Should I just pay it back?

[wellnowwhat]

I'm starting to wonder if I shouldn't just make the effort to pay off my creditors and the accounts that have charged off. As I mentioned in a previous post, I recently accepted a job with a fairly substantial pay increase, which may or may not put my wife and I over the median income for our state.

There are some other factors at play, however, that are making me consider just paying off the debts. Firstly, there's the sense that, now that I'm making more money, it would be more "responsible" to pay back the old debts. There's also this feeling of powerlessness as I look at all the paperwork involved with filing for Chapter 7, the itemized lists, the possibility of losing things or having money taken away. It almost just seems easier to deal with the creditors and pay them back.

What do you all think? If I have the means to pay back some of these debts, should I just settle with them and pay them back? Would I be doing the right thing, both financially and ethically?

I haven't talked to my lawyer about this, yet, nor am I sure that I will...

[bcohen]

I'm starting to wonder if I shouldn't just make the effort to pay off my creditors and the accounts that have charged off... If I have the means to pay back some of these debts, should I just settle with them and pay them back? Would I be doing the right thing, both financially and ethically?

The debts are apparently already defaulted, and thus, your credit is shot whether you pay in full, pay a portion, or pay nothing. Bankruptcy is one option for "clearing the boards" of defaulted or unaffordable debts, though certainly not the only one. Doing nothing, attempting to settle, or paying the debts in full are other options. Your decision as to how the debts should be handled is a financial decision, and should be treated strictly as such. Ethics or morals do not factor into the equation.

My advice is to consider what you will have to pay or give up in bankruptcy compared to what you would have to pay to satisfy the debts in full. Do not assume that you will be able to settle all--or even most--of your debts for less than the amount owed. The reason is because once you pay or settle one debt, that fact will hit your credit reports, and your other creditors will figure that since you now have money, they can file a lawsuit to collect, so they won't discount the debt very much.

If you have the money and the willingness to repay your debts IN FULL, then you should go ahead and try to settle, with the advance understanding that you probably will not settle for much less than the current balances. If you do not have this money and willingness to pay off these old debts, then I suggest you either do nothing, or file for bankruptcy. If you would lose too much in bankruptcy, and don't own any real estate to which a creditor could attach a lien, then doing nothing might be your best option.

[keepmine]

Just my opinion here but, I don't think ethics or morality has any place in a bk decision.
This is just nothing but business. Act like a good capitalist and make a decision that reflects your best interest. You can rest assured, that your creditors are going to do the same thing.

[Blossoms]

Just my opinion here but, I don't think ethics or morality has any place in a bk decision.
This is just nothing but business. Act like a good capitalist and make a decision that reflects your best interest. You can rest assured, that your creditors are going to do the same thing.

+1!

[AngelinaCat]

Hi wellnowwhat:

This is a decision that is totally up to you.

I do not remember if you were successfully discharged or not. However, if you were, somewhere on your BK Discharge Order is a line to the effect that "even though you are not now legally required to repay this debt, there is nothing to prevent you from repaying any debt you wish to do." That is a paraphrase of what is on the backside of our Discharge Order.

With that said, if you have some medical providers that you wish to pay the co-pays to, I can agree with that. If not, and everything is/are in the huge numbers category, I would just ignore them. That is just my 2 cents, and how I have had to handle our affairs....

Good wishes to you, and Merry Christmas!

[AngelinaCatHub]

Well it will be difficult to top the fine advice of all above posters.

Ethically as well as morally, I have to say this: Your creditors loaned you money that YOU asked for. In good faith they trusted you. We do not PROMOTE bankruptcy on this forum.

That being said; there are times (in which we found ourselves in) that the mistakes or circumstances beyond our control put we and our families into a real bind. Our early government and to date, our government recognized this and gave us a way out, rather than a debtor's prison. "A CLEAN START" as assumed to be one time in life, to learn and not to repeat.

This boils down to the real facts. You will ALWAYS owe this money. It is NOT forgiven by the creditor. You have been given leave and forbearance of this debt without obligation to pay. The hope is to get you back onto your feet and learn not to make those same mistakes. It is a business decision that only you can make. After the privilege of this relief, you may pay the debt at your leisure or not at all.

If you have no other solution, bankruptcy is the solution of last resort. Nothing to be ashamed of and your penalty is the bad credit rating that is earned for this privilege, granted.

Only you can determine how to handle your own situation. My advice is to do what will help you and your family the most. Learn from the experience and throttle back your life to a more affordable solution, not to have to repeat this again.

