October 9, 2003 11:46 PM   Subscribe

The Seven Year Itch (Not To Mention The Solution To All Your Financial Problems): Bankruptcy! Clarissa Dickson-Wright, the surviving (blonder; more corpulent; less Mediterranean; less adept at actually cooking) half of the wonderful BBC cooking show Two Fat Ladies, serves a salty and amusing column on bankruptcy. For those deep in debt - never mind how paltry the sums involved - it offers a legal, no-more-stiff-letters-and-phonecalls solution. And the consequences, credit-wise, seem only to last 7 years. As someone who's lunatically overspent ever since I was born, growing worse and more debt-ridden ever since, I'm sorely tempted. But the apparent immorality of it keeps holding me back. To what extent is it a viable alternative? Are we hoi polloi suckers for not using it more? I mean, rich people use it mercilessly all the time!
posted by MiguelCardoso (51 comments total)
For those who can't be bothered registering here's the main link, thanks to Google News. Hope it works.
posted by MiguelCardoso at 11:57 PM on October 9, 2003

"No series and no income in 2003; and half the year gone. I had no option but bankruptcy."

My heart bleeds love - did she look for another job / source of income? Seems like a cop-out to me - surely someone "known by 70 million people" would be able to find some source of money (like writing for the Telegraph). I don't find the column amusing - i find it (and her) annoying. Some of the other stuff is interesting though - I didn't know much about bankruptcy. Your debts are simply wiped out and you can't get a credit card for 7 years? Seems like there should be more of a catch.
posted by jontyjago at 12:24 AM on October 10, 2003

Lord, if You exist, please protect this world from "serial bankruptists".

And if You don't exist, please protect this world from serial bankruptists anyways.
posted by WolfDaddy at 12:32 AM on October 10, 2003

My brother and his wife filed bankruptcy a couple of years ago. I don't know all the details of how this affected them, but I do know they were able to buy a house this past year, apparently with little trouble (not sure what kind of rate they got on the mortgage, though). The way he describes it, it doesn't seem to have affected them much at all, though he could be minimizing things.

For them it was probably a good move -- I think they had piled up something like 40K in credit card debt and their monthly payments were staggering. The bad mark will be off their credit before they could have ever hoped to have gotten that paid off. (I believe Chapter 7 bankruptcy, where all your debts are wiped out, leaves a 10 year mark on your credit, not 7; the kind where you re-structure your debts and pay them off lasts 7 if you finally pay them off and 10 if you don't, IIRC.)

It is a little irksome, though, given the aggressive budgeting my partner and I have done to get ours paid off. To be fair, we owed a fraction of what my brother owed (we used our credit cards to get by when things got tough while we were in graduate school), but it feels good now that we've gotten them all but totally paid off on our own.

Now, if bankruptcy could be used to wipe out student loan debt, then it might tempt me, because I'll probably be paying those off until I die. I could be driving a sweet car with the money I send to the Dept. of Ed. every month, if such things interested me. (Not that I'd trade my education for a car...)
posted by boredomjockey at 12:44 AM on October 10, 2003

(Thinking that through some more, I don't think it would tempt me, actually, because my student loan debt is manageable, but you get my point. Funny that one could spend 40K on toys and be forgiven, while one who spends that amount on education is stuck with the debt.)
posted by boredomjockey at 12:58 AM on October 10, 2003

Perhaps this would work for the US economy?
Perhaps not.
posted by asok at 1:55 AM on October 10, 2003

I have reached the advanced and unexpected age of 38 without incurring any debt of any kind. More fiscally reckless friends tell me I'm a fool, and that spending Other People's Money is the way to get rich. That may be, but I do not intend to change now.
posted by stavrosthewonderchicken at 2:44 AM on October 10, 2003

One piece of advice I've heard from random financial advisors: instead of defaulting on loans/going bankrupt, contact your creditor and negotiate. They will accept deals (like 50 cents on the dollar, etc) if the alternative is nothing. And you can get them to mark your file as "paid in full" rather than defaulted or otherwise blemished, too, which keeps you in the good books and able to quickly rack up more debt sooner.

I've heard it enough times (and from enough locations) I'm starting to think there's something to it. So if you're contemplating the extreme of bankruptcy, give this a shot and tell me how it goes. Might be better.

