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There's a huge difference in the risk you are taking when you take on debt that can be cleared with bankruptcy and debt that can not. This is why I always say

by lsc 11y ago

There's a huge difference in the risk you are taking when you take on debt that can be cleared with bankruptcy and debt that can not. This is why I always say that the first thing your business should pay for is an accountant. Same thing. Business mistakes? bankruptcy is the worst case. Sure, it's not that weird for even smallish businesses to sign leases that are worth truly intimidating amounts of money. My own company's co-lo contract would cover a very high-end Ferrari. Leases are debt. But they can be discharged through bankruptcy. Tax mistakes? Tax mistakes are for life (or, as you say, until you pay them off, along with penalties and interest.) I mean, I'm not saying that I'd never take such a loan, just that it is money at what I consider completely brutal terms, and for me, at least, it would be a last resort. As an aside, I think that only taking loans that can be cleared by bankruptcy is something of a sanity check. Nobody, right now, would loan me the money to buy a Ferrari, because I can't afford a Ferrari (well, not a new one, anyhow.) and this fact is obvious if you look at my finances, as a bank would before loaning someone that kind of money for a car. I mean, I probably could usually make the payments, but one financial misstep on my part, or some slight flutter in my income stream and I'd be in bankruptcy territory. Now, on the other hand, if that loan couldn't be cleared by bankruptcy? I think it would be a reasonable risk for most banks to loan me the cash for the Ferrari. I mean I'd be eating ramen, but I could make payments as long as nothing went wrong, and even if I screw it up and they've gotta repo the thing, It's pretty likely that my lifetime earnings, which they'll get to garnish in this hypothetical world where car loans operate like student loans, are going to be enough to more than cover the loan plus interest and penalties. The point being that operating without bankruptcy really moves the bar on how much effort the bank puts into figuring out if you can afford something.

downandout 11y ago
> I mean, I'm not saying that I'd never take such a loan, just that it is money at what I consider completely brutal terms, and for me, at least, it would be a last resort. Please look at my comment in the context of OP's story of living at Starbucks and being beaten and mugged at gunpoint in the park where he was sleeping. I would say that's last resort territory. Hmm...that or take a loan that you have to start paying back in 4 years? I'm guessing that these negative responses about bankruptcy discharge are mostly from people that have never been in such desperate circumstances. Also, even in less desperate circumstances, (such as my sister's, where she simply got tired of working in her field) going to school and (hopefully) dramatically raising ones earning potential isn't exactly a worthless pursuit.
- lsc 11y ago
  Yeah, if I didn't have a safe place to sleep, I agree, taking loans that I couldn't clear with bankruptcy would be something I'd be willing to do. Again, your point that I've never been in any situation that desperate is quite true. I've never experienced anything like that. My real worry though would be that: >going to school and (hopefully) dramatically raising ones earning potential isn't exactly a worthless pursuit. especially if you are going to a for-profit school? I... really think that this idea that formal education means more money is a lie that we sell vulnerable children, and a lie we sell ourselves, because we don't understand how to end the cycle of poverty. Then we sell them loans they can't get out of. It really seems pretty terrible to me. I went to a pretty poor high school - I make a lot more money than most of the people who went to school with me who have gone on to get two year degrees or four year degrees from low-end institutions. I'm not saying that education for educations sake isn't valuable; it is. I'm just saying that when it comes to ability to earn a living, for me and most of the people I've known, for the people who did well after going to school? School was part of a life that meant you were going to be successful; if you took someone who otherwise didn't have that life and sent them to a low-end school? it doesn't seem to help them much. college doesn't seem to do it without the parents... and at least in my experience, if you have the parents, they will push you in to college, but if you resist, it doesn't seem to depress your earning ability much. See, my real worry would be that I'd go to school and at the end of those four years I'd be no more employable than I was at the start, and at that point I'd be way worse off, because I'd have this big bunch of debt. None of this, of course, invalidates your suggestion that you take out the loans and use them to live while you get a regular job again, doing whatever minimum work is required to keep the loans. Obviously, having a place to sleep, shower, and basic transportation is going to make getting a job way easier- so yes, your suggestion is a completely reasonable last resort suggestion. I think the pushback you are feeling is that I felt like your attitude towards those loans was that they were no big deal, and personally, I think they are a very big deal, especially if you are trying to live on the salary you get if you have a for-profit degree and nothing else.
mikekchar 11y ago
> This is why I always say that the first thing your business should pay for is an accountant. For my company (which we started up only 5 months ago), we hired an accountant in the first week. He saved us 3x his 1 year cost in the first 5 minutes. How I wish we had hired him before we started the business. He could have saved us about the same again. If you are ever even thinking of starting a company, follow this advice. The accountant is the very first person I would talk to. It's amazing the pitfalls you can get into even when you are being relatively careful (as we were).

