I read an article in the Washington Post on Sunday written by a reporter complaining about bankruptcy laws . She cited one couple that filed for bankruptcy and was told by the court that any money had to go to the debtors before their church, and how unfair that is. This really takes place during filing Chapter 13 bankuptcy. Basically any income other than "reasonable expenses" must be paid to your debtors over 3-5 years.
I don't really want to argue this, but I would like a little clarification from religions where tithing exists. I personally can't imagine a church wanting their members to give money that they can't afford to give. In fact morally I would think they would insist that the debts be paid first.
I have no problem with tithing. Especially considering how much money most Americans "tithe" to the gods and godesses of Hollywood each year.
Hmmm I need to think about that for a bit. It was my impression you should still pay your tithing on your income even though most of the income ought to go towards paying back your debts. With how much literature my church has put out about staying out of debt and getting out of debt, I'm suprised I do not know for sure how they address the tithing issue.
edit: You might be able to argue within Mormonism at least that the believe we should be subject to kings, majestrates, etc and rendering unto ceasar would indicate that until the debt is paid as the govt has dictated the nature of how payment ought to be made, you are exempt from tithing until the debt is paid. But that is a possibility NOT in anyway to be considered doctrine.
Posted by King of Men (Member # 6684) on :
Aw, poor babies. They have to give money to the people they ripped off, before the church that is the mainstay of their lives? How terribly nasty of the court. Persecution of Christians!
Posted by Dagonee (Member # 5818) on :
I'm not sure how I feel about the rule or the ethics of donating when one is in bankruptcy. I do think that the difference in treatment needs to be remedied.
From the perspective that this is a change that was almost certainly unintended by Congress (or at least many members), and leads to disparate treatment (in fact, harsher treatment for those paying more of their debts), I think a change is needed. No real strong feelings on which way it should go.
I do really like Michelle Singletary. She has taken a lot of flack recently for urging people to pay debts even when they can get out of them. I like the way she refuses to separate morality and money, even when I disagree with a specific application. For example, she actively discourages people from refraining from saving for college because it hurts financial aid options. She gives two reasons, the purely financial one (this is a very risky strategy) and the ethical one (financial aid is designed for those who can't save up). She does make recomendations on the form of savings that include an analysis of impact on aid.
At the same time, she has called for substantially increased financial aid to be available and for restructuring student loans to allow more people to take public service jobs.
I recomend anyone looking to redo their finances to read her back columns. I keep meaning to get her book, but keep forgetting.
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by King of Men: Aw, poor babies. They have to give money to the people they ripped off, before the church that is the mainstay of their lives? How terribly nasty of the court. Persecution of Christians!
KOM: Ill remain civil, but for SOME Christians it is believed that the paying of tithing guarantees that God will assist you in your finances. They COULD be under the mistaken belief that if they cannot pay their tithing then God will not help them.
I suppose that just gives you further cause to scorn them, but I doubt they are trying to screw their debtors over by flushing all their finances into a church fund.
Posted by Stephan (Member # 7549) on :
quote:Originally posted by Dagonee: I'm not sure how I feel about the rule or the ethics of donating when one is in bankruptcy. I do think that the difference in treatment needs to be remedied.
From the perspective that this is a change that was almost certainly unintended by Congress (or at least many members), and leads to disparate treatment (in fact, harsher treatment for those paying more of their debts), I think a change is needed. No real strong feelings on which way it should go.
I do really like Michelle Singletary. She has taken a lot of flack recently for urging people to pay debts even when they can get out of them. I like the way she refuses to separate morality and money, even when I disagree with a specific application. For example, she actively discourages people from refraining from saving for college because it hurts financial aid options. She gives two reasons, the purely financial one (this is a very risky strategy) and the ethical one (financial aid is designed for those who can't save up). She does make recomendations on the form of savings that include an analysis of impact on aid.
At the same time, she has called for substantially increased financial aid to be available and for restructuring student loans to allow more people to take public service jobs.
I recomend anyone looking to redo their finances to read her back columns. I keep meaning to get her book, but keep forgetting.
In regards to Michelle Singletary, I second eveything Dagonee said. It is sort of why this article surprised me.
Posted by King of Men (Member # 6684) on :
Ah, so their tithing isn't done for reasons of faith and charity, then, but only out of self-interest? Well, that's not very nice, is it? And if it is out of charity, well, charity is a fine thing, but not an obligation. While if you've borrowed money, then you have an obligation to repay it. If that means your god gets pissed at you, well, that's just too bad; you borrowed the money, deal with the consequences. Staying on good terms with your god is not more important than personal integrity - or perhaps you believe in "Lying for Jesus"? Indeed, the linked columnist quotes the Bible for this : "The wicked borrow, and do not repay."
Posted by ketchupqueen (Member # 6877) on :
I believe that our church does not encourage members to file for bankruptcy, at all (AFAIK), unless there are some seriously unusual circumstances. But I don't know what they would be. In most cases, I think the Church of Jesus Christ of Latter-day Saints and the leaders thereof would counsel people to pay off their debt rather than file for bankruptcy. I've heard on several occasions that many consider paying your debts part of "dealing honestly with your fellow man" (which is important if we want to participate fully in the works of our church.)
Posted by katharina (Member # 827) on :
I read that article in the Post as well. My favorite part of the article was where the last paragraph quoted Psalms admonishing people to pay their debts. Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by King of Men: Ah, so their tithing isn't done for reasons of faith and charity, then, but only out of self-interest? Well, that's not very nice, is it? And if it is out of charity, well, charity is a fine thing, but not an obligation. While if you've borrowed money, then you have an obligation to repay it. If that means your god gets pissed at you, well, that's just too bad; you borrowed the money, deal with the consequences. Staying on good terms with your god is not more important than personal integrity - or perhaps you believe in "Lying for Jesus"? Indeed, the linked columnist quotes the Bible for this : "The wicked borrow, and do not repay."
KOM: In all the time you've spoken with me can you honestly say that I believe in not paying my debts? Or lying for Jesus? Anyway,
Its more, in the act of giving back to God what is already His, you are cultivating selflessness, and one of the promised blessings is "He will pour out a blessing that you won't have room to receive." Some interpret that to mean your finances, or your available food, Christianity is not "Do this and get bribed, or else its the fires of hell for you." Its "Do this because it will make you more like God, and he is truely happy."
Some people do keep the commandments out of fear and out of a sense of bribery but I doubt you can find God endorsing the practice.
Posted by Amanecer (Member # 4068) on :
quote: I believe that our church does not encourage members to file for bankruptcy, at all (AFAIK), unless there are some seriously unusual circumstances.
This statement seems to assume that somebody would file for bankruptcy without seriously unusual circumstances. While there may be a very few unscrupulous people that do this, they account for a tiny, tiny, tiny percentage of the people that file for bankruptcy. I believe around 90% of bankruptcies are caused by health problems, job loss, or divorce where their finances get so messed up it's virtually impossible to get out of debt. Unless you're saying that 90% of bankrupticies are seriously unusual, I think your statement is off. And while the LDS church is excellent at providing aid to help people avoid the point where they can't get out of debt, they do encourage bankruptcy when that is the case.