But make sure you get it in writing that your file will be marked as paid in full. That's apparently the key.
posted by GhostintheMachine at 5:07 AM on October 10, 2003

Ahem. No offense, but for most people, this is a form of stealing. Essentially, what people are doing is spending too much on things they know they can't afford, then declaring bankruptcy so they don't have to pay off. And it's not just big businesses who get holding the bag. It's the little companies who can't afford the revenue loss that suffer. Also, remember this: Banks set their loan cost and approval rates based on the risks they face by giving you the money. So, more risk of clients declaring bankruptcy=making it harder for people to get a loan. So, if you wish banks would actually give poor people a break and loan 'em money for college or a house of their own, you're making that less likely when you take the easy way out and don't pay off what you owe.
posted by unreason at 6:23 AM on October 10, 2003

I agree with unreason - bankruptcy should be an absolute last resort. 40K in debt between a couple is manageable (remember that the average mortgage is much, much larger, even though it is at a lower rate of interest) and they should not have been allowed to declare bankruptcy.
posted by orange swan at 6:39 AM on October 10, 2003

"give this a shot and tell me how it goes"

I went this way. It worked out much better. I actually went through a credit counseling service, so they did all the negotiating with creditors. Having had the option to turn my back on my obligations, or pay my debts, I'm glad I chose the latter. It was hell for a couple years, but it was worth it..
posted by y6y6y6 at 6:44 AM on October 10, 2003

I'm currently watching my bills skyrocket, but bankruptcy is not an option.

Changing the way I operate is the only choice I have. If you declare bankruptcy it should be a pause to recuperate, to keep yourself on your feet, but all bills should be paid.
posted by Yossarian at 6:47 AM on October 10, 2003

The way I've always seen this (and maybe I'm nuts) is that even if you're able to get out of having to pay via legal means, on a philosophical/moral/social level, it still comes down to you owing someone money and not paying it, which isn't cool.

Yossarian, you hit the nail on the head. Declaring by legal means that you need some time to get back on your feet is perfectly legitimate -- but in principle you still owe the money.
posted by oissubke at 6:59 AM on October 10, 2003

My good friend did bankruptcy he was about 120k in credit card debt. There is an industry that caters to such people and he has had no trouble getting a mortgage and car loan. I believe for a lot of people this is a good option much better than not eating or being homeless or whatever. The creditors will make you feel guilty and like your stealing but they are the thieves IMO handing out credit cards like candy to freshman college students offering goods and services that are overly tempting. Countrys and corporations write off debt all the time individuals have the same rights.
posted by stbalbach at 7:18 AM on October 10, 2003

Some may argue about the morality of bankruptcy : I argue about the morality of limited liability companies.

Given that limited liability companies are considered (as far as I know in many legal systems) subject of Rights , when such a company files for bankruptcy the effects of bankruptcy do not affect associates or stockholders rights and capitals, unless a Court declares that they are involved in a fraudulent bankruptcy (but that's entirely another story)

In other words they can start another company anytime (unless there is some limitation in local legal systems that I don't know about) while I believe they should NOT be allowed to be associates or stockholders of another limited liability company for 7 years, unless they pay the company creditors in full (including interest) with their own money, even if they were NOT involved in a fraudulent bankruptcy.

Unless such a system already exists, it should be introduced in order to limit the "limited liabilty" which would otherwise be an incentive to reckless management.

On a tangent: if anybody spills some toxic waste in a stream he/she is likely to go to jail for a long (?) while ; if a limited liability companies does so , the manager/associate/employee that was involved in the spilling may go to jail, while the company pays reparations and MAY survive. I think the company should be liquidated because of reckless management.
posted by elpapacito at 7:21 AM on October 10, 2003

I agree that LLCs seem like a quick and easy sheild for debt. In my state you can start your own LLC within minutes, so long as you have a credit card and an internet connection. But when it comes to small business (or people who want to "incorporate themselves"), most lenders will not loan money to a fledgling corporation without either a personal guaranty or a significant pledge of collateral.

Also, society gains an entirely different benefit in easing the risks suffered by businesses than by wiping out a twenty four year old's credit card debt.
posted by eastlakestandard at 7:41 AM on October 10, 2003

People who get in trouble with their first credit cards do not make money for those banks. The fees and interest don't help when 35% of the people in that situation just decide not to pay the bill, ever.

The reason credit card companies struggle to be the first to extend you credit is because there's a strong first card loyalty, which means that the responsible people are very likely to stay with the company for decades to come (assuming the terms are reasonable). They want responsible users, but there's no easy way to get the responsible users without also getting the irresponsible users.

