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Could someone well-versed with bankruptcy please explain the pros/cons of going that route? I have heard that credit card debt is essentially free money because

by hcmag 11y ago

Could someone well-versed with bankruptcy please explain the pros/cons of going that route? I have heard that credit card debt is essentially free money because filing for bankruptcy will wipe out all the debt. If you already own a home/car, and have no intention of getting a loan in the next 10 years, what is wrong with this strategy?

remyp 11y ago
A pesky thing called morality and the fact that incurring debt with the intention of later going bankrupt is fraud?
- tamana 11y ago
  Don't be moral with corporations that have no intention of being moral with you. The National Mortgage Foundation defaulted on its own mortgage!
  - tunesmith 11y ago
    > Don't be moral with corporations that have no intention of being moral with you. Why not? Seriously.
alkonaut 11y ago
I guess that varies with where you live. In Europe the deal is usually e.g. if you buy a house the safety isn't just the house, it's the house AND the future lifetime income of the buyer. If you manage to buy a house in what turned out to be Detroit and its value goes from $1M to $1k, then the bank might take the house but you will also be paying off that $999k for the rest of your life. Not to mention you'll never get any credit again. Personal bankruptcy will let you off but not easy. You'll make a plan to live att the poverty line for 5-10 years paying everything you earn to the bank, so they can get maybe 1/3 of their losses, and write off the rest. And after this of course you still won't get a loan again so you'll be a renter without credit cards for the rest of your life.
rsync 11y ago
"If you already own a home/car, and have no intention of getting a loan in the next 10 years, what is wrong with this strategy?" It's dishonest and is the work of a scoundrel.
ac29 11y ago
Because, at least in the US, bankruptcy laws have changed such that it is difficult or impossible to get a "clean slate" debt wipe. If the courts think you can afford to pay your debts (you had enough money to buy a house and a car outright in your scenario), they may restructure your debts to make payments more manageable, but not eliminate them. Also as mentioned below, it ruins your credit and might be construed as fraud.
dragontamer 11y ago
What if your car breaks?
rhino369 11y ago
Each state is different, but they'll take your car and some of the equity in your house to make up the difference. California for example would take all the equity from your house except for 75k so a single person with moderate income.

by hcmag 11y ago

remyp 11y ago

A pesky thing called morality and the fact that incurring debt with the intention of later going bankrupt is fraud?

tamana 11y ago
Don't be moral with corporations that have no intention of being moral with you. The National Mortgage Foundation defaulted on its own mortgage!
- tunesmith 11y ago
  > Don't be moral with corporations that have no intention of being moral with you. Why not? Seriously.

alkonaut 11y ago

I guess that varies with where you live. In Europe the deal is usually e.g. if you buy a house the safety isn't just the house, it's the house AND the future lifetime income of the buyer. If you manage to buy a house in what turned out to be Detroit and its value goes from $1M to $1k, then the bank might take the house but you will also be paying off that $999k for the rest of your life. Not to mention you'll never get any credit again. Personal bankruptcy will let you off but not easy. You'll make a plan to live att the poverty line for 5-10 years paying everything you earn to the bank, so they can get maybe 1/3 of their losses, and write off the rest. And after this of course you still won't get a loan again so you'll be a renter without credit cards for the rest of your life.

rsync 11y ago

"If you already own a home/car, and have no intention of getting a loan in the next 10 years, what is wrong with this strategy?" It's dishonest and is the work of a scoundrel.

ac29 11y ago

Because, at least in the US, bankruptcy laws have changed such that it is difficult or impossible to get a "clean slate" debt wipe. If the courts think you can afford to pay your debts (you had enough money to buy a house and a car outright in your scenario), they may restructure your debts to make payments more manageable, but not eliminate them. Also as mentioned below, it ruins your credit and might be construed as fraud.

dragontamer 11y ago

What if your car breaks?

rhino369 11y ago

Each state is different, but they'll take your car and some of the equity in your house to make up the difference. California for example would take all the equity from your house except for 75k so a single person with moderate income.