Posted by BlackBlade (Member # 8376) on :
I'd disagree I think the majority of bankruptcies are a result of bad business planning, lack of good budgeting and prioritization.
All I've got is anecdotal evidence but every bankruptcy I can recall I can clearly see where the financial plan was lacking and it all came crashing down.
I admire stories of folks who work their butts of years to repay debts rather then simply declaring bankruptcy and walking away from it. I have family that took the latter route and it makes me sick.
Posted by ketchupqueen (Member # 6877) on :
I'm talking about personal, not corporate bankruptcy, and there are specialists in my ward, at least, who will help people work out a plan to get out of debt, including utilizing state and local programs to pay back medical debt, etc. Also, in times of health problems or job loss the Church can help with medical expenses, rent, food, etc. if you can't afford it, and most local leaders would prefer you ask for that help than go into debt.
I have heard many times from our local leaders, at least, that bankruptcy should be avoided if at all possible, and to go to your bishop if you are in financial trouble so that you can (hopefully) figure out a way to get out of trouble.
Posted by Icarus (Member # 3162) on :
I agree that people should pay their debts, because they have already received the goods or services, and so if they do not pay, they are, in essence, stealing. I think "not stealing" needs to come before "tithing" or "charity." I see not paying your debts as more a sin of commission than ommission, if you will.
But I see no need to be an arrogant, insulting jerk. Posted by katharina (Member # 827) on :
Tithing is first. Tithing, then savings, then bills, then fun stuff. You'll need the Lord's help to get out of debt, and this is a pretty good place to declare where your ultimate loyalty lies.
The first answer would be: don't get into debt in the first place. What about people with mortgages and student loans? Should they also not pay tithing because they owe money? I think people should not get into debt in the first place and then cut all fun stuff until they are out when the worst happens, but tithing doesn't count as fun stuff.
Posted by Amanecer (Member # 4068) on :
Black Blade, I don't have the time to look up the statistics right now, but I guarantee that 80- 90% of personal bankruptcies are because of the three reasons I listed. If you're interested, later tonight I'll try and scrounge up sources.
I think when it comes to bankruptcy, it's very easy for people to say it would never happen to them. They're not irresponsible like those people that make you sick. But when something horrible and unexpected happens to you and yours, bankruptcy is sometimes the only way out. People should absolutely do everything they can to try and prevent against disaster, but that still doesn't provide any guarantees. Unless the government moves to socialized health care, mandatory prenups, and better unemployment coverage, there are always going to be a great deal of people that go bankrupt for legitimate and completely unshameful reasons.
Posted by Stephan (Member # 7549) on :
quote:Originally posted by katharina:
The first answer would be: don't get into debt in the first place. What about people with mortgages and student loans? Should they also not pay tithing because they owe money? I think people not get into debt in the first place and then cut all fun stuff until they are out when the worst happens, but tithing doesn't count as fun stuff.
Oh, I would never say someone should use their mortgage alone as an excuse to get out of tithing if that is part of their faith. But when a budget has been stretched thin with just the basic living expenses and you have debt, I think tithing should be behind those.
Posted by katharina (Member # 827) on :
I think that getting into debt that cannot be gotten out of is not good as well. Bad things happen, but that's the point of saving for the rainy day. I don't think it's the government's job to remove the obligation to save for a rainy day.
I'm glad that bankruptcy laws are there - they are essential.
Isn't the average credit card debt for American households something like $6,000? That's a huge amount - that's more than 15% of the average annual income. If that's an acceptable burden of debt, then no wonder a crisis will put someone into a financial tailspin.
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by Amanecer: Black Blade, I don't have the time to look up the statistics right now, but I guarantee that 80- 90% of personal bankruptcies are because of the three reasons I listed. If you're interested, later tonight I'll try and scrounge up sources.
I think when it comes to bankruptcy, it's very easy for people to say it would never happen to them. They're not irresponsible like those people that make you sick. But when something horrible and unexpected happens to you and yours, bankruptcy is sometimes the only way out. People should absolutely do everything they can to try and prevent against disaster, but that still doesn't provide any guarantees. Unless the government moves to socialized health care, mandatory prenups, and better unemployment coverage, there are always going to be a great deal of people that go bankrupt for legitimate and completely unshameful reasons.
I'm always game for illumination. I'd appreciate the effort.
Posted by TomDavidson (Member # 124) on :
quote:You'll need the Lord's help to get out of debt...
Leaving aside the issue of whether it's ethical to bribe the Lord in this way, I need to point out that I got out of debt without the Lord's help.
Posted by Rappin' Ronnie Reagan (Member # 5626) on :
With personal bankruptcy do the people have to pay back all the debt eventually? I was under the impression they didn't have to, since that's the way it seems to be in corporate bankruptcy from my experience of it. When Delta went into bankruptcy a couple years ago they owed my dad a lot of money from contract work and only had to pay him around 10%, which has left us in debt up to this day. So I'm not a big fan of corporate bankruptcy laws.
Posted by King of Men (Member # 6684) on :
quote:Originally posted by BlackBlade:
quote:Originally posted by King of Men: Ah, so their tithing isn't done for reasons of faith and charity, then, but only out of self-interest? Well, that's not very nice, is it? And if it is out of charity, well, charity is a fine thing, but not an obligation. While if you've borrowed money, then you have an obligation to repay it. If that means your god gets pissed at you, well, that's just too bad; you borrowed the money, deal with the consequences. Staying on good terms with your god is not more important than personal integrity - or perhaps you believe in "Lying for Jesus"? Indeed, the linked columnist quotes the Bible for this : "The wicked borrow, and do not repay."
KOM: In all the time you've spoken with me can you honestly say that I believe in not paying my debts? Or lying for Jesus?
No, obviously I know that you do not believe in those things. But that's where your post was going, and by pointing this out, I had hoped to make you reconsider.
quote:Its more, in the act of giving back to God what is already His, you are cultivating selflessness, and one of the promised blessings is "He will pour out a blessing that you won't have room to receive."
Well, that makes no sense. It's one thing to give what's yours; but if you are bankrupt, then we are speaking of money that's not yours to give! How are you 'cultivating selflessness' by giving away other people's money in the hope of getting a blessing?
quote:Some people do keep the commandments out of fear and out of a sense of bribery but I doubt you can find God endorsing the practice.
Well, this is obviously a place where we have different assumptions and are never going to agree. Since your god doesn't actually exist, it 'endorses' whatever the people who believe in it do in its name.
Posted by BlackBlade (Member # 8376) on :
quote: Well, this is obviously a place where we have different assumptions and are never going to agree. Since your god doesn't actually exist, it 'endorses' whatever the people who believe in it do in its name.