Personally I'm with stavros in that I have trouble believing that it's better for me to spend other people's money than my own. I do incur credit card debt, but I pay it monthly so it's hard to consider it an actual debt.
posted by mosch at 8:02 AM on October 10, 2003

For exactly how many of the millions of US citizens is $40k a manageable debt? For the millions of US workers earning the lovely minimum wage of $5.25, which totals less than $11k a year BEFORE unle Sam takes his rightful cut?

It's an unfortunate situation to be in and anyone who faced $15k or more in consumer debt likely doesn't know the hopelessness of the situation.

My partner was a combination of many of the above: 24 year old making $20k a year and caring for an aging non-working parent, after her lover left her with thousands of dollars in credit card debt. She chose bankruptcy knowing that it would take her nearly 20 years to pay off the debt in her situation. She regrets that it was necessary, but it was the best financial move for her at the time. It's completely changed the way she lives for the better, though, and she manages her finances beautifully now and is credit-debt free.
posted by answergrape at 8:08 AM on October 10, 2003

Re: negotiating, a year or so ago I racked up about $7000 in medical expenses for an operation that fell through a crack in my insurance coverage (first doc appointment was days before I switched from one policy to another, so it was a "pre-existing condition" for the second policy, etc, grrrr).

Anyway, I contacted all the doctors, physical therapists, etc and told them Hey, this is what happened, and I can only afford to pay X percent of your bill, which is enclosed. If I don't hear from you I'll assume the account paid in full.

Never heard from any of them again.

Oh, and credit cards are EVIL. They add up so quickly and quietly...
posted by gottabefunky at 8:09 AM on October 10, 2003

I just deleted a 925 word post about this. Here's the short version: yes, people who game this system need a good swift kick in the head. However, so do the credit card companies for making it so easy to rack up such high levels of unsecured debt.

Also, there are people who wind up in bankruptcy for reasons that do not involve deliberate financial insanity. The law exists to give people who get into trouble a way to get back on their feet, and they are in a whole different category from the serial bankruptcy types.
posted by Irontom at 8:40 AM on October 10, 2003

I can't wait for Miguel's Financial Planning Service (LLC):

Step 1: Buy what you can't afford on credit you won't repay
Step 2: Steal from restaurants
Step 3: Profit!
posted by NortonDC at 9:30 AM on October 10, 2003

I imagine that not getting paid back the money that is lent out is a sufficient kick in the head for these companies. It's all a calculated risk on their part when they lend the money out to different groups of consumers. I think the wisdom of this business model has not been fully meaded out. I only hope that taxpayers are not required to fund the bail out if such financial institutions fail.
posted by Gif at 9:50 AM on October 10, 2003

I'm a big fan of simple living. Or out-and-out tightwadness. The less stuff you have, the less stuff you have to deal with.

The only people I know personally who filed for bankruptcy were incredible spendthrifts who certainly brought it on themselves. However, because they had a young child, it was comforting to know that bankruptcy was an option. The arguments regarding the morality of the procedure are strong ones, but it's harder to be concerned about that when dependents are involved.
posted by JanetLand at 10:12 AM on October 10, 2003

I only hope that taxpayers are not required to fund the bail out if such financial institutions fail.

Gif, it's way too late for your plea--the US Gov spent much the '80s and early '90s bailing out S&Ls (*cough*Charles Keating*cough*) and a few banks, plus a few key corps (Chrysler, for instance), though many swift individuals (Bass Brothers, Richard Rainwater) made a fecking fortune off those bailouts. In the 1998 timeframe (I think), the Fed bailed out a huge hedge fund in CT (forget the name though there have been several good books about it) that allegedly would have taken down the global financial system if allowed to fail. The airlines, though I think less than they would have liked, got some big assistance post-9/11. All in all, if you are well-connected, Big Sammy will keep you going.
posted by billsaysthis at 11:06 AM on October 10, 2003

I am thinking of declaring bankruptcy, largely due to a $5000 hospital bill that my HMO declined to pay. They said I was covered when I entered the hospital, but six weeks later suddenly decided that I wasn't.

Six years ago when I was making good money, I systematically paid off quite a lot of credit card debt (and my student loan), including settling for half of the total I owed Discover. The jerks then sent THREE separate collection agencies after the other half, even though I had it in writing that the debt was settled. Bastards.

