[excon]

Hello:

This isn’t a question, but I hope is brings a response. We’ve had lots of people here lately who don’t understand what happens when they don’t pay their bills. I have some advice for them that I’m sure some of you will disagree with. Let’s see.

I’m a black and white kind of guy. I see the world in those terms. It makes it easier for me when I don’t have 52 choices to make – only one. So, I think you should be either a bill payer – or not - and nothing in between.

Therefore, if you’re broke (ok, not broke – but bouncing along the bottom, about a week away from being broke), and can’t pay your bills, you should do one of two things, (1) STOP paying all of them, go underground, make yourself judgment proof, OR (2) change your situation so that you can pay ALL the bills. Anything in between is a recipe for disaster.

I don’t recommend stiffing people and going PERMANENTLY underground. However, it IS a way one can gather up the resources to actually PAY the bills, and make a new start. But, if one stays in a netherworld where they keep trying to work, and creditors keep garnisheeing their money, they’ll be stuck in that rat trap FOREVER.

Prior to Bush, bankruptcy was the route these people could have taken – but he took that away, and to my mind, is forcing people to follow my advice (go underground).

excon

[s_cianci]

When was bankruptcy taken away? That's news to me. My wife and I had a bankruptcy discharged 5 years ago due to increasing credit balances that we were unable to keep up with. Most of it originated from legal fees and child support arrearages that I had to pay, all of which transpired during 1997-98, shortly before we got married. One thing to our advantage was that we owned our own home, so we were able to use the equity in that (which was shielded under the bankruptcy law in effect at the time) to refinance some of our remaining debts, rebuild our credit and get "back into the fold", so to speak. Our credit rating still isn't top of the line but is getting better day by day. In a lot of cases, people have changing circumstances in their lives which renders them unable to pay their debts. I believe that a certain measure of compassion is called for in such cases and there should be legal channels available to these people to get them back on their feet. After all, the profits that creditors make on interest charges doesn't exactly leave them in the red if, say after paying 15 years worth of a 30-year mortgage, something happens such as the customer losing their job or other circumstance beyond his/her control that renders them unable to pay, at least according to the original terms. Typically when a 30-year mortgage is paid off, the borrower has paid back approximately 3 times the original amount borrowed. That's a profit margin of 67%! Not too many other businesses operate at such as high margin. Certainly that leaves them enough of a cushion to cover those borrowers who default, either through legal channels or by going "underground." A similar argument can be made for other types of creditors as well.

[Fr_Chuck]

And yes sadly most people don't change the problems that cause them to get into debt, spending or borrowing money they don' have a resourse to pay back.

It can be very simple, don't buy it , if you can't pay for it, if you can't afford a new sofa, that old one, or that one for 30 bucks at the good will can do just fine.

I drive a 1988 chevy pickup, I ran my last truck over 300,000 miles and it still started on first turn when I sold it. My current truck I put a new engine into instead of trashing it. But guess what I don't have a car payment on it.

And don't use credit cards, if you have to have one, pay it off at the end of each month or don't use it.

If you make 40,000 a year you don't drive a 30,000 car or live in a 400,000 house. I see it happen all the time. And it starts in college, and we all see it on here every day, the first words are, I have these student loans, or they want to borrow more money to go to college.

I know a doctor in Nashville, who has just finihsed medical school, he owes almost 400,000 his first day he is a real doctor. Now he will earn to pay it off but how long and at how much interest. But instead of living in a small home to pay off this bill, he know has to move into a million dollar house, drive that 50,000 car and so on. He will stay in debt for the next?? Years.

I think sometimes we need to hold some lenders to blame and look at the laws allowing them to give credit cards to college freshmen or loaning a persons years salary on a car and such things.

[excon]

Hello again:

I wrote a book on how not to get into debt. It's one page, and the bottom half of the page is empty. The top half says, "Don't buy anything unless you have the money".

Ok, OK, you can buy your house on credit.

excon

[J_9]

I agree with you Excon. I refuse to buy anything unless I have the cash, or someone else buys it for me! :p

Oh, yeah, I did get my house on credit though!!

[Dr D]

I beg to differ with the sentiment expressed by s cianci regarding mortgages. He stated that the profit margin is an outrageous 67%. While a person with a $100,000 mortgage @6.5% will repay $227,544 over its life, remember that the extra $127,544 is paid for the use of that money for 30 years. Considering that the mortgage servicer (who collects payments, pays taxes & ins and deals with delinquency) is paid about .5% per year, the return to the investor is only 6%. If a person choses not to pay this interest, they can live in their van while they save up enough money to pay cash for the house.

[ScottGem]

First, I don't agree with excon that there are only two options. As a former collector and skip tracer, I believe there are multiple options available. Most creditors do understand that hardships can happen. The debtor who maintains contact and makes a clear good faith effort to make payments will be cut a significant amount of slack. It's the ones who stop payment and run from their debts that the creditors go after with a heavy hand.

I've had some periods of unemployment where money was very tight but I always managed to keep payments going and maintain a good credit rating.

I do agree that Bush has made it harder to get debt discharged.

While I agree, in prinicple, with J_9 and Chuck about not buying what you can't afford, I don't think its as easy or simple as they state. I'm not happy to admit that I'm pretty heavily in debt. Not counting mortgage debt, I'm in debt for more than half my annual earnings. I have almost no savings or investments other then 401K and house. I realize, I'm paying a great deal of interest, but, at the same time, I've also had a fairly good life. Nice home, my daughter is almost finished with college (she gets her Masters in May), we all have cars, we go away on vacation at least 1 week a year.

Once my daughter graduates my expenses significantly decrease. Which will make things easier, especially if you stay home and starts paying for room and board. I am managing my debt and it is going down. So it is possible to do. If the government can survive on deficit spending so can I.

I also agree with Dr D. While the amount of interest paid for a mortgage over the term of the loan seems large, its not all profit for the lender.