The Biggest Losers (of Debt): How a Family Shed $106,000 in Debt

[hereforinfo]

You have to keep in mind that once you are outside of a Credit Union most lending is not to individuals, those people who file BK that you are harping on. Most of that lending is to business and institutions, I would bet dollars to doughnuts that the majority of those troubled assets are commercial real estate. So, HHM's guess of 1% is really probably about right.

Nope, total consumer/household debt ($13 trillion) is actually higher than business debt ($11 trillion) so that's not true. A lot of the troubled assets are due to the residential mortgage foreclosures.

Regardless, the numbers reflect total bad debt, not just bankruptcies. Bankruptcies are only a portion of defaulted debt. The end result is the same whether the person files bankruptcy or not. If one files bankruptcy it relieves them from the burden - it doesn't change the fact that the debt is unpaid. The fact is, the median ratio of troubled assets is 13%, not 1%. Remember, that's the median ratio. There were nearly 400 banks on the stressed list and the ratios started at 90% and went up from there.

[Rahaton]

You have to keep in mind that once you are outside of a Credit Union most lending is not to individuals, those people who file BK that you are harping on. Most of that lending is to business and institutions, I would bet dollars to doughnuts that the majority of those troubled assets are commercial real estate. So, HHM's guess of 1% is really probably about right.

[hereforinfo]

As for those studies, I am not sure what they point out relative to this issue. I am not arguing that people who pay higher interest rates are more likely to default...(no kidding).

No, they are more likely to default because they over borrow again. If you have a higher interest rate, then you borrow less money to keep your payment affordable. The article clearly stated that households with a bankruptcy history tended to have higher amounts of unsecured debts post bankruptcy than non filers...

Obviously it is going to depend on the reasons for filing and the type of debt that will determine whether or not a person is likely to end up in the same spot.

[shabam]

Which also explains the 94 bank failures so far. If anyone thinks that bankruptcies have nothing to do with the economy, they need to read up on sub-prime. That is, the cause of the worst crisis since the depression. Medical debt is one thing, however totally reckless spending or downright stupid and delusional investments (quick $$$) strategies are another.

Personally, I would not have been here if people had not screwed up and defaulted in 2007. Their actions had a direct impact on my life and consequently contributed to me being forced to file.

[hereforinfo]

I already did, the percentage of discharged debt relative to assets held in consumer oriented banks is less than 1%.

As for those studies, I am not sure what they point out relative to this issue. I am not arguing that people who pay higher interest rates are more likely to default...(no kidding).

Also, now you are switching issues, you have gone from "bankruptcy" to the "mortgage meltdown". Those are VERY separate issues.

The two are not separate issues. The mortgage meltdown is relative because it's proof of how bad debt impacts the banks and the economy. A lot of debt that people discharge in bankruptcy is mortgage debt, not just credit cards. Regardless of whether the borrower files bankruptcy or not, the unpaid debt does have an impact.

Yeah, you made that statement about 1% but I'm wondering where you got the information. You haven't shown proof like you demanded from us.

In June 2009 the national median troubled asset ratio was 13.9%. (Bank's bad loans divided by their capital and reserves).

http://www.msnbc.msn.com/id/29619237/ns/business-us_business/

[shabam]

1% of assets of the large banks who just so happen to receive bailouts in order to ensure that they do not go under.

[HHM]

By the way, perhaps you can back up your statement: "the debt discharged in BK is mere fraction, it actually has no effect on anything, the amount of debt discharged in BK is too insignificant."

I already did, the percentage of discharged debt relative to assets held in consumer oriented banks is less than 1%.

As for those studies, I am not sure what they point out relative to this issue. I am not arguing that people who pay higher interest rates are more likely to default...(no kidding).

Also, now you are switching issues, you have gone from "bankruptcy" to the "mortgage meltdown". Those are VERY separate issues.

[andy158]

Don't get me started on Suzie Orman. She never had a family to support, lives an "alternate" lifestyle with her female lover and makes me puke with her "Can you afford to buy this" bs on her show. Granted I support some of her theories , but looks like she makes her money now from books and tv shows instead of financial counseling. Can you say over rated? Don't think she is very well connected to us struggling middle class families that have had the perverbial rug pulled out from under us.

[hereforinfo]

Wow, where exactly did you get that fact from...(out of your ass I suppose, just like the rest of your facts, or should I say, misinformed "ASSumptions).

Who is it sticking too, discharged debt represent less than 1% of the assets under control of the 4 largest banks, who exactly is getting stuck...the debt discharged in BK is mere fraction, it actually has no effect on anything, the amount of debt discharged in BK is too insignificant.

Before you say something stupid like, "we pay higher interest rates, blah blah blah", you better come with some proof. (oh wait, you won't be able to because its not true).