The amount I face now may seem small, but my finances are in truly terrible shape, to the point where I will only just barely be able to scrape by once I move out on my own (again). And god help me if something should happen to my car. In May 2004 I will have to start paying child support, as well. I think my kid deserves my money more than some faceless corporation that screwed me over.

Starting back at zero will make it so I will be able to go back to school to become a nurse. I'm trying to claw my way back to the middle class, working my ass off to better my situation.

We live in a world where people like Ken Lay are given a free pass, and I'm supposed to feel guilty because I want a few thousand dollars forgiven?
posted by beth at 11:23 AM on October 10, 2003

What I found interesting about this article is that Clarissa Dickson-Wright got sober in AA and (according to interviews I've read with her) follows a 12-Step programme, part of which involves making amends to people she has harmed.

To what extent does she include financial amends in that, I wonder?

And not all bankruptcy debts are owed to credit card companies. What about the car mechanic who's serviced your car, the guy who's fixed your roof, ... etc, etc. Bankruptcy has a knock-on effect on plenty of people other than big corporations.

"When I suggested to my students that they use this device for their student loans, the Government moved the goal posts on tuition fees and turned them into a graduate tax they can't get shot of."

Great example to students, eh? Teach them they can get something for nothing and other people will pay for it. I don't think so!

posted by essexjan at 12:24 PM on October 10, 2003

I mean, rich people use it mercilessly all the time!

I think it's definitely not a good idea to model your behavior after rich people.
posted by JanetLand at 1:30 PM on October 10, 2003

With apologies to Homer Simpson, I think my version is more accurate:

"Ah, money! The cause of, and solution to, all of life's problems."
posted by DevilsAdvocate at 1:37 PM on October 10, 2003

Over the last few years, I've paid off over $50,000 in unsecured debt -- without bankruptcy. Here are ten things I've learned about debt and bankruptcy (obviously, much of this applies to the U.S. only):

1) Banks are willing to give you a break on your interest rate, but they are only required by law to work with credit counselors. Sadly, far too many credit counselors are sleazebags or simply incompetent (same difference to your credit), so do your research. Furthermore, many "non-profit" credit counselors get a monthly kickback from the creditor for each payment you take, so it is in their interest for you to take as long as possible to pay off your debt. So be careful and do the math to make sure most of your money is actually going to creditors each month. Your creditors will still send you statements; watch them scrupulously.

2) After you miss several payments, some of your creditors will offer to settle with you for a fraction of what you owe them. This looks almost as bad on your credit report as a total write-off, however, so it is generally a good idea to avoid it if you can reasonably pay the entire amount. (The morality of it I'll leave for you to decide. My take is, if they make an offer to settle for less, you should not lose any sleep about accepting the offer. They didn't have to offer.)

3) Getting on a payment plan through a credit counselor is better than bankruptcy from the standpoint of your credit report (way better) but it's still bad. Do not expect to get any major sources of new unsecured credit anytime soon. Capital One will probably send you an offer for a secured card that offers you a few hundred dollars' limit if you send them a $50 deposit. They are a reputable bank and I have one of their cards. You need one because you need to re-establish your credit, and it's hard to get into too much trouble with them. But there are also scam artists who will send you ridiculous offers. One lovely bit of junk mail I get regularly offers me a MasterCard for "only" about $250 in fees! Other offers give you what is basically a store credit card, which is only good for buying overpriced merchandise from the creditor's catalog, except the card is designed to look as much like a Visa or MasterCard as possible without getting sued. Avoid these.

4) Unsecured creditors are obnoxious because that's the only option they have. Legally, they can't repossess anything. (Nearly all credit cards are unsecured.) All they can do is take you to court and get a judgment against you, and if you fail to pay that judgment they can begin garnishing your wages. They cannot seize your assets. If you're behind due to unemployment, obviously you should not worry about these debts. Instead, make sure you stay current on your secured debts, such as your mortgage and your car loan. Pay those first and put as much as you can toward your unsecured debts -- not toward the ones that are harassing you the most, but toward the ones that are charging you the most in fees and interest. It sucks to have blemishes on your formerly perfect credit report, but it sucks losing your home or your transportation even more.

5) If you notify a creditor that they may not call you, by law they must stop. But if they stop, their only other recourse is to file suit. I recommend Caller ID or an answering machine; keep 'em calling as long as possible. A judgment against you in a suit looks very bad on your credit report. But if you do get one, it's not the end of the world. And the good news is, typically no interest accrues on judgments. By the way, if you really owe the money, there's no point in wasting your time actually going to court, since you'll lose anyway. Might as well lose by default.

