How To Live On $0 A Day: The Pros And Pros Of Declaring Bankruptcy
Clearly, it's time to get over the stigma. Bankruptcy is awesome. Once you know the specifics, you'll wish you did it sooner. I know I do.
What makes bankruptcy particularly appealing right now is the fact that the courts are so clogged with cases (over 6,000 new ones a day), it'll take years for yours to be processed and set a hearing. That means after you file the preliminary papers, all your debts will be frozen and no further payment will be required until the court date (which should occur no sooner than 2014 at the current rate). In the meantime, nobody can take legal action against you, evict you or charge interest and penalties. Sure, it may screw up your credit rating for awhile, but let's get real; your credit rating is already shot. Bankruptcy allows you get to live exactly as you have been, without the annoying monthly payments.
Let me compare the lifestyle of two people who have been unemployed for over a year. One has declared bankruptcy (we'll call him Prince )and the other hasn't (we'll call him Pauper).
Pauper has been trying desperately to pay off credit card debt for years. Unable to deal with the threats of creditors and predators, he moved into his parents' laundry room so he wouldn't have the added expense of paying for a place to live. Since then he has staunched the financial bleeding, but has also acquired a nervous tic, a chipped tooth (from getting hit in the mouth by the zipper on his father's pants as they flew towards the dirty laundry bin) and stress induced eczema (diagnosed by Google). Despite no longer having to pay rent, he still struggles monthly to pay his minimum balance, which is mostly interest. Pauper hasn't been on vacation for years. His last clothing purchase was a pair of $2.00 flip flops on sale at Old Navy. He has no social life because it usually involves spending money on drinks and food and he doesn't want to blow his monthly food budget on a beer and buffalo wings.
Meanwhile, Prince filed bankruptcy six months ago when the incessant calls from creditors were making it impossible to enjoy his new $500 Blackberry. Prince is still living in his lovely home, purchased for $300,000, borrowed on at $850,000 and now worth $600,000. Well, actually Prince is currently vacationing at a spa in Hawaii, which he can afford because he is no longer paying bills and isn't accruing one bit of interest or penalties while he waits for his case to make the court calendar. Now he can spend every cent he earns on necessities like food, clothing, vacations, premium cable, exfoliation and Cuban cigars. His skin is clear, his belly is full and he is up to date on the latest episode of Dexter.
The old way of thinking would have labeled Prince an immoral cad. Today he probably qualifies for a top banking job. On the other hand, Pauper comes off as a naive douche with unattractive skin, bad teeth and a twitch.
Before you rush off to declare bankruptcy, a few important tips. Think like a corporate executive. Maximizing the amount you'll be absolved from owing is just good business sense. Make sure you charge all your credit lines up to the limit before declaring. Get things you really need like a good haircut, pedicure and fancy espresso machine (think of the money you'll save on Starbucks). While Chapter 11 is the most famous kind of bankruptcy, you'll want a Chapter 7, which lets you keep your material possessions without necessitating a repayment plan. You'll probably lose your house if you have one, but all your other possessions like your flatscreen, Chanel jacket, margarita maker and sub-zero remain yours. You just don't have to continue paying them off. And now that your house is worth less than you're paying for it, squatting there for free is a welcome relief from the burden of ownership.
Sound too good to be true? Well, there is a catch. It'll cost you. In order to declare bankruptcy, there's a fee and you'll probably need a lawyer, which usually costs $5,000 - $6,000 (which if you had it, you wouldn't need to declare bankruptcy). So before you enter into an arrangement with any lawyer, make sure he or she accepts credit. If you can't find a willing lawyer, try bartering. Sure, you may have to sacrifice your first born child, but you're doing it for your child's own good (bankruptcy law is booming--he/she shall not want).
The other option is to file the initial claim yourself and go to law school. You'll earn your degree before the case comes to court.
The sooner you file, the sooner you can begin your new stress-free life and start stimulating the economy again. Rumor has it Narcisco Rodriguez's fall line is to die for and Apple is coming out with a new iPod any day now.