by lsc 11y ago

downandout 11y ago

> I mean, I'm not saying that I'd never take such a loan, just that it is money at what I consider completely brutal terms, and for me, at least, it would be a last resort. Please look at my comment in the context of OP's story of living at Starbucks and being beaten and mugged at gunpoint in the park where he was sleeping. I would say that's last resort territory. Hmm...that or take a loan that you have to start paying back in 4 years? I'm guessing that these negative responses about bankruptcy discharge are mostly from people that have never been in such desperate circumstances. Also, even in less desperate circumstances, (such as my sister's, where she simply got tired of working in her field) going to school and (hopefully) dramatically raising ones earning potential isn't exactly a worthless pursuit.

lsc 11y ago
Yeah, if I didn't have a safe place to sleep, I agree, taking loans that I couldn't clear with bankruptcy would be something I'd be willing to do. Again, your point that I've never been in any situation that desperate is quite true. I've never experienced anything like that. My real worry though would be that: >going to school and (hopefully) dramatically raising ones earning potential isn't exactly a worthless pursuit. especially if you are going to a for-profit school? I... really think that this idea that formal education means more money is a lie that we sell vulnerable children, and a lie we sell ourselves, because we don't understand how to end the cycle of poverty. Then we sell them loans they can't get out of. It really seems pretty terrible to me. I went to a pretty poor high school - I make a lot more money than most of the people who went to school with me who have gone on to get two year degrees or four year degrees from low-end institutions. I'm not saying that education for educations sake isn't valuable; it is. I'm just saying that when it comes to ability to earn a living, for me and most of the people I've known, for the people who did well after going to school? School was part of a life that meant you were going to be successful; if you took someone who otherwise didn't have that life and sent them to a low-end school? it doesn't seem to help them much. college doesn't seem to do it without the parents... and at least in my experience, if you have the parents, they will push you in to college, but if you resist, it doesn't seem to depress your earning ability much. See, my real worry would be that I'd go to school and at the end of those four years I'd be no more employable than I was at the start, and at that point I'd be way worse off, because I'd have this big bunch of debt. None of this, of course, invalidates your suggestion that you take out the loans and use them to live while you get a regular job again, doing whatever minimum work is required to keep the loans. Obviously, having a place to sleep, shower, and basic transportation is going to make getting a job way easier- so yes, your suggestion is a completely reasonable last resort suggestion. I think the pushback you are feeling is that I felt like your attitude towards those loans was that they were no big deal, and personally, I think they are a very big deal, especially if you are trying to live on the salary you get if you have a for-profit degree and nothing else.

mikekchar 11y ago

> This is why I always say that the first thing your business should pay for is an accountant. For my company (which we started up only 5 months ago), we hired an accountant in the first week. He saved us 3x his 1 year cost in the first 5 minutes. How I wish we had hired him before we started the business. He could have saved us about the same again. If you are ever even thinking of starting a company, follow this advice. The accountant is the very first person I would talk to. It's amazing the pitfalls you can get into even when you are being relatively careful (as we were).