6) Even with bad credit, including a bankruptcy, you can get mortgages and auto loans. These are secured loans, which means if you don't pay, the lender can foreclose on you or repossess what you bought, so they are relatively low risk for the lender. You will probably have to put a bit more down and/or pay a higher interest rate, but you can get the loan. However, the longer you have been making regular payments after your credit implosion, the better the deal you'll be able to get, so don't buy anything of this sort until you really need to, and consider refinancing after a year or two when your credit begins to look better. However, and this is just stupiid, be prepared to pay a large deposit ($100 or more) for cell phone service -- even Sprint, where you pay full retail for the phone -- and to be subject to spending limits for at least a year. What are they afraid of, you stealing their air?

7) If you really cannot see any way you could possibly pay your debts, then don't hesitate to declare Chapter 7 bankruptcy. I had a friend whose husband died. He was the primary breadwinner and there was no way she could pay their debts, and he stupidly didn't carry enough life insurance to pay them off. This is the scenario Chapter 7 is intended for. It's not her fault and not even (mostly) her debt. But do get a good attorney; don't try to file yourself. All your creditors will send lawyers to your bankruptcy hearing to try to keep you from declaring, and this can be very emotionally stressful. Plus you might mess something up and have your filing denied. By the way, a chapter 7 takes 10 years to be removed from your credit report. (You can remember the bankruptcy chapter numbers with a simple mnemonic. 7 is a lucky number, and getting all your debt wiped clean is "lucky." 13 is unlucky, which means you gotta pay. In reality, both are unlucky.)

8) Chapter 13 is typically not a good idea for most people, though, and here's why: you still have to pay your debts. The court will decide how much you have to pay. If you can reasonably pay most or all of the debt, the court will order you to do so. You'll save the interest, but the bankruptcy will be on your credit report for seven years after discharge. That means seven years from the date you finish paying it off. Whereas if you pay it off yourself, perhaps with the help of a reputable credit counselor, if it takes you five years to pay things off, then all the worst items are already five years old when you finish and will fall off your credit report in just two years. Much better, especially if you've been re-establishing your credit in the meanwhile.

9) will tell you your FICO score, which is what lenders use to decide whether they'll give you a loan and what interest rate you will pay. This single number is more important than the actual items on your credit report (in fact it is the ONLY thing a lot of lenders look at), so you should definitely know what it is. MyFico also has a simulator that lets you play what-if: "What if I paid off all my debts by next year?" Very handy and fairly reasonably priced. Once your crisis is behind you, I recommend signing up so you can watch your credit getting better and find any errors. And there will definitely be some. If you can't get them fixed after going through the usual dispute channels, you are entitled to take the creditor to small claims court and collect up to $1000. Usually just the threat of this is sufficient to get them to correct the error immediately.

10) Beware of people who promise to clean up your credit report for a fee. No one can get correct information removed from your report for any amount of money. However, one thing that can help is that if you find yourself able to pay off a sizable debt all at once, such as $1000 or more, call the creditor and tell them you have X dollars but you have two creditors who want it. And that you will send it to them if they give you a more favorable mark on your credit report than they would usually give. Otherwise they'll have to wait because the other creditor's interest rate is slightly higher and you really should pay them first. Sometimes this works, sometimes it doesn't.

Anyhow, that's what I know. Hope it helps someone.
posted by kindall at 3:39 PM on October 10, 2003

Oh yeah, actually these go to 11:

11) Be careful with home equity lines. It can be tempting to pay off your high-interest unsecured debt using a home equity line, where the interest is lower and tax-deductible. But there's a catch -- doing so converts your unsecured debt to secured debt, with your home as collateral! (It's the same thing as a second mortgage.) If you find yourself unable to pay, you could lose the house. Generally this is a bad idea. There are other forms of debt consolidation, but typically you will be asked for some kind of collateral -- maybe your car -- which you will lose if you default. And the finance companies that provide these loans will repo on you if you are one day late with payment! If you can afford to risk your car (or whatever asset), you should consider just selling it and putting the proceeds toward your debts.
posted by kindall at 3:48 PM on October 10, 2003

kindall -- great comment, though I disagre with the point about taking a default judgment. Many collection lawyers are only interested in default judgment. If you actually show up at the court dates and argue (if there is anything to argue about) you can really throw them for a loop. You might be able to negotiate a payment plan or a reduction in the debt by just being a pain in the ass.
posted by Mid at 4:18 PM on October 10, 2003

And, yes, a "home equity" loan is nothing more than a nice name for a second mortgage.
posted by Mid at 4:19 PM on October 10, 2003

"Hoi" means the. We're members of the polloi, not the hoi polloi.

posted by emf at 4:20 PM on October 10, 2003

"Hoi" means the. We're members of the polloi, not the hoi polloi.