Dave Johnson: Maybe We Really Do Want Government to Make the Decisions
Before deciding whether or not government should make decisions let's look at the alternative. Not enough consideration is given to the real question: if We, the People don't make decisions, then who does?
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hey i got this info from onlinebkassist.com that you can file for bankruptcy without attorneys fees. do you know about this company?
Just a quick note in case anyone takes you seriously here....
1. You can declare bankruptcy for about $600. And if u are truly desperate and have no money, legal aid societies or local law schools will do it for free.
2. Your credit rting recovers far faster after a bankruptcy than if ou struggle to 'pay off' your creditors over years on a payment plan.
Funny stuff, Lesey!!!! Made my morning!!
Thanks! That's good info. I know people who paid $5,000 to file. It always gnawed at me that it would cost so much. I guess they went for a designer bankruptcy.
I've just been reading Lesley's other blog posts and they are really funny and laughter truly is the best medicine! What are you gonna do?
Buy some Ramen, and get ready for the revolution.
Thank you. You made my day.
OK I've just been told that in order to file, I would have to get current on my mortgage?
I don't understand...
It seems to me that a new type of bankruptcy needs to be enacted: Chapter 69. Here's how it works:
-- when you declare Chapter 69, your debtors begin deducting the amount they normally charge you in interest. For instance if you owe $ 25000 to BofA at 25 % interest, then after the filing, BofA has to deduct 25% APR from your balance for seven years. You would pay monthly payments of what you can afford. Same for mortgage, student loans and other debt.
-- if its health-care-related bankruptcy, the medical insurance company has to keep covering you and your family for a reduced monthly fee, no deductibles or copays.
-- if you owe the IRS, penalties and interest are reversed and you are given a nominal tax credit.
Write your congressman now (those not paid off by the banking/credit/health industries) and let's get us some relief!
great idea ! but I think I will charge a couple hundred pounds of good weed first... if i can just find a dealer who works on credit... i'll sell the house and rent a house in the country... for free ... and get a good truck .... then on to a lawyer , on credit of course.. or coarse..
There you go! You're thinking like a Wall Street exec now!
Dude you may be way high already, you'll need the banks permission to sell the house that is now worth way less than the mortgage?
They won't agree to allow the short sale forcing you into default....then you'll not be able to get the rental cause you've got bad credit numbers......so you'll need to get a big shopping cart...like maybe a tandem hook up of two together? Getting a good truck will be tricky too....at least I'll have a swank address living in my car...but it's a little small, way to small to invite Lesley Stern over for pasta and Chianti....but I agree that " Weed will get you through times of no money better than money will get you through times of no weed.!"
Do the weed shops in LA take credit cards?
hah... haven't heard that one in a long time... the fabulous furry freak brothers ... wish i could remember the cat's name.
If you charge up all your credit cards before declaring bankruptcy, the judge will throw your case out.
I watched Bush sign the "no bankruptcy reform' and not only will you have trouble paying a lawyer with a credit card! ( any lawyer stupid enough to do that, doesn't' deserve to be called one) your lawyer is legally responsible for reporting your assets and won't take a case with any flimflam involved.
You may be able to "squat" in your house, you may not. But you'd better find out what your real rights are. I went to my state bar credit counseling seminar...that's another thing, you will be required to PAY for credit counseling.
This is a rather dangerous and flip post and I wouldn't take much advice from it if you want to save your shirt.
You're absolutely right. I would advise anyone considering bankruptcy to try to comprehend the laws before filing (and consult with a lawyer if they can afford one), rather than to take the word of an article labeled "comedy" verbatim.
Lesley - don't discount the validity of comic advice these days. It's what is sustaining (or draining?) the republican party.
Hello! Hello! Comedy is rarely dangerous, unless you want to talk about the Republican Party these days.
Credit Counseling costs about $50.00 from a certified counseling agency, and you can get that suspended if you can prove hardship.