Only my two cents. 'Hub

[bcohen]

Ethically as well as morally, I have to say this: Your creditors loaned you money that YOU asked for. In good faith they trusted you. We do not PROMOTE bankruptcy on this forum.

I do not see how "ethics" or "morals" factor into the equation at all, unless you are talking about debts owed to individuals or small family-owned businesses. When it comes to large multinational banks and finance companies, more often than not, the customer is treated with anything but "good faith", and furthermore, these companies charge high enough interest and fees to cover the cost of the small percentage of accounts which are never repaid. If it is considered "good faith" for a creditor to slash limits, raise interest rates, raise minimum payments, and do things which are designed to cause penalty fees such as changing the due date or processing transactions in an order which maximizes fees, then surely it's "good faith" when the over-extended debtor turns to bankruptcy for relief.

That being said, you're right that we do not "promote" bankruptcy, at least I certainly never do. The decision to file for bankruptcy protection is one which must be carefully weighed against all other options including doing nothing. Bankruptcy is supposed to be a last-resort option, not a first-choice option, and most people view it this way. In fact, most people who desperately need relief, and could benefit from bankruptcy never file, due to fear, shame, and inability to afford the filing costs.

This boils down to the real facts. You will ALWAYS owe this money. It is NOT forgiven by the creditor. You have been given leave and forbearance of this debt without obligation to pay. The hope is to get you back onto your feet and learn not to make those same mistakes. It is a business decision that only you can make. After the privilege of this relief, you may pay the debt at your leisure or not at all.

I disagree that you "owe" anything on debts which are discharged in bankruptcy. It is true that after the discharge, and once your case is closed, you can voluntarily repay any creditor, however that is supposed to mean that you can repay your family doctor/dentist, friends and family members who you borrowed money from, local "mom and pop" shop which you owe money to. Paying money to large corporate creditors after you have paid the price of bankruptcy and successfully discharged their debt is beyond insane! Banks and finance companies seldom seem to care when their customers are facing difficulties, and almost never agree to reasonable modification or restructuring of the debt in order to help a financially-strapped customer avoid default. When the shoe is on the other foot, why on Earth should you do them any favor? I can't think of any reason.

[Blossoms]

I do not see how "ethics" or "morals" factor into the equation at all, unless you are talking about debts owed to individuals or small family-owned businesses. When it comes to large multinational banks and finance companies, more often than not, the customer is treated with anything but "good faith", and furthermore, these companies charge high enough interest and fees to cover the cost of the small percentage of accounts which are never repaid. If it is considered "good faith" for a creditor to slash limits, raise interest rates, raise minimum payments, and do things which are designed to cause penalty fees such as changing the due date or processing transactions in an order which maximizes fees, then surely it's "good faith" when the over-extended debtor turns to bankruptcy for relief.

That being said, you're right that we do not "promote" bankruptcy, at least I certainly never do. The decision to file for bankruptcy protection is one which must be carefully weighed against all other options including doing nothing. Bankruptcy is supposed to be a last-resort option, not a first-choice option, and most people view it this way. In fact, most people who desperately need relief, and could benefit from bankruptcy never file, due to fear, shame, and inability to afford the filing costs.



I disagree that you "owe" anything on debts which are discharged in bankruptcy. It is true that after the discharge, and once your case is closed, you can voluntarily repay any creditor, however that is supposed to mean that you can repay your family doctor/dentist, friends and family members who you borrowed money from, local "mom and pop" shop which you owe money to. Paying money to large corporate creditors after you have paid the price of bankruptcy and successfully discharged their debt is beyond insane! Banks and finance companies seldom seem to care when their customers are facing difficulties, and almost never agree to reasonable modification or restructuring of the debt in order to help a financially-strapped customer avoid default. When the shoe is on the other foot, why on Earth should you do them any favor? I can't think of any reason.

I agree with this. My husband and I are in the middle of a bankruptcy. I feel terrible about having to include money I owe my daughter's therapist (balance not covered by insurance) in the bankruptcy, and would love to be able to pay her back. I know that for someone who is essentially self employed, it will hurt her financially not get paid for her services.

I don't, however, feel bad that my husband and I are surrendering our vehicle in the bankruptcy.

We had a very nice vehicle at a decent interest rate, which we lost to a repo last year, due to me being out of work, unable to find a job, and my unemployment pay having run out. My husband ended up spending several months taking 3 busses back and forth to work, each way, a 2 1/2 hour commute each way, in a bad Ohio winter. He has a physically demanding job, where he is on his feet all day, which didn't help matters.

We managed to scrape together enough money for a small downpayment on another vehicle, and went to a local "reputable" dealership chain, who promised they could get us financed for a vehicle. After going back and forth for two weeks with the dealership, they finally got us a loan for a vehicle.