Fair enough
quote: Well, that makes no sense. It's one thing to give what's yours; but if you are bankrupt, then we are speaking of money that's not yours to give! How are you 'cultivating selflessness' by giving away other people's money in the hope of getting a blessing?
Again I have not established my personal views on the matter, you commented on a possibility. I said, "Hmmm I need to think about that for a bit."
But personally speaking I think I am in your camp in regards to debt. I think its right to pay back your debts as you do not really have income until you do, thus you can't be tithed.
Posted by Stephan (Member # 7549) on :
quote:Originally posted by Rappin' Ronnie Reagan: With personal bankruptcy do the people have to pay back all the debt eventually? I was under the impression they didn't have to, since that's the way it seems to be in corporate bankruptcy from my experience of it. When Delta went into bankruptcy a couple years ago they owed my dad a lot of money from contract work and only had to pay him around 10%, which has left us in debt up to this day. So I'm not a big fan of corporate bankruptcy laws.
For personal bankruptcy it depends on the income. Lower income people get to have non-secured debt (credit card for instance) wiped clean. Higher income have to give anything they reasonably can to their debtors for a set amount of years. (Dagonee feel free to correct me.)
Posted by MrSquicky (Member # 1802) on :
If I understand the issue correctly, it's not that you are absolutely prevented from tithing if you are in debt, but rather that you are prevented from doing so and receiving bankrupty protection. That's a very different thing, at least to me.
I mean, if I understand this correctly, if you really believe that it is more important for you to give money to the church, that option is still available to you, just at increased personal cost, i.e. you don't get bankrupty protection.
Posted by Dagonee (Member # 5818) on :
quote:I mean, if I understand this correctly, if you really believe that it is more important for you to give money to the church, that option is still available to you, just at increased personal cost, i.e. you don't get bankrupty protection.
More accurately only the more forgiving form of bankruptcy protection is available to you. My major problem with the policy is that it was put in place by accident. It's such a sweeping change that it should have been addressed by the legislature directly.
Not that this is different from hundreds of other changes that get passed each year, of course. Stupid legislatures.
quote:Dagonee feel free to correct me.)
Don't know the details. In very (very, very) general terms, one forgives debt but liquidates all assets and the other puts debtors on hold, puts the bankrupt party on a strict budget, and allocates the rest to creditors. I don't know what the second does to assets.
Also, lots of assets are protected. I just don't know which ones. I'm most likely wrong about something in this description.
Posted by Tante Shvester (Member # 8202) on :
quote:Originally posted by TomDavidson: I need to point out that I got out of debt without the Lord's help.
Oh, He told you that, did He? Posted by aspectre (Member # 2222) on :
"the linked columnist quotes the Bible for this: The wicked borrow, and do not repay."
The Bible also forbids usury. Most bankruptcies are driven by usurious lending practices as defined by the various states' laws, from which financial corporations are exempted.
[ November 21, 2006, 10:09 AM: Message edited by: aspectre ]
Posted by King of Men (Member # 6684) on :
quote:Originally posted by Tante Shvester:
quote:Originally posted by TomDavidson: I need to point out that I got out of debt without the Lord's help.
Oh, He told you that, did He?
Y'know, if I had made such a comment as this on somebody's theist beliefs, winkie smiley or none, people would jump all over me about what an arrogant jerk I am. But perhaps there's no need to show respect for the beliefs of an atheist?
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by King of Men:
quote:Originally posted by Tante Shvester:
quote:Originally posted by TomDavidson: I need to point out that I got out of debt without the Lord's help.
Oh, He told you that, did He?
Y'know, if I had made such a comment as this on somebody's theist beliefs, winkie smiley or none, people would jump all over me about what an arrogant jerk I am. But perhaps there's no need to show respect for the beliefs of an atheist?
You are welcome to call people out when you feel they are rude or ungracious towards your beliefs or any atheists.
Posted by pH (Member # 1350) on :
quote:Originally posted by katharina: The first answer would be: don't get into debt in the first place. What about people with mortgages and student loans? Should they also not pay tithing because they owe money? I think people should not get into debt in the first place and then cut all fun stuff until they are out when the worst happens, but tithing doesn't count as fun stuff.
Does that mean that people shouldn't buy houses unless they have $300,000 in cash lying around? 'cause that's how I'm reading what you're saying.
-pH
Posted by Tante Shvester (Member # 8202) on :
quote:Originally posted by King of Men: Y'know, if I had made such a comment as this on somebody's theist beliefs, winkie smiley or none, people would jump all over me about what an arrogant jerk I am. But perhaps there's no need to show respect for the beliefs of an atheist?
KoM, when have I ever jumped all over you for your beliefs? I totally respect your beliefs, and your right to express them here.
I intended my post as a bon mot, and had figured that Tom would take it as such. I have not often seen the same good will in your posts, or respect for other people's beliefs.
Before you start calling the kettle black, I suggest you check a mirror, Pot.
That said, if Tom did consider what I wrote to be an inappropriate mockery, then I sincerely apologise to him. I was not intending disrespect.
Posted by Dasa (Member # 8968) on :
Why not take the middle ground?
Keep accounts for how much you should have tithed, while paying your secular debts. Then, once you are out of trouble, you can give back the money ..with interest if you wish. I am sure the Lord is more patient than the lender.
Posted by BlackBlade (Member # 8376) on :
pH: Laying around? Thats just silly, you put your spare cash under your bed, DUH!
Posted by pH (Member # 1350) on :
quote:Originally posted by BlackBlade: pH: Laying around? Thats just silly, you put your spare cash under your bed, DUH!
It could be laying under your bed!
-pH
Posted by Bob_Scopatz (Member # 1227) on :
I do not see bankruptcy as a sin or immoral. It is the law of the land, first off. It is part of a system of laws governing financial transactions in this country and, while subject to some famous abuses, it is also part of a safety net built into the financial structure of this country.
What that means is that the interest rates that creditors charge already assume (and have for years) a certain level of bankruptcy.
During the years when they were buying Congressional influence to "reform" the bankruptcy laws, the major creditors were earning record profits. Despite the deplorable abuses of the bankruptcy laws.
So...let's get real here people.
If you could go without more than three paychecks without being in a financial hole deeper then you could reasonable escape from in a decade, I applaud you. That status would probably put you among the 1% most financially stable in this country.
For most people, loss of one partner's income in a family, a serious illness (even WITH insurance in some cases), or just a bad setback at just the wrong moment (like your car getting wrecked and not having enough money around to pay your deductibles) is going to mean hardship and sometimes well beyond the breaking point.
You can moan all you want about how people shouldn't get themselves into these situations in the first place, but let's get a grip. How many people do you know living basic normal lives who you would say could survive a major financial hit and not be quickly thousands in the hole?
I know more people who would be homeless inside of 3 months without a paycheck than I do who could be stable.
And people who are just starting out are in the most precarious position.
