn into stress and give you a heart attack if held onto.

I was financially irresponsible for most of my life--I never learned how to handle money--this is bad-- I do blame myself for my bankruptcy. But I'm done feeling bad about it. It was what it was and it's over.

Shame may have some fleeting intrinsic "learning" value, but in the long run it is worthless and even detrimental. I refused to show up for my town stoning but I think I did feel a few pebbles whiz by.

ep