Sorry to make it personal, but so far, from Shabam and Hereforinfo have provided no meaningful contribution. Sure, your entitled to your opinion about whether you think the actions of this family are admirable, but when you start whipping out statements like, "someone pays for it", or statistically if you file once, your likely to file again, at least have something to back it up.

Anyone who has a differing opinion or says something you don't like is talking out of their ass and providing no meaningful contribution? I wasn't aware that we had to cite references for every statement we make. Or is it only if we make a statement you disagree with?

By the way, perhaps you can back up your statement: "the debt discharged in BK is mere fraction, it actually has no effect on anything, the amount of debt discharged in BK is too insignificant."

If you really believe that debt default has no effect on anything, then you must not be aware of the impact of the mortgage meltdown on our economy.

http://www.abiworld.org/am/template.cfm?section=Bankruptcy_Statistics1

"Research by the Federal Reserve indicates that household debt is at a record high relative to disposable income. Some analysts are concerned that this unprecedented level of debt might pose a risk to the financial health of American households. A high level of indebtedness among households could lead to increased household delinquencies and bankruptcies, which could threaten the health of lenders if loan losses are greater than anticipated."


You can read the following publication regarding a study done on post-bankruptcy household borrowing, which found that non-business filers were 30% more likely than non filers to have trouble paying their debts again:

http://www.federalreserve.gov/pubs/feds/2009/200917/index.html

Abstract:

An extensive literature has examined factors determining filing for personal bank-ruptcy, but few has studied household borrowing behavior after bankruptcy. Using data from the Survey of Consumer Finances, we find that, in general, households with a bankruptcy history are less likely to have access to unsecured credit comparing to those with no bankruptcy history. Conditional on having debt, households with a bankruptcy history tend to have more unsecured debt and higher leverage in secured debt. In addition, debtors with a bankruptcy history pay higher interest rates on all types of debt, and more strikingly, they are also more likely to be delinquent on their debt payments and accumulate less wealth. Our analysis suggests that this worse performance may reflect the preference bias of these households toward overborrowing.

[Rahaton]

I'm not going to get into a debate so I will agree to disagree. The comment regarding filing twice was made by Suzie Orman.

Suze has a very bad record of getting bankruptcy related facts correct, just google "orman bankruptcy" and you will find lots of criticism. Using real data [googled and not vetted, this is a hobby research project I do work for real money if you are interested ;)] resulted in a 10% rate of filing a 13 in a lifetime. The rate for someone with a first bankruptcy filling again is 13%.

So, a rough estimate says that you are 3% more likely to file if you have before. Certainly not a case of most of fillers refiling like you said in your first comment.

If I had more trust in the base numbers I would also point out that even the 3% is inflated since there are situations where people have to file twice to get through what is really a single bk. Dismissals, chapter 20s, 13s that are not finished are undoubtably mixed into that number.

[Rahaton]

They just had them on the news here and my first thought was that they could have paid for there kids' college with that money. Give them a debt free start on life.

Also in the TV spot they said he used to sleep in his car at work so that they did not have spend the money on gas--saving $80-$100 a month!

They also ate a significant amount of hashbrowns that they could get for free instead of spending money on real food.

I am sorry but these people have a martyr complex, what they did to their children in this process is unconscionable.

[killinstinct]

Yes, admirable but stupid.

I feel bad for all the time the children missed out with their father. Especially the teenagers. Tell me that wouln't have made a difference to have him home instead of out being a slave to the loanmongers.

[shabam]

I'm not going to get into a debate so I will agree to disagree. The comment regarding filing twice was made by Suzie Orman.

[HHM]

Statistically speaking most people who file for Bk once, will file again. Now I see why.

Wow, where exactly did you get that fact from...(out of your ass I suppose, just like the rest of your facts, or should I say, misinformed "ASSumptions).

Please don't be so naive as to think that defaulting on your debt to the bank is sticking it to the bank.

Who is it sticking too, discharged debt represent less than 1% of the assets under control of the 4 largest banks, who exactly is getting stuck...the debt discharged in BK is mere fraction, it actually has no effect on anything, the amount of debt discharged in BK is too insignificant.

Before you say something stupid like, "we pay higher interest rates, blah blah blah", you better come with some proof. (oh wait, you won't be able to because its not true).

Sorry to make it personal, but so far, from Shabam and Hereforinfo have provided no meaningful contribution. Sure, your entitled to your opinion about whether you think the actions of this family are admirable, but when you start whipping out statements like, "someone pays for it", or statistically if you file once, your likely to file again, at least have something to back it up.

[Rahaton]

We were with the same outfit and they don't do partial payoffs to my knowledge, so it was a 100% plan.