And, truthfully, how many people get any sort of education on how to manage their credit? It's a lot easier to get a credit card than it is to even find a course on how to manage credit. Until you're in trouble, of course...
I think our bankruptcy laws are ridiculous, but the changes made recently are not making it better. They so favor the credit card companies and don't do anything for the consumers. Did the legislature stop predatory lending practices? No. Did they close the payday loan places? No. Did they cap interest rates? Sure...at 30%
Is it possible to stop pre-approved credit card offers from coming to you? Have you tried this? I have. It's awfully difficult. You practically have to be on a first-name basis with the credit reporting companies and renew your "do not solicit" orders periodically because they magically get "erased" so that the card companies can send you stuff unsolicited.
Do you know how difficult it STILL is to get your own credit info? Every person is entitled to a free report from each rating bureau once per year. But if THEIR records have a mistake in it on a crucial field, then you can't just order the report, you have to call them and play 100 questions and then they'll "research it" and send you a record. And you try to fix it? They don't have to fix the record. And even if they do fix it, if the same creditor that sent the bum information before sends another report (which some do monthly) then the bad info is RE-entered onto your record. It doesn't STAY fixed. Did Congress address any of that? NO! NO NO!!!
I'm not trying to say that people shouldn't be more responsible with credit, they should be. But let's fix some other aspects of the system at the same time.
They didn't because the bill that was passed was written by VISA. Check the history on it. Check who the major campaign contributors were to the "authors of record" in that committee. Seriously. This was the biggest boon to the financial industry in decades.
Arrrrrggghghhh!
Posted by Marlozhan (Member # 2422) on :
Amen on what Bob said.
Edit: Sorry about the long quote, wasn't thinking.
[ November 20, 2006, 07:24 PM: Message edited by: Marlozhan ]
Posted by King of Men (Member # 6684) on :
Edit : Never mind.
[ November 20, 2006, 08:02 PM: Message edited by: King of Men ]
Posted by Icarus (Member # 3162) on :
I think a couple of you are misreading Kat. I don't believe she was saying nobody should get a mortgage. I believe she was saying that the fact that mortgages are a fact of life, and that a serious setback can leave you unable to pay your mortgage, make the advice "don't get into financial trouble in the first place" an unsatisfactory answer to those who are in debt and believe they should tithe. I believe she was saying that debt is just about unavoidable, and that bankruptcy can be a matter of misfortune as much as irresponsibility.
Am I misinterpreting you, Kat?
That being said, I agree with King of Men, actually: that money isn't yours to give, if you're in bankruptcy. You are living with belongings you have not paid for.
Posted by Stephan (Member # 7549) on :
The only thing I disagree with Bob is towards the beginning of what he wrote. About building the cost of bankruptcy into the interest rate. Many businesses build shoplifting into their cost of doing business. Does that make it ok to steal from them? Insurance companies build fraud into your premium, does that make it ok to fake a claim?
Posted by Icarus (Member # 3162) on :
I don't know that Bob is saying that anything is okay, just that banks are not the victims here.
I will say that I have experienced the exact same thing with inaccurate charges reappearing on your credit report after you go through the effort of getting them off. I think that part of the system stinks. They have all the power. All a creditor has to say, pretty much, is "Yup. He owes us money," and you do. I expect there's a legal recourse, but who has the time, money, and energy to deal with that?
(Did anybody else cheer at the end of Fight Club?)
Posted by TL (Member # 8124) on :
quote:Many businesses build shoplifting into their cost of doing business. Does that make it ok to steal from them? Insurance companies build fraud into your premium, does that make it ok to fake a claim?
That's not the same thing at all. Bankruptcy is legal. It is legal to declare bankruptcy. It is not legal to commit fraud or to shoplift.
When I was a kid growing up, my dad was a coal miner -- and we went through some very rough years due to layoffs and labor disputes and strikes and more layoffs. Ultimately my parents had no choice but to file for bankruptcy. It was the last thing they would have ever chosen. Without bankruptcy laws, there would have been no mechanism by which my parents could have pulled themselves back up. I think we would have become homeless.
Bankruptcy is not theft. It can be abused, but it's such a drastic and devastating thing for most people to do, I can't imagine abusing it is a very common thing.
Posted by Bob_Scopatz (Member # 1227) on :
I'm not saying you should steal because the store builds the cost of pilferage into their prices. Nor am I saying that beating credit card companies out of money is okay. What it is NOT is it is not illegal. If you qualify for bankruptcy, the law is there to protect your assets and, basically, as a stop-gap against having debtor's prisons and work-houses like in the bad old days.
But c'mon. The law is blind to who the creditors are. You declare bankruptcy owing Visa $1,000 and the small businessman at the end of the street out of $1,000. The law says you pay them back at an equal rate. Even though VISA has been able to charge ALL its customers an interest rate that more than covers its anticipated losses for the year (record profits, rememmber!) and the small businessman might just go out of business himself for want of payment. Why is the law written that way? To be fair...of course. Under one definition of "fair."
Is that good for the economy?
Is it good for the economy to allow VISA to charge an interest rate as high as it does AND also let them write bills for Congress to pass protecting them from losses? Well...let's just say the convinced Congress it was the right thing to do.
I don't have a lot of sympathy for them, really.
The small business person who has people declaring bankruptcy and them losing payment for services and goods...you bet. That's horrible and it hurts the economy, the community, and real families.
Visa gets to declare those losses on their taxes.
The small contractor can too. If his business survives and makes enough of a profit that he needs to offset it with losses.
Look, I'm not even saying that bankruptcy laws didn't need some reforming. But the reforms we recently ended up with were pretty darned one-sided and it's not just me saying that. The Wall Street Journal had a series of articles on how bad it was for the US economy for Congress to have sold out to the credit companies. It SHOULD have been a national scandal. It would have been were it not for more pressing matters of terrorism. As it is, I think people are just now waking up to how incredibly ham-fisted Congress was when they revised the statutes.
I wasn't aware of this issue of tithing, and I really have no comment on it except to say that the discipline of tithing may make people more conscious of their spending habits and choices, and thus find that they are generally better off after getting into the tithing habit than they ever were before.
I think it's in churches best interest to help their parishioners deal wisely with money. If they can offer budgeting and financial management courses at low cost, that's a boon to parishioners that may just have a pay-off for the church too. But a church full of people who are always strapped for cash has bigger problems than just money woes. When people are stressed out over money, their relationships with each other start to fall apart. Spouse and child abuse increase. Alcoholism go up. All sorts of bad things.
And, at least for people who ARE active in the church, they are going to turn there for help in getting things back on track. A good church doesn't shun people in that situation, it helps them. Whether or not they can tithe.
Posted by katharina (Member # 827) on :
pH: Don't be ridiculous. There is a huge difference between consumer debt and a mortgage.