We are members of "the hoi polloi" because "hoi" doesn't mean "the" in English. When we borrow a word from another language, it becomes subject to the rules of English; when we say "hoi polloi" we are not speaking Greek for two words, we are saying an English word that used to be two Greek words. Greek is opaque to English speakers and now that "hoi polloi" has been borrowed as a unit, "the" is perfectly appropriate.

I disagree with the point about taking a default judgment.

Some others have told me the same thing, but frankly, I don't have much stomach for legal confrontation, and there was really nothing to argue about -- they had my signature on the credit app (I didn't know banks actually keep those things, although if I'd thought for a moment, of course they do) and a list of all the purchases I made on the card, and I did indeed make the purchases. Frankly, I wouldn't have been comfortable getting out of my debt on a technicality anyway.
posted by kindall at 4:36 PM on October 10, 2003

I know, just within my personal circle, at least five people who declared bankruptcy just to get out from under their student loans. After a decade of paying off mine, during which I didn't even get to the principle due to the interest rate I was locked into, I owed about thousand dollars more than when I started; I just couldn't afford the rates of payment they wanted. After handing over my inheritence from my grandmother, I still owe a few thousand, but I don't even want to think what they've had off me in total over the last 13 years. I look at my friends, all of whom are debt free, and wonder why I didn't do the same thing, to be honest.

Ezra Pound had one thing right: usury is evil.

I'll spare you all my rant about the cost of higher education...
posted by jokeefe at 5:54 PM on October 10, 2003

I understand those who had unfortunate circumstances: medical bills, family emergencies. For those circumstances, I honestly feel for you.

My business is IT consulting, primarily for law firms. It just so happens that two of our largest clients are Bankruptcy/Foreclosure firms. Surprise, surprise, they represent the banks. What is frightening is this: These two firms, combined, receive approximately 500 new suits *per week* and this is for one state only - that is 26,000 per year, on average. Wow. And the pace is only picking up since April/May of this year.

What amazes me is our apparent inability to stop ourselves from purchasing things. My grandparents and parents seem to have been able to restrain themselves and more importantly - they understood the value of a dollar. Perhaps it is the immigrant mentality in them, but they also consider it to be the highest sin to borrow money and to not repay it in full, on time or *ahead* of time. The lack of self-restraint is what ultimately dooms us all, and I am victim to that as well. I consider myself good at managing my finances, I've never been over my head nor ever missed a single payment in my life. It isn't easy - and I don't see why I should (ultimately) end up paying for other peoples' bad decisions in the form of higher interest rates and loans that are more difficult to secure.

As I look into new cars (Acura TSX - Whoot!) I am reading forums where 19, 20, 23 year olds are talking about buying these cars. And I'm not talking about a few - I mean *lots* of people. Wow. Things have changed when 20 year olds are looking at sub-$30k vehciles (depreciating assets) (barring a sudden windfall - which, regardless, should be stacked away earning interest)

Unless you have a mitigating circumstance follow the maxim of my forefathers: spend less than you make and save more than you expect to ever need. The second maxim is this: put your money into an appreciating asset and avoid depreciating ones.
posted by tgrundke at 8:36 PM on October 10, 2003

Tgrundke, I'm going out on a limb here, but I'm guessing that you went to college, and that your family helped pay for that. Don't take this as an attack on you, please, I'm just trying to point out that many people here have had privelidge from birth, and it is still very possible to accrue debt without suffering from consumer gluttony.

If you have to live on your own, an apartment is an expense. If you like electricity and warmth, those, too are expenses. A car, while a potential luxury (i.e., the Acura TSX), can also be an unfortunate necessity for those working outside the range of walking or public transport. Then you have to add insurance for that car, and repair costs (which will be higher if you end up with an older car that you can afford). Just about the only "luxury" that one might be able to do without is telephone, but if you are looking for work, I can tell you not having a phone will definately crimp your style.