Sorry, but Ch.7 bankruptcy is almost impossible to qualify for via passing the "means test" which means your income has to be below your state's median income level. Ch.13 is like being under house arrest in a debtors prison for 5 years, but what you would expect given that it was largely written by MBNA lobbyists. The best solution is to move to Texas and just stop paying.
I'm pretty sure having no income qualifies you for chapter 7, which is the situation many Americans find themselves in.
This Texas solution is interesting, though. Except the part about moving to Texas.
I agree with the author AS LONG AS the author doesnt ever claim moral high ground against banks refusing loans to businesses and indivuduals these days.
With all these loser deadbeats around, the banks will be stupid to give away loans.
Ummm, aren't the banks among the biggest deadbeats of all? And isn't one of the problems that even with all the bailouts the banks are getting, they're not giving out loans, and choosing to use the funds to pay bonuses, decorate their offices, buy jets and other failing banks for the tax credits? Claiming moral high ground over the banks is sort of like claiming moral high ground over Bernie Madoff.
The bursting of the housing bubble and collapse of our econy was planned and executed by the Wall Street/OPEC/Federal Reserve/SEC/Congress cabal. That is why the Congress removed bankruptcy protection for the little people a couple of years ago while making it easy for the giant corporations to screw their employees and creditors. You used to be able to keep a little money when declaring bankruptcy. Now they take everything and you still owe them. Congress paved the way for the wealthy one percent to grab what little they don't already own.
I'm not sure if they planned it or stumbled greedily. But it's clear that a declaration of moral bankruptcy is long overdue.
I believe it was a gamble that would pay off whatever the politcal response, because they knew, especially the Goldman Sachs boys who toddle in and out of government like clockwork, that they'd come up with a disaster so sweeping it would guarantee a government bail-out of some stripe: if government had chosen to make good on the bad mortgages, the usurers in charge would have gotten back all the money they lent plus the interest, and now, as the government opted to instead vouchsafe the insurance claims resulting from mortgage crisis, and the derivatives and other exotic financial instruments, they get paid many multiples of what they would have made had everybody managed to keep up their toxic mortgage payments. Heads they win, tails they win.
Essentially everybody is only one banker away from bankruptcy: look at the Bernie Madoff investors, many of whom were actually bankrupt for a decade, except nobody knew it; we as a country are bankrupt, too; that's what Congress's Annual Raising of the Debt Limit's about. People ruined by subprime mortgages are in the same boat, although how to allocate all that blame is debatable. There are con artists and idiots aplenty on both sides of the conference table.
Alas, though, Lesley's right, and the "smart" ones among us game the system every which way; bankruptcy's by no means the only one. The "too big to fail" idea works on the individual scale, too -- a bank would in principle want to settle a great big bad debt for a dime on the dollar than force a big creditor into formal bankruptcy, but the same isn't true of small fry (who, as LS points out can't afford the pricey lawyers who can actually cut a putably sensible deal.)
The scary thing is, we lionize these people for figuring out how to exploit us.
I would lionize anyone who could figure out how to exploit them back. So far, all I can come up with is a massive, organized default.
Exactly correct.
Why after so many years of supporting their corruption am I now enslaved to a mortgage of $258,000 on a property they say is now worth just $175,000?
Now I MUST work to pay them and maintain their revenue stream or suffer? For how many years? Some say decades will pass before housing returns to the levels that most people paid or mortgaged their properties too at the urging of the corrupted bankers that wanted those refi fees.
Default is the only path to Freedom for millions of Americans and we're just even bigger fools if we don't stop paying them immediately and set ourselves free from enslavement. Thanks for this truth, I think I love you...
This is inaccurate. If you file Ch. 7, your mortgage company and car creditor can get relief from the stay (and proceed to foreclose/repossess) just 2 or 3 months after you file. If you file Ch 13 and don't make payments, your case is dismissed within 2 to 3 months. Some people try to scam the system, and they create a headache for us, but it doesn't last years, and you can't do it without repercussions. We know what it looks like when people try to abuse the system like that.
I realize this is satire, but people having misconceptions about bankruptcy creates a lot of extra work for me in my job. An abusive filing might buy you three months, not a year, and it can prevent you from succeeding in an honest bankruptcy case down the road.