Bob, I don't see anyone advocating shunning or even suggesting it as an option. Can you show me where someone did?
quote:I don't believe she was saying nobody should get a mortgage. I believe she was saying that the fact that mortgages are a fact of life, and that a serious setback can leave you unable to pay your mortgage, make the advice "don't get into financial trouble in the first place" an unsatisfactory answer to those who are in debt and believe they should tithe. I believe she was saying that debt is just about unavoidable, and that bankruptcy can be a matter of misfortune as much as irresponsibility.
This is close. I do think mortgages are a fact of life, and student loans can be.
What is NOT a fact of life is consumer debt, and getting into consumer debt - owing anything to VISA at all that you can't pay back in a month - is setting yourself for financial disaster.
The $6,000 average consumer debt is not referring to a mortgage or medical bills - it's means you're spending more than you make, consistently. If American households had $6,000 in liquid savings as a matter of course instead of $6,000 in consumer debt as a matter of course, bankruptcies would dry up dramatically.
I know it isn't easy and things happen. However, the first step to disaster is taken that first month you don't pay off your credit card bill completely. That's avoidable. I think the easy credit Americans get into leads directly to the high bankruptcy rate.
[ November 21, 2006, 10:16 AM: Message edited by: katharina ]
Posted by kmbboots (Member # 8576) on :
I am relatively healthy and have good insurance. I have a decent job. I have no credit cards. I will never be able to afford a house. I am roughly $600 in debt for medical bills just from some minor procedures last month. I can't imagine what would happen, even with insurance, if I had something serious happen to me. I would use up my savings and be on the streets in 6 months.
Posted by pH (Member # 1350) on :
I have a friend who just turned 19 and has ten major credit cards. She is shocked that anyone would ever accept less than a $1000 limit on EACH CARD. She is $19,000 in debt without student loans (which she also has). I really, really want to know where she got the idea that this sort of thing was okay. What's even better is that she becomes hostile when she realizes that I DARE to pay for things with a debit card because apparently, I shouldn't be spending money that I have, or something.
-pH
Posted by katharina (Member # 827) on :
pH, isn't that terrifying? it isn't unusual at all, either. Posted by The Rabbit (Member # 671) on :
quote: I think the easy credit Americans get into leads directly to the high bankruptcy rate.
This is a very commonly held belief that isn't backed up by the facts. In the US, the leading causes of bankruptcy is illness. A Harvard study found that in 2001 half of all personal bankruptcies in the US were the result of illness and medical bills. The next leading cause of bankruptcy is divorce. Another study found that families with children were more than twice as likely as families without children to file for bankruptcy.
I know that there are people who a reckless spenders and who don't seem to grasp the basics of interest and debt. I know quite a few of these people and I am sure that there are bankruptcies that happen primarily because people don't know the basics of money management. But those are the exceptions and not the rule in bankruptcies.
Posted by King of Men (Member # 6684) on :
The question is, would those illnesses lead to bankruptcy without a prior history of credit card use? I don't know one way or another, I'm asking.
Posted by ClaudiaTherese (Member # 923) on :
Some perhaps not, given the provision of comprehensive healthcare insurance. The average hospital stay in 2002 cost more than $17,300, and it is now well up over $20,000, IIRC. The cost of a hospital stay can run up into the hundreds of thousands of dollars, although of course that is more rare.
Median household yearly income in 2005 was $46,326.
---
Edited to add: I am sure many people who declare bankruptcy do have some form of health insurance. However, I am concerned that much of such coverage is not what I would consider "comprehensive"; i.e., many out-of-pocket expenses, including high deductibles and pre-existing uncovered conditions.
Of course, once someone loses his or her job, usually the health insurance is lost with it, unless one can afford COBRA. (Without a job, that is rather difficult, as COBRA generally runs in the $600-$1000/mo range.) And then the pre-existing conditions clauses may kick in, even if you do get another job. Hard stuff.
[ November 21, 2006, 07:40 PM: Message edited by: ClaudiaTherese ]
Posted by The Rabbit (Member # 671) on :
KOM, I don't know but I can refer you to the Harvard study Here is a summary of the reports findings.
Posted by The Rabbit (Member # 671) on :
If find myself is a rather awkward position here defending people who declare bankruptcy. To the best of my knowledge I am the second most conservative person on the planet when it comes to debt and financially planning. I have never carried a credit card debt, never borrowed money for school or a car and I paid of the morgage on my home in record time. I am absolutely not one to justify consumer debt of any kind.
At the same time, I have read enough on the subject to recognize that the common stereotypes about bankruptcy are not valid. People who declare bankruptcy most likely have too much consumer debt, but they don't generally have more consumer debt than Americans who don't declare bankruptcy.
It's really easy for someone in my position to advise people never to borrow money on a credit card. But what would I do if after paying my utilities and my mortgage there wasn't enough money left to buy food? If I was on a really tight budget and the car needed a $500 repair or my child needed new glasses, what would I do? What would I do if my 4 children each came home from the first day of school with a list of $100 in school supplies that were required? If I was living from pay check to pay check and my child broke a leg, how would I make the copay?
Those aren't strictly hypothetical questions. I know people who've been in those exact situations. Invariably they always plan to pay those credit card debts off fast, but the reality is that next month is rarely better than this month and if you can't afford to pay your bills now, you probably won't be able to pay them plus interest next month.
People who have children young often really struggle financially. Young parents often overextend themselves in order to live in a neighborhood with good schools and so any crisis can devastate them financially. Is that a mistake?
At the same time, I think many in our society have lost track of the difference between necessities and luxuries. The average home size keeps rising even as the average household size drops. Children can share bedrooms without suffering irreparable damage. Many of my students think owning a new car is essential even while they are in college. Even things like a personal computer, which are very useful for an engineering student, aren't really necessities. A thrifty student can get along just fine using the computer labs on campus.
Bankruptcy is a very complicated problem. Part of the problem is that, in our economy, a persons earning power is usually lowest during the time of life when they have young children placing heavy demands on their time and resources. In addition, our culture tells us that wanting "the best" for our children is fundamentally different from being greedy so parents will justify going in to debt to get the latest thing for their child even when they wouldn't justify it for themselves. Part of the problem is that medical costs are out of control and that many safety nets which once existed, from extended family to community to government programs, are no longer viable.
I'm the 2nd to last person on earth who would recommend anyone go into debt, but still I think we have to look beyond the stereotypes before we condemn those who are in serious financial trouble.
Posted by The Rabbit (Member # 671) on :
One more thing, I'd like to comment on the original question. For many religious people the paying of tithes, alms and offerings is a crucial obligation. It isn't something you can do if you have excess, it is an important and essential religious practice. For those who believe in this principle, the offferings are made before even their basic needs are met. In this sense, it isn't any different than other religious observances like honoring the Sabbath, keeping a fast, prayer, dietary codes, holy days of obligation or any other religious observance.
Would you support a law that require a 7th day adventist to work on their Sabbath until their debts were paid? Would you support a law that required an orthodox Jew to eat pork until their debts were paid? Would you support a law that forbid fasting or prayer for debtors? Would you support a law that forbid Mormon's from attending the Temple until their debts are paid?