So imagine this scenario: you decide to go to college, because you've been told it will increase your chances at getting a job. You take out loans to pay for it, and still work full time just to be able to pay for your home and transport. In four years, you graduate to a market that has very little in the way of job opportunities. With degree and heart in hand, you end up taking a generic office job making $12/hr. (if you're lucky). This is simply not enough to cover your basic living expenses, not to mention the thousands of dollars of debt you now must pay off. And now you're living in a state of permanent fear, because if something -- anything -- goes wrong (car gets stolen, you or your parents get sick, etc.) then you're ruined.

This is how a lot of people ruin their credit. An aquaintance of mine had their credit ruined by his father, who took credit cards out in his name and charged thousands of dollars before he caught on. He had the choice of either turning in his alcoholic dad, or taking responsibility for the charges and (eventually) declaring bancruptcy. I have little respect for those who charge tens of thousands of dollars on plasma TV's and Acura TSX's and then look to be bailed out when the bill comes in the mail -- personally I think the government should reposess luxury assets in bankruptcy cases. But please remember that there are plenty of people who know not to spend beyond their means, and yet still fall behind because even a basic standard of living is more expensive than the average salaries paid in a difficult job market. When you've got a family that can help you out financially, or that you can live with during/after college, it's a lot easier to have the "I lived within my means, why can't you?" attitude.
posted by Civil_Disobedient at 9:42 PM on October 10, 2003

stealing? give me a break! given the current state of business ethics, the brightest corporate futures are reserved for those who succeed in acquiring the most swag while paying the least. beat visa out of $40,000? somewhere there's a CEO/CFO in need of your fiduciary expertise. to quote some old dead fucker, what is the robbing of a bank compared to the founding of one?
posted by quonsar at 11:12 PM on October 10, 2003

They toss out offers for many a credit plan,
but what's unstated in their marketing campaign:
"Buy more than you can afford whenever you can,
but when we own your ass, you can't complain."
posted by troybob at 11:34 PM on October 10, 2003

As someone who's worked in the field a few years, slightly more accurate information:

Collection agencies cannot legally update your tradeline as "paid in full" if you did not pay in full. Collection agencies are bound by the rules of the FDCPA, which you should brush up on if you're planning on taking on your debt.

If you tell a creditor not to contact you, they are still legally allowed. You owe them money. If you notify a collection agency (in writing) to cease and desist, they must. Creditors are not bound to the same rules as collection agencies because they are the lenders.

Not everyone who files bankruptcy has their debt discharged, and it's getting harder. More judges are looking at the people who've racked up the 40k in credit card debt and telling them no.

Are credit card companies unscrupulous? Duh. But if you don't feel like you'll be able to pay back what you're borrowing (and that is what you're doing, you are BORROWING MONEY from a bank), don't sign the contract. No company forced you to live beyond your means, that was all you. If you're going to file bankruptcy on unsecured debt, at least be honest why.
posted by Andrea at 11:38 PM on October 10, 2003

[the preceding comment was brought to you by 5th/3rd Bank, whose latest financial innovation is the $8 check cashing fee. q-dad writes q a check. q takes said check to q-dad's bank for negotiation. q, as it happens, does business with a different bank and has no accounts at 5th/3rd, although clearly q-dad does. yet for motives which can only be deemed larcenous, 5th/3rd contends that negotiating a check drawn on their institution when presented by q, as opposed to q-dad, is above and beyond reason, thus legitimizing a fee which would have been absent had a different person actually walked the check up to the teller window. with my usual tact and aplomb, i offered, at generous volume, my opinion that the teller was a thief. now, in these days post 9/11, you may know that such uncivil and anti-patriotic behavior frequently results in the immediate Fetching Of The Manager, who (while eyeing me as if i may in reality be a freshly fueled boeing about to impact his lobby) proceeds to inform me that Bank Policy Requires The Fee. again, with less tact and only a scintilla of aplomb, i offer, at a genuinely philanthropic volume, my opinion that the manager, the policy maker, the in-house loan sharks, and indeed, the entire organization are all thieves, stealing the hard-put-away savings of 80 year old retirees, $8 at a time. At this juncture, as i could see that several 5th/3rd employees had quietly begun the process of escalating to DefCon3 (the Fetching Of The Security Guard) i left, money in hand, minus the $8 of course.]
posted by quonsar at 11:57 PM on October 10, 2003

The problem, q-son, is that 80 year old retirees who have to write their sons checks do not have nearly enough money to donate to politicians and therefore influence the process in any way. Unless you can get, say, AARP on the case. Or maybe Domokun.
posted by billsaysthis at 10:08 AM on October 11, 2003

no, billsaysthis, i know you were mostly being facetious, but the problem is that business, financial business especially, is corrupt to the core. the problem is that not one single teller, manager or policy maker has enough conscience to see what is wrong with stealing $8 from anybody, rich, poor, old, or newborn. the problem is that money for politicians, for influence, for AARP or the Domokun is actually accepted as the price for "honesty" in any "process".
posted by quonsar at 11:29 AM on October 11, 2003

Collection agencies cannot legally update your tradeline as "paid in full" if you did not pay in full.