But the "help" they gave us was telling us the only vehicle on the lot we qualified for was one that was worth no more than $2,000,10 years old, 100,000 miles, for which they marked up the price to $11,400. AND which they neglected to inform us of until we came in to sign the paperwork for the vehicle. The finance manager also lied to us, telling us that we were obligated to buy a worthless warranty, for $1,700, included in the loan, or we couldn't get the loan.

We had inquired about half a dozen other vehicles on the lot, all newer than the one we financed, much better condition, with far fewer miles, that were priced between $5,000-$10,000, only to be told that we didn't qualify to finance any of them, at the marked sales price, for some ridiculous reasons, just excuses. Yet, some how we "qualified" to finance a $2000 piece of junk vehicle at $11,400?! What kind of sense does that make?!

We got stuck with a 24% interest rate, and were financed through a bottom of the barrel lender, who gives the dealership a small portion of the funds upfront for the vehicle, then pays the dealership as the borrower makes monthly payments. We had to have a GPS tracking device put in the vehicle, so the lender could shut off the engine or repo the vehicle, if we were even so much as a day late on a payment.

The salesman swore up and down that the vehicle was in great shape, had a lot of work done on it, etc. Yet, not even two weeks after we bought it, the brakes went nearly completely out, making the vehicle undriveable, until we spent $300 getting them replaced. The vehicle easily needs another thousand plus dollars worth of work on top of that.

The dealership got the vehicle as a trade in, and no doubt paid no more than about $1,200 for it. We put down $800 on it, and between the downpayment and the monthly payments we made prior to our bankruptcy, they've easily gotten close to $4,000 from us. $4,000, for a vehicle worth maybe $2,000, and for which the lender only paid about $1,200.

So no, I do not feel bad at all about surrendering the vehicle in our bankruptcy, not do I feel any obligation to pay them back after my bankruptcy. I stopped making payments on it when we filed the bankruptcy, and I don't feel that I am cheating the lender or the dealership out of anything.

I think it's ironic when lenders "help" financially struggling people by lending them money at usurious rates and terms, knowing that those outrageous rates and terms will no doubt guarantee that the borrower will default on the loan.

As bcohen said, the small mom and pop businesses are the ones who suffer when someone files for bankruptcy, and doesn't pay them. The mammoth corporations and legalized loan sharks don't suffer a bit, and no one should feel morally obligated to pay those types of lenders back after filing for bankruptcy, nor feel guilty for having to include them in a bankruptcy.

[TXskyblue]

This reminds me of Dave Ramsey who filed BK and later, when he had made ridiculous amounts of money, paid back all his creditors.

For my situation, I had about 80K in credit card debt that is no one's fault but my own. Over the years, I paid untold tens of thousands of dollars in 20%+ APRs, usually just the minimum payment. A reason why credit cards have such high rates is because they know a certain percentage of borrowers are going to discharge their debt via bankruptcy or otherwise default and not repay. It is built it. Should someone 'game' the system and charge up a lot just so they can file BK? No, and I don't think it happens very often anymore. Should someone feel bad about their bankruptcy? Perhaps. I do. I don't feel bad enough about it to pay back my former creditors. It's just a business transaction, albeit an unfortunate one.

[justbroke]

I will just add this... my proverbial $0.02.

A bankruptcy discharges only your liability to pay a debt while establishing a legal injunction on any creditor who should use process or any other method to collect. It does not remove the debt itself, nor does it, contrary to popular belief and even some non-legal definitions, forgive the debt since only the creditor can do such.

It will remain the individual debtor's decision, based on their belief systems, desire, and ability, whether to repay those creditors that are enjoined from collecting the discharged debt. The discharge does not stand in the debtor's way, to do such, and does not even offer a way to categorize debts into "evil corporations" or "nice family doctors", as it should not.

Enjoy.

[jst4f]

Financial institutions loan money to make money. Bankruptcy is just one of the costs of doing business. They do a lot to cover themselves such as credit checks, risk managers, lawyers, using only their documents, etc. Bottom line is, they are in the business to enrich their stockholders and themselves, which is not evil just business. While I sincerely believe that BK is the option of last resort, I did not have any moral problem listing them on my BK petition. I viewed our BK7 as a business decision that is completely legal and fully transparent. Certainly not our finest moment but we took a risk, started a company, and lost. The financial institutions were of no help when we started to lose ground and if fact took actions that they believed were in their best interest (pun intended) but in fact accelerated our financial decline and hastened our BK. I have no intention of paying them back now that we are on our feet and enjoying our fresh start.