It doesn't matter whether or not you like the idea of tithing. It doesn't really matter whether or not you think church's are justified in asking a tithe of the poor. What matters is whether our laws will allow an individual to decide for themselves whether or not to follow any religious practice.
I don't think that bankruptcy courts should account for a persons religious commitments when calculating out debt payments made under bankruptcy. If the court only allows the person/family to retain enough money to pay rent, clothing, utilities, food etc, that amount shouldn't be changed to allow tithing. However, if the persons religious beliefs direct them to pay the tithing instead of buying new clothes or eat beans and rice so they can donate to the poor, it is wrong for our laws to forbid them from doing so.
Posted by Dagonee (Member # 5818) on :
quote:I don't think that bankruptcy courts should account for a persons religious commitments when calculating out debt payments made under bankruptcy. If the court only allows the person/family to retain enough money to pay rent, clothing, utilities, food etc, that amount shouldn't be changed to allow tithing. However, if the persons religious beliefs direct them to pay the tithing instead of buying new clothes or eat beans and rice so they can donate to the poor, it is wrong for our laws to forbid them from doing so.
Thank you. You've saved me the trouble of formulating my thoughts on this. I was unhappy with both sides of the issue until I read this, but hadn't taken the time to work out exactly why. Would you mind if I posted this on the weekly discussion the author of the OP article does each week (probably next week)? I'd like to see her thoughts on it.
Posted by The Rabbit (Member # 671) on :
You have my permission Dag.
Posted by Dagonee (Member # 5818) on :
Thanks. If I remember to do it and if she answers, I'll post her response back.
Posted by BannaOj (Member # 3206) on :
katharina in another thread about homeownership made the point to not exchange secured debt for unsecured debt. We bought our house (a definite fixerupper, but livable) four years ago. We were just out of college and so we did an 80-20 loan with no down payment. (80% fixed plus 20% variable rate home equity loan)
Recently with the housing prices going up in our neighborhood, we theoretically had gained 20% equity in the house. So we hustled to refinance our mortgage into a fully fixed rate loan, which I still believe was the right thing to do. We didn't take out any additional money or anything when we did the refinance (even though the loan company would have been happy if we did)
That was last winter. This spring the roof started leaking severely. The roof was less than 5 years old. However it was improperly installed by a fly-by-night company and there was no warranty.
A leaky roof is one of those items that can't be ignored. Unfortunately we *didn't* have 9K in savings to get a new roof. So we had to go into consumer debt and now we are stuck paying it off rather than putting that amount monthly into savings. It is at least a fixed rate loan, but since the price we paid for the house was already for a house with a new roof, (and it was inspected at the time of purchase... an improper installation shows up about the 4-5 year mark) unless we hold on to the house for at least 5 years it is unlikely we will recoup the amount in a sale.
We also have auto loans which will be paid off in another year, and our plan is to hit the remaining consumer debt hard once that monthly sum is freed up. Again, fresh out of college needing reliable transportation we had to go into debt. The first vehicle we had to buy new because they wouldn't finance us on a used vehicle, because we didn't have enough of a credit history because we were frugal college students that didn't use credit cards. The second vehicle we bought was used and at a fabulous price. But, in order for both of us to work, we needed cars to get there so it was a circular problem for debt. We bought our house in the best place we could for an investment, but as a result it was too cheap to be close to the public rail transit, and not low-income enough to be closes to the main bus lines... again a circular consumer debt problem. (And don't tell me to ride my bike Rabbit... I draw the line at bicycling 13 miles one way in winter snowstorms...)
Now there are some luxuries in our lives that could and would be cut summarily should a true emergency arrive, but we don't live outrageously beyond our means either. I *know* we are better off than most of the U.S. when it comes to consumer debt and we have good health insurance etc, yet if only a few things went wrong simultaneously, we could be in pretty big trouble. And we don't have kids and have two substantial full time incomes. I have no idea how someone with children would make it, because we aren't doing much more than getting by ourselves.
AJ
Posted by The Rabbit (Member # 671) on :
quote:(And don't tell me to ride my bike Rabbit... I draw the line at bicycling 13 miles one way in winter snowstorms...)
Bike and ice really don't mix. I really hope my earlier statements didn't come across this way.
Even though I do think many people spend too much on luxuries, that was not my point. I think most Americans get into debt for very legitimate things just like you did Anna. I can't think of many circumstance where people would be better off paying rent than paying on a mortgage. In the US, we have designed our communities and transit systems so that a car is a necessity for most people. While I find it ridiculous that its easier to get a big loan for a new car than to get a small loan for a used car, you didn't make the system. If I were in your circumstances, I can not say I would have made different choices. Its very easy for people to sit on the internet and criticize people who declare bankruptcy or have large debts. But when you look at the actual studies, you find that most people who declare bankruptcy aren't reckless spend thrifts. Most of them are like you and me but they've had worse luck.
The really sad thing is that the poorer you are, the higher interest you end up paying on most things. If your roof starts to leak and you don't have a great credit rating, you may have no choice but to put it on your credit card at 20% interest. If your credit is even worse, you will probably have to rent because you can't get a mortgage. When you run out of money before the end of the month, your only choice for feeding the kids may be an outrageous payday loan. Its a really vicious cycle.
Posted by BannaOj (Member # 3206) on :
Whoops sorry Rabbit... on that line about bicycling I meant to add a smiley face.... so you didn't take me too seriously. I wish there was some sort of winter HPV that one could warmly traverse city streets on though.
Your last paragraph gets to the heart of the matter. We are "wealthy" enough to have a decent credit rating... otherwise we'd really be screwed.
Another interesting parallel is life insurance. Term life insurance is better than nothing. Then there is the other life insurance that appreciates over time, but it costs a lot more. Now they've got hybrids between the two to help you bridge the gap (the plan we currently have is a hybrid...) but if you can't even afford term life insurance to begin with then what does one do?
Posted by BannaOj (Member # 3206) on :
Incidentally... if you ever do need to finance necessary home improvments, Home Depot has great fixed rate financing plans, tiered based on your credit ratings. They also offer a 25 year transferrable warranty on their roof installations too, and their roof installation prices was extremely reasonable for a quality install.
You can also pay it off, but leave the fixed rate line of credit open at a rate well below credit cards, and "re-use" it for another remodelling project too. Obviously it would be better if you paid it off and then saved up separately for another project, but if we decide to sell the house rapidly, it is what we would do.
Posted by Bob_Scopatz (Member # 1227) on :
katharina:
quote: Bob, I don't see anyone advocating shunning or even suggesting it as an option. Can you show me where someone did?
No. Nor did I say or mean to imply that anyone had.
I'm kind of sad that this is what you got out of my post. I was reacting to what I perceived as a negative strain in this thread where people are accusing religious institutions of having a somewhat mercenary attitude about tithing. I think the reality is pretty different from that.
