A client asked me this the other day. It didn't occur to me until the client kept repeating the question that bankruptcy is something both scary and almost unbelieavable. Why would anyone EVER let someone borrow money if there is a possibility that the debt may NEVER be paid back under the law? The answer is simple--Capitalism is all about risk. The government encourages banks to lend money and allow them to make a profit by betting on their customer's future. It also encourages people to take risk, big risks, to better our society. And when one fails, the government provides a mean to hit the 'reset' button and start over. Indeed, we almost lost GM if it wasn't for this policy.
When it seems like life is impossible to go on and debt is keeping life from progressing, bankruptcy may be the relief valve that one needs. Bankruptcy law allows a judge to order a discharge of any debt. A discharge is an injunction, or restraining order, against creditors. It is an order to cease ALL collection action against the debtor and it last forever. Some debts are not dischargeable, such as child support, certain tax debt, and government fines, but a majority of all debts are indeed dischargeable. And just like that, debts simply just go away.
wow explaining it in this such a way, debts can easily just be completely gone? how's that possible? Just choosing the path of bankruptcy lets you "reset" yourself? So a person runs away from the debt collectors chasing after them to pay. they are never found so after a certain time, can the debts just disappear? I just can't believe that it could just magically disappear. o.OReplyDelete
Happy Christmas Eve Minh!
It sounds great for people that are seriously in debt but it just seems so easy for people to run towards bankruptcy to not pay their debts. Understandably, bankruptcy has a negative impact on your credit history but it seems even the rich are taking advantage of this. How often can people declare bankruptcy in their lifetime?ReplyDelete
Everything we do in life is a risk...starting a business, getting married, buying a house...but people need to think things thoroughly before taking the next step. Responsibility and consequences go hand in hand.
Enjoy your holiday season with your friends and loved ones! Stay warm and happy!
I'm glad that this option does exist but I hope people don't all immediately want to think this will be the easy way out of their problems. I agree with what the posters above have to say in that life itself is a risk and there are risks we take every day.ReplyDelete
I totally agree with you. Sometimes someone should say that some people can not pay them money and they will not be able to Afrotan debt. Of course, if seeing someone at risk of debt that is not facing, not lend you money, how banks would work?. Capitalism is complicated.ReplyDelete
I hope not to have to see me ever in a bankruptcy sutuacion.
Merry Christmas! What passes these days surrounded by people you want.
debt will be gone with the reset button( bankruptcy) ?? then wont the guarantor be suffer?ReplyDelete
well one of my uncle become X guarantor...is it if X did not pay n my uncle have to help X pay?
Debt is extremely scary. I know some people who are struggling every day because of their debts and it just seems to never get better. They're scared of declaring bankruptcy though. I think it's just the uncertainties that are keeping them away from doing so. sighhh debt is scary.ReplyDelete
Oi! I'm not a law person but you seem to explain it so clearly that even a noob like me understands!!ReplyDelete
Oh Minh.. You should enjoy your holiday and take a break from this for a couple of days! Thanks for the post though :D Taking risks is a BIG part of making big money...I'm sure everybody knows that. Especially those who go to casinos. haha A lot of rich entrepreneurs take risks and many of them come out with great success! Take Steph, for example. She dropped out of law school to focus on her jewelry business and look at her now :D Successful ^_^ReplyDelete
Anyway, hope you're having a great holiday..merry Christmas and happy new year! To both you & Steph and both of your families. : )
xx The Little Dust Princess
I feel that bankruptcy is the last resort one takes when he/she can no longer making the required monthly payments and to stop creditors from going after and to stop banks from foreclosure. Most people are scared to file bankruptcy because it has a very big and negative impact on their credit. It will take them years to build their credit up again. And without credit, they'll have to depend solely on their hard earned cash.ReplyDelete
Big banks are not going to suffer just because a few people settled their debts or had filed bankruptcy. The people who are currently paying are the ones suffered with high APR that was raised on their accounts because of the economy. Sometimes i feel like i'm being punished for someone else's mistake.
As always, thank you for your post, Minh! Merry Christmas Eve!!!
I've never thought of a discharge as a restraining order against the debt collectors... but then again, I don't know much about bankruptcy anyway, haha!ReplyDelete
Bankruptcy is a scary thing, I think we can all agree on that.. but I think it's mostly because we can't imagine what is it all about - when put into context (like the risks and the huge possibility to go into debt, if things go wrong), it's not all that bad, and it seems like a good option when things are really, truly bad - and should be only considered as a last resort, because I'm sure it'll affect the person filing it to some degree (through credit and their eligibility for taking out loans in the future, for example).
Thank you for such informative and well-written posts - I'm learning so much!
PS. Sorry about any spelling or wording mistakes; it's quite late and I'm a bit sleepy, but I wanted to comment right away.
I don't know much about bankruptcy, but I really enjoy reading your blog. It's very informative! From reading your blog I'm sure a lot of us can learn about different laws in life. I always say if you can't afford it than don't buy it!...haha Declaring bankruptcy is pretty scary from what I hear. I know people who struggle from debt, it very scary.ReplyDelete
Anyways Thanks for the post. Your explanation is really easy to understand!
Feliz Navidad to you and your love ones!
