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Gardnr · 10-25-2008, 11:09 PM

This article is about the unsurprising increase in personal bankruptcies.

R.O.I. - WSJ.com

One thing that really caught my eye is at the end of the article:

Quote:

Of course filing for bankruptcy is going to hurt your credit score and could make it harder for you to get a loan in the future. But the effect may not be as bad as you think. Most people who end up filing for bankruptcy already have poor credit scores. And bankruptcy, by wiping out debts, can actually help rebuild them. "Most people can rebuild their scores within one or two years," says Jeff Tromberg, a bankruptcy attorney in Fort Lauderdale, Fla. "It's actually quite common for somebody who files a chapter seven bankruptcy to rebuild their credit scores back up to the high 600s (a reasonable rating), if not higher, within two years."

Is this just another symptom of the easy credit days that is going to change? I sure hope so because the idea that somebody could get back on the credit drug so soon after filing BK is disconcerting to me.

I'm not advocating debtors prisons or anything like that, and I'm sympathetic to those who truly fall on hard times not caused by personal irresponsibility; most often a big medical problem and the resultant bills. But there really needs to be a significant penalty for those who just flat out abuse credit for "wants" that they can't afford. A good 7-10 years of living only on what they bring in should be in order.

I could even see making some distinctions in what brought about the BK. If it was just running up consumer debt then throw the book at them. If it was some other circumstances like health, family hardships, job loss, etc., then give them a much earlier chance at rehabilitating their credit standing.

Of course making those distinctions would be easier said than done in reality. Like when a huge medical bill is just the straw that broke the camel's back after they already had a bunch of consumer debt. Judgments would need to be made and we know how that can go wrong.

youbet · 10-26-2008, 12:31 AM

Prepare for most frustration. IMHO, it's likely that Congress will make bankruptcy easier and less painful in the future.

haha · 10-26-2008, 03:11 AM

When I saw this thread I wondered if someone in this august company had declared bk. I shouldn't have worried. It was only the usual complaining about the unsaved getting away with murder.
What a relief!

Ha

2B · 10-26-2008, 05:47 AM

Well, as my old grandfather used to say..."You can't take it with you but you want to make the finance company think you did."

You can guess what his credit history was like and what it would have been in the current easy credit days. Of course, he never seemed to worry about anything and always seemed to be enjoying life. He died from pneumonia just about broke at 65.

Gardnr · 10-26-2008, 03:15 PM

Quote:

Originally Posted by haha

When I saw this thread I wondered if someone in this august company had declared bk. I shouldn't have worried. It was only the usual complaining about the unsaved getting away with murder.
What a relief!

Ha

I'm not really sure what your point is. Partly I was just wondering if this was really somewhat outdated advice since this kind of quick recovery to a decent credit rating after BK was just part of the whole easy credit bubble era. And yes, I have a problem with the moral hazard of discharging debts for irresponsible (and yes, greedy) people.

jazz4cash · 10-26-2008, 07:11 PM

ok, this is where I am obliged to post that FICO and credit scoring in general is just a scam anyway.

haha · 10-26-2008, 11:57 PM

Quote:

Originally Posted by Gardnr

And yes, I have a problem with the moral hazard of discharging debts for irresponsible (and yes, greedy) people.

Gosh, I had missed that part!

2B · 10-27-2008, 04:49 AM

Quote:

Originally Posted by jazz4cash

ok, this is where I am obliged to post that FICO and credit scoring in general is just a scam anyway.

It's just as worthwhile as bond rating agencies. The real deadbeats are obvious. The risk is their missing the disaster waiting to happen which they do all the time.