Did you read into it a criticism of LDS tithing practices -- of which I know nothing and would not venture any opinion? Does someone's status in the LDS church depend on their tithing habits? Like do you no longer get to participate in some activitities if you aren't tithing?
Posted by Stephan (Member # 7549) on :
quote:Originally posted by BannaOj:
Another interesting parallel is life insurance. Term life insurance is better than nothing. Then there is the other life insurance that appreciates over time, but it costs a lot more. Now they've got hybrids between the two to help you bridge the gap (the plan we currently have is a hybrid...) but if you can't even afford term life insurance to begin with then what does one do?
Going off on a tangent- I sell life insurance and always recommend term, even though my commision ends up being less. A 20-30 term policy should be all anyone needs. After 20-30 years one should have enough in savings, kids should be out of college, and ones house should either be paid off, or close to being paid off.
I usually recommend either taking the difference in price between a term and a whole life policy and either saving it, or using it to buy more term insurance.
Hybrids, or return of premium policies, in my opinion are a waste of money. At least the ones I sell are. Basically they are a term policy, but you get all the money back after the 20-30 year term expires. They typically cost twice as much (again at least with my company). Saving the difference in a mutual fund over those 20-30 years will be a lot more profitable.
People have this idea that life insurance should be an investment. Its not, its so your family can survive on their own if anything happens to you.
The other thing to consider is long term disibility insurance. I would always tell someone to buy that BEFORE life insurance. A disabled spouse is a lot more of a burden on a family then a dead one, and disability is much more likely to occur. As stated before health reasons are a leading cause of bankruptcies.
Done my rant.
Posted by katharina (Member # 827) on :
Rabbit, that makes a lot of sense.
Bob, I did kind of read it as a criticism. I hadn't seen anyone advocating what you were decrying, so I wondered where it came from.
Posted by pH (Member # 1350) on :
quote:Originally posted by katharina: pH, isn't that terrifying? it isn't unusual at all, either.
I know. Unfortunately I'd never actually SEEN it before I met this girl. I mean, how do you counteract that? How do you explain to people what credit and credit cards actually mean before they turn 18 and start running amok? How do you keep teenagers from buying timeshares in Cancun (which is apparently another part of her debt)? I just keep thinking how completely screwed she's going to be once she has to start paying back student loans on top of everything else. She's already paying off one credit card with the other.
I also don't know how the heck she got all these credit cards in the first place, honestly. I have two cards (one a store card) and one line of credit, and they're all with low limits. I don't know if I could get into $19k of debt if I wanted to.
-pH
Posted by DaisyMae (Member # 9722) on :
As of late I have tended to refrain from getting into the sticky arguments, so I will just say to Katharina and Rabbit "Thank You" for making the statements I would have.
Posted by AvidReader (Member # 6007) on :
The worst part of debt is how much harder it makes it to get back out again. I budget $1,000 for each car in car repairs every year. This year, we needed $4,500.
Then my boyfriend quit his job. After I pay the rent in December, I'm out of savings and still have all the car repairs on the card.
I have no idea how I'll get any savings back since I'll be paying off the credit cards once he gets another job. If anything else happens, or if he doesn't get a job this month, I'll be putting bills on the card - even after I cancel the cable and long distance.
Maybe if we cut the grocery budget I can avoid it. I've been saying I want to lose weight. Looks like now's the time.
I may not have created the situation, but I did choose my boyfriend. So while I take responsibility for the situation (and $1,000 worth of binge shopping on the card) it's still nothing I did on purpose. I had a budget. The cards would have been paid off next year. Then life happened.
Posted by Dagonee (Member # 5818) on :
Michelle Singletary is interviewing an author in her chat today, but I tried to post the question anyway:
quote:Michelle, I'm not sure if you're taking questions on your other columns today, but I wanted to ask about the column you wrote last week about tithing while in bankruptcy. I agreed with your point, but something about the situation was nagging at me until I read this comment on a message board:
"I don't think that bankruptcy courts should account for a persons religious commitments when calculating out debt payments made under bankruptcy. If the court only allows the person/family to retain enough money to pay rent, clothing, utilities, food etc, that amount shouldn't be changed to allow tithing. However, if the persons religious beliefs direct them to pay the tithing instead of buying new clothes or eat beans and rice so they can donate to the poor, it is wrong for our laws to forbid them from doing so."
Then I realized what had been nagging at me was that I didn't like the idea that the court would set a different allowance for a household based on their religious practices. However, I really, really didn't like the idea of the court actively preventing someone from using a portion of their allowance in a charitable manner - in effect, forbid frugality in the name of charity. The above quotation clarified those two concerns for me.
I couldn't tell from your column if the courts were forbidding tithing at all or were not increasing the allowance for those who chose to tithe. Can you clarify? Thanks.
Will post her response if she gets to it, otherwise I'll submit again next week.
Posted by mr_porteiro_head (Member # 4644) on :
quote:That's not the same thing at all. Bankruptcy is legal. It is legal to declare bankruptcy. It is not legal to commit fraud or to shoplift.
I don't see how bankrupcy being legal makes it necessarily moral. There are lots of immoral things we can do which are perfectly legal or are even protected by law.
Posted by Dagonee (Member # 5818) on :
Her response:
quote:And I did see the questions about my tithing column. Couldn't get to them but I will at a later time (perhaps in the e-letter or a follow up column).
I do think that most commercial contracts are made with the implicit understanding that bankruptcy is a possibility, so unless one hides imminent bankruptcy or abuses the system to qualify, one is not being dishonest or taking something that does not belong to oneself.
The legal framework of contract is essentially a set of default rules that both parties agree to (although some may be contracted around). When two parties agree to a contract, they agree, for example, that impossibility of performance that meets certain legal tests will excuse a party from its obligations. Presumably both parties set their price in accordance with this expectation.
Similarly, when two parties agree to a contract, they agree that if the party that owes money goes bankrupt, bankruptcy law will determine how that money is repaid. Although the bankruptcy rule cannot be contracted around by mutual agreement (the impossibility rule can be), many contracts structure debt so as to enhance the creditor's priority as much as possible. And, of course, the interest rates charged price in this risk.
It's as if every contract has a clause atached to the payment provisions that says "unless I go bankrupt." So it's not per se breaking one's word to use the bankruptcy system.
Now, I do think it's possible to use bankruptcy in an immoral manner. In that sense, you're absolutely right: there are perfectly legal instances of bankruptcy declaration that are immoral.
I also think there's a moral responsibility to realistically assess one's ability to meet one's financial obligations. The weight of this responsibility varies with the wilfullness of the unrealisticness of the assessment. A person who knwos they can't pay back a debt when taking the debt is less moral than a person who merely suspects or has not bothered to effectively calculate whether he can pay the debt, all other aspects of the transaction being equal.