Yeah, but it's my understanding that they can say "Paid settlement" instead of "Paid settlement, late 120+ days."

If you tell a creditor not to contact you, they are still legally allowed. You owe them money. If you notify a collection agency (in writing) to cease and desist, they must. Creditors are not bound to the same rules as collection agencies because they are the lenders.

Yeah, I should have made this clearer. The most harassing stuff comes from agencies. The creditors may actually be rather helpful. MBNA sent me a letter offering me a 50% settlement just as I was starting the credit counseling program. I probably should have taken it, since the black mark would be four years old by now anyway, but the savings "only" amounted to about $1500 and I figured I'd pay what I owed.
posted by kindall at 2:21 PM on October 11, 2003

see what is wrong with stealing $8

An $8 charge for cashing a check is ridiculous. But it's not "stealing." It's a clear signal to go to a different bank, such as, say, your own. They intend to expend their employees' resources mostly on helping their own customers, not other banks' customers. If it is more convenient for you to go to 5/3, even though you're not a customer, then they intend to make you pay for that convenience, just like you'll pay more for groceries if you shop at 7-Eleven than at Costco. $8 won't make or break anyone, so consider it a lesson learned and in the future take checks to your own bank.

Also, cashing checks at the bank they're drawn on is a tactic used all the time by small businesses to avoid reporting income for tax purposes. If you're saving $25 by cashing a $100 check at 5/3, then damn right they want a cut and I say they should get it. (Doesn't apply in this case, but I imagine it applies in a large number of cases.)
posted by kindall at 2:30 PM on October 11, 2003

problem is, there is no way to escape their web - my own bank would wait 5 business days before making the money available. (i can swipe a card at a gas pump and immediately debit my account from anywhere in the country, how can banks stand there with a straight face and cite that 5 day bullshit?) since my account balance was not sufficient to cover this particular check on that particular day, and since immediate access to the cash was necessary, i took the check to the people who had the money. you remember the money, right? the money q-dad gave to the bank, and which bank provided q-dad with instruments for his use in dispersing said money. in return for safeguarding and dispersing said funds via the provided checks, q-dad pays a checking account fee. possession of said money also allows the bank to invest it and reap the profits therefrom. perhaps he pays no fee - in which case the bank has solicited his business solely for the investment opportunites his money provides them. one way or the other, kindall, THE BANK ALREADY GOT PAID. the check cashing fee? legal larceny. and not one whit less repugnant than that which might be carried out by a desperate junkie with a pistol, despite the lavish ambience, the ties and white shirts and the armed geriatric who guards the whole scam for minimum wage.
posted by quonsar at 4:47 PM on October 11, 2003

Of course it's less repugnant, unless you feel that you were actually in danger of being shot by the bank guard!

You didn't have to pay the fee. You could have waited five days to get the money. (The fact that you considered immediate access to the money "necessary" is not the bank's problem.) Bottom line, you decided to pay the fee because having the money immediately was worth $8 to you. If it wasn't, you wouldn't have paid it.
posted by kindall at 4:57 PM on October 11, 2003

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in that case, i was being exploited by the monopoly 5th/3rd has on my father's money. perhaps the government should step in and force some competition in the check cashing market. yeah! that's the ticket!
posted by quonsar at 6:20 PM on October 11, 2003

how can banks stand there with a straight face and cite that 5 day bullshit?

This aggravates me, too. It's 2003, for crying out loud -- all electronic communication is instant, and even physical goods can be delivered anywhere in 48 states overnight -- largely due to instantaneous communications systems.
Credit card transactions are approved, and even show in my online register, immediately. That "ACH" financial transactions are still run in batches -- seemingly timed to miss any conceiveable window of opportunity the customer might hope for -- amazes me.
posted by Tubes at 10:11 AM on October 14, 2003

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