It just seems that there is never an up side to any of this.ReplyDelete
I hope I never get into this kinda trouble
Wow, if it was that easy then, this world would be debt free! hehehe, but reality is its not that easy. -__- But thats nice to know about how it could all go away. I never knew that nor have I been really focus on bankruptcy since there are quite a lot of commercial on it.ReplyDelete
Merry Christmas! :)
lol.. You've read my mind, Minh!! When I went to apply for a car loan, they were offering me so much money.. and I was like "how am I gonna pay this?!?!" I don't even make much money... It's crazy to think that one can be "debt free" after filing for bankruptcy.. Wouldn't that only hurt in the long run though? Meaning a person can never ever get credit? Or does bankruptcy on record go away after a certain amount of time?ReplyDelete
Anyways, with all that aside, Merry Christmas to you!
Don't we all just wish sometimes there was a reset button? This is great to have in place... but I think I would feel awful about just not paying my debt, ya know? Unless something awful happened and there was no way to pay for it!! Great post as always!!ReplyDelete
If only we all had a change at discharge life would be a bit easier but it doesnt work that way. Hope I never have to file for bankruptcy.ReplyDelete
having that way makes it looks easy..so there must have some conditions behind it...like.. the person in debt must feel in some ways "drained out" in a stressing and depressing way (suicidal ideas) before obtaining the green card, right? (like in a desperate manner) *i hope i'm making sense >.>*ReplyDelete
O.O so.... what happens if you go bankrupt a second time? are you like, super screwed and unexcused?ReplyDelete
So is the banks lending money kind of like how insurance companies work? I know insurance companies give quotes based on how big a risk you are. They count on the fact that most of the time they don't have to pay out so they're still profiting overall. Because I guess while some people can't pay back bank loans, others can and the banks are still profiting? But while bankruptcy as a way of starting clean can be a relief, what are the effects? I'm assuming your credit score goes wayy down...ReplyDelete
Look at the recession -- the banks contributed largely to the U.S.'s struggle and strife. I was just actually having a conversation about this with my boyfriend just the other day!!ReplyDelete
What happens when someone files for bankrupcy? As in, obviously they have to prove that they do not have the means to pay their debt, however can they simply spend, spend, spend and then get a decent job and continue the process all over? Granted, I know after bankrupcy the person does not have any credit, however look at the reality shows with the housewives from like Bev. Hills, etc. Almost all of them have filed for bankrupcy, however they are still continuing to live this lush and luxurious lifestyle! How!?
Although in your previous post you mentioned that the top two leading causes to bankruptcy are not simply reckless spending, however what about the people who do recklessly spend, do not pay back their debt and then file bankruptcy?
Also, say someone buys cars and just material items, how does that money get payed back to the company. Such as if I bought a $100,000 car from Mercedes among other things, however I then wasn't able to pay in full, I filed for bankruptcy and then the debt was relieved. Would Mercedes be out that money??
WOW--Such an interesting topic!!
Happy Holidays :)
Sometimes I wish I could file but i'm just sick of paying silly bills i made yeah horrible right... To be free of dept would be amazing but then again I wouldn't be able to use those credit cards anymore and sometimes I need them :-/ hmmm interesting topicReplyDelete
Merry Christmas, Minh!!! :)ReplyDelete
It seems so crazy that this could happen. That one day, you could be in massive debt, life is terrible, and the next, it just...goes away? I don't know that I understand tis, but I'd like to. I know you've done posts on bankruptcy, but do you think you could do one that is a little more in debt? because the first one really interested me in the whole process. :) Merry Christmas!! :)ReplyDelete
Reset button, but with it comes your horrible credit.ReplyDelete
Wish there were also other reset buttons for mistakes I've made while growing up. Lol, but is besides the point. Nevertheless, Merry Christmas!
Merry Christmas ALG!ReplyDelete
I had something written earlier but it never posted. Just wanted to say that this recession is just horrible. Hope everyone enjoys their holidays regardless if they're in debt or not. Merry Christmas!ReplyDelete
File in as Bankcruptcy is last option, eventho' it will discharge of any depts. But one's file as bankcruptcy, I think he/she will be hard to gain any bussiness trust from anyone. I'm not a risk taker, so I won't let someone borrow money without any guarantee. I've seen my friends or relative who are a risk taker, but many of them can't get their money back :(ReplyDelete
I'm not a risk taker...And I hope I never have to file in as Bancruptcy :/ReplyDelete
No one knows what is going to happen and that's okay, 'cause life wouldn't be life without unexpected situations, you have to deal with what's coming up to you... :)
Merry Christmas! :)
It's Christmas day, so merry Christmas~ReplyDelete
to all of you~
hah, I love the holidays.
Debt is so different for everyone and I agree with you that the gov'ts press the "reset" button when the risk turns into fail. The gov't has been doing that a lot lately huh? I heard from one of my friends that people actually file for bankruptcy even though they didn't really have health problems - they simply maxed out their credit cards, and filed for bankruptcy because they already owned many homes outside of the US, had enough money with their friends and family... they wait 10 yrs or so when they get back to having no credit instead of bad. It's intense... =/ Can this be true or actually happen? I'm sure you know more than I :pReplyDelete