Further, I think the necessity of the thing being borrowed for enters the equation. Life-saving surgery can be purchased on credit even when one knows one can't pay it back now, as long as one does the best they can after they're back on their feet.
A person who has wilfully or negligently exceeded their repayment capacity, barring a necessity circumstance, is committing an immoral act when they borrow and aggravating the effects of that act when they declare bankruptcy. A person who is capable of saving for an emergency and does not may be acting irresponsibly enough to have some moral culpability for an unforseen bankruptcy caused by a necessity event, but I would put this at a lower level of culpability than the reckless borrower.
A person who, through no fault of their own, becomes unable to pay an otherwise payable debt is not committing an immoral act.
I take no position on which camp the majority of bankruptcies fall into. The medical bankruptcy studies suggest the majority are triggered by non-culpability-causing events, but we would need to analyze prior spending to be sure. Regardless, I think a consistent bankruptcy policy that allows pricing of the risk should err on the side of mercy if error is necessary.
Posted by mr_porteiro_head (Member # 4644) on :
You make some excellent points, Dag. Thank you for doing so.
Beverly and I are considering starting a small buisness for tax purposes, and we were pondering the morality of "exploiting" the tax code to pay less.
My opnion was that we don't have a choice on whether to pay taxes, and we don't have a choice about the rules for paying taxes. Since we have to play by those rules when it helps the government, we should certainly be allowed to use those same rules to help ourselves.
I am forced to accept the risk of another's bankrupcy when I am a lender, and in fact have been burned by that before. It doesn't make sense to me to be forced to accept the risks of bankrupcy but not be able to reap the benefits, if I ever need them.
In other words, I'm continually, in all my other transactions, paying for benefits of being able to declare bankrupcy.
[ November 30, 2006, 02:33 PM: Message edited by: mr_porteiro_head ]
Posted by rivka (Member # 4859) on :
quote:Similarly, when two parties agree to a contract, they agree that if the party that owes money goes bankrupt, bankruptcy law will determine how that money is repaid. Although the bankruptcy rule cannot be contracted around by mutual agreement (the impossibility rule can be), many contracts structure debt so as to enhance the creditor's priority as much as possible.
This is true, of course. However, for small business owners, especially those who bid for jobs and/or are in highly competitive markets may, of necessity, neglect to allow for "bankruptcy insurance" in their contracted rate.
I seem to recall Belle talking about situations like that, neh?
Posted by Belle (Member # 2314) on :
In our situation, we lost a ton of money because a contractor that hired us declared bankruptcy and left us holding the bag. We had already installed thousands of dollars worth of fixtures and pipe into a house (it was a million dollar home with five bathrooms) and we wound up having to pay for it ourselves and getting nothing back. We took the homeowners to court, to try and get the money from them...after all they did have the fixtures and did have possession of the house...but the judge found that we could only recover from the bankrupt contractor, not the owners. So not only were we left with the debt incurred for the fixtures and work, but we had to pay our own legal bills as well.
We very nearly went into bankruptcy ourselves because of it but my husband refused, said he couldn't face himself in the mirror if he defaulted on what we owed. So we took the next two years and put every spare dime we had toward our creditors until we had it paid off. Ruined our credit, by the way...we're still trying to recover our credit rating. But the alternative was to declare bankruptcy which he considered morally wrong.
Posted by Dagonee (Member # 5818) on :
The biggest single problem for bankruptcy and small business creditors is that most lack a sufficiently large transaction base. Given an expected bankruptcy rate B for the entire universe of transactions of a given type, and a pool of N transactions of that type, the actual number of bankruptcies in that pool will tend to be closer to B the greater N is.
A small business can go under because of one bankrupt customer. One bankrupt customer will likely greatly exceed the number of "expected" bankruptcies based on B times N. So most small businesses won't be affected in a given year, but the few that are will suffer consequences out of proportion to the expected rate.
What compounds this problem is that many small businesses don't take the legal steps to enhance their protection by obtaining security interests or mechanics/subcontractor liens when possible, usually due to cost.
MNBA's bankruptcy rate is probably very close to B, so they can spread the cost and accurately price the expense of obtaining protection when possible. Most small businesses can't do that as easily.
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by Belle: In our situation, we lost a ton of money because a contractor that hired us declared bankruptcy and left us holding the bag. We had already installed thousands of dollars worth of fixtures and pipe into a house (it was a million dollar home with five bathrooms) and we wound up having to pay for it ourselves and getting nothing back. We took the homeowners to court, to try and get the money from them...after all they did have the fixtures and did have possession of the house...but the judge found that we could only recover from the bankrupt contractor, not the owners. So not only were we left with the debt incurred for the fixtures and work, but we had to pay our own legal bills as well.
We very nearly went into bankruptcy ourselves because of it but my husband refused, said he couldn't face himself in the mirror if he defaulted on what we owed. So we took the next two years and put every spare dime we had toward our creditors until we had it paid off. Ruined our credit, by the way...we're still trying to recover our credit rating. But the alternative was to declare bankruptcy which he considered morally wrong.
Belle good for your husband. Frankly speaking I highly respect taking such a hard path for the sake of honor.
My own grandfather was doing quite well, but in his 30's a good friend had him cosign on a huge loan, and then skipped town leaving my grandfather holding the bag. He only recently finished paying back the money for that, and he probably won't ever be able to retire because he had no chance to set aside money for it. He will likely work until the day he dies, or until he simply cannot and one of his children agrees to pay for him, something I doubt he would ever allow.
Posted by Dagonee (Member # 5818) on :
quote:I am forced to accept the risk of another's bankrupcy when I am a lender, and in fact have been burned by that before. It doesn't make sense to me to be forced to accept the risks of bankrupcy but not be able to reap the benefits, if I ever need them.
In other words, I'm continually, in all my other transactions, paying for benefits of being able to declare bankrupcy.
This is the model current bankruptcy law is based on - spreading the risk of inability to pay across all transactions.
Insurance does the same thing, except you get to opt in to it. In both opt-in and mandatory systems, there are ways to exploit the risk-sharing, generally by increasing one's risk (and reaping the benefits of the increased risk-taking) without letting that increasd risk be reflected in the transaction cost.
The S&L crisis in the 80s was an example of this.
quote:Beverly and I are considering starting a small buisness for tax purposes, and we were pondering the morality of "exploiting" the tax code to pay less.
My opnion was that we don't have a choice on whether to pay taxes, and we don't have a choice about the rules for paying taxes. Since we have to play by those rules when it helps the government, we should certainly be allowed to use those same rules to help ourselves.
This is generally my take on it. My way of making the moral determination is to make each factual statement required for taking a tax benefit and examining it to see if I would consider that statement to be honest and fair if it were made to me and I were deciding whether to invest based on that statement. If so, then I consider the tax benefit fair game, assuming I meet all the technical requirements.
Edit: And this is true even if the reason I'm making the decision that makes the factual statement true is that it will lower my taxes - assuming that is compatible with the tax rule in question.
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