What if I file Chapter 9 - would it get me in a Fellini movie as an extra? I could be one of the poor wastrels napping in the alley as the ingenue lilts by....
Hi nightowl, I'll be honest, I've read the bankruptcy laws and they confused the heck out of me. But I can tell you that I've heard of several families who declared in CA and have been living comfortably in their homes for almost a year. At any rate, I'm sorry if I made your job more difficult (I'm assuming you're in a bankruptcy related field). I imagine this is an incredibly busy time of the millennium for you.
There is A LOT that is inaccurate in this blog.
The point, however, is that bankruptcy is an important social tool that should not be stigmatized. It never ceases to amaze me how commercials on TV say things like "Don't declare Bankruptcy; pay us a fee and let us negotiate your debts for you".... Why on earth would anyone choose one of those "debt management counselor" services?
Bankruptcy is a great tool for the debtor who is no longer able to pay debts when owed.
Those debt management counselors are awful. Aren't they owned by the banks?
Dammit. I feel it necessary to put away my Funny Hat and instead wear my Pontificant's Hat. I'd like to request that jhNY and Aaror look beyond their narrow subjective experiences and out to the bigger picture. The Financial Services Industry (FSI) is now functioning as the END, not the MEANS. To put it another way, we no longer produce goods and services with the ASSISTANCE of the FSI, NOW the FSI extends its USURIOUS reach into each and EVERY PART of the ECONOMY. But, let's not be naive. We are ALL (or nearly all) greedy people--terribly pleased to earn a 25% return on our Mutual Funds, without ever considering what is actually being done to generate that revenue. Now one could hope that those in power and/or positions of responsibility would work toward the "Greater Good", and look for reasonable yearly ROI as part of their corporate strategy, but THAT'S NOT WHAT WE'VE DEMANDED.
We've demanded 'over the top' and 'every man for himself' capitalism, and that's what we've gotten.
If I ever get a 25% return again (return on what I have to ask) - what will actually be being done then is some serious shopping! Hermes scarves all around! That's what we are most concerned about. Who gives a crap who gets poor in the process.
Are you saying this is all my fault?
what? that I crave Hermes? I don't suppose that is your fault. It is probably the fact that I'm a wasp from the south. Can I blame that on you? Oh, maybe your reply isn't about me. dammit! It's always about mememememe!
I've been blaming the wrong people??
Dammit Resolute Bob, but why in the world are you trying to roil me into some debate I never wished to participate in? What I said in my response to Aaror below is a fact-- most people in serious credit card trouble have gotten there by losing employment or having to to pay medical bills their insurors wouldn't. I'm not advocating this-- just pointing it out.
And I have no mutual funds or retirement beyond whatever Social Security will send me by the time I need it, and I haven't participated in any demand for over-the-top capitalism ever, nor can I count myself one of its beneficiaries. Look for a fight elsewhere.
If I was looking to pick a fight, I would have been far more direct with you, and less philosophical. My frustration has to do with people looking at the symptoms of our financial woes, rather than root causes. Why do we (citizens of the United States) in large part think we can get something for nothing? How is it, that after seeing other World-leading countries in the past do the very same thing, that we think we can take $100 worth of goods or services and magically make it worth $175, so that people (from the Wall Street broker to the 401K account holder) can reap enormous rewards from goods and services that they had NO PART in creating? A reasonable return for goods and services is no longer enough--and that demand is not sustainable. It's very annoying that we can see the bad road we're headed down, but seem not to have any will to stop it.
Well I declare! as my grandmother used to say...
But what kind of example would I be to the younger generations if I did this? Holy mackeral, they would look at me like I was a, um, ah, banker or (god forbid) mortgage broker.
I shudder at the thought....
Don't worry about the younger generation. They'll love and respect you as long as you send them great birthday and Xmas presents every year.
Will you check with your friend, Pauper, to see if he's willing to take on a roommate?
Pauper has moved into a homeless shelter. Living with his parents was too depressing.
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