Yet another scary study on how poor Americans are...

[Andre1969]

Is this true? I thought they made money from the loans, so cash is a negative for them?


-ERD50

I've heard that, too. FWIW, about 5 years ago, I took a risk and co-signed on a car loan for a good friend. They came back with an interest rate that, honestly, downright offended me, and I asked them what's the point in me co-signing, if we're still getting a crap rate? I also said something along the lines of "I don't wanna sound like a trust fund baby, but I could just pay cash for the thing"

Well, they did come back with a lower rate, and cut a deal on the extended warranty that my friend wanted to get for the thing so badly. I thought that extended warranty was still a waste of money, but he just had to go in for some a/c work, so he's getting some use out of it, at least!

Oh, and I ended up paying the thing off within about 5 months, and then just let my friend pay me back. Dunno if I'd ever co-sign again, but at least this time I didn't get screwed.

 

[arebelspy]

Is this true? I thought they made money from the loans, so cash is a negative for them?

Indeed. I've read several times in different places that you should not tell them you're paying cash, don't mention payment and they'll usually assume financing, negotiate as low as you can, then tell them cash. Otherwise they won't negotiate as low of a price for cash.

 

[FUEGO]

Maybe the bottom 25% of society doesn't need an emergency fund.

A third of households don't own a home, hence rent or live in government housing or government subsidized housing (a la Section 8). Renting smooths the need for emergency cash.

The bottom 25% of society has a zero net worth. They are essentially judgment proof. Medical care is a trip to the emergency room and since they can't pay their bill it gets written off (unless they have government provided health care in which case a dr's visit or hospital visit might cost a couple bucks).

The main concern for the bottom 25% is probably car repair expenses. Maybe being carless temporarily isn't a problem if you can hitch a ride with a friend or take a bus.

 

[donheff]

The bottom 25% of society has a zero net worth. They are essentially judgment proof.

From you and me maybe but what about the changes in bankruptcy that protect credit cards? I haven't paid close attention since I am not a candidate for bankruptcy but CC companies (and the outfits they hand over deadbeats to) can follow you for life now, can't they?

 

[Andre1969]

From you and me maybe but what about the changes in bankruptcy that protect credit cards? I haven't paid close attention since I am not a candidate for bankruptcy but CC companies (and the outfits they hand over deadbeats to) can follow you for life now, can't they?

I wonder what happens nowadays when a debt is charged off and forgiven, but then gets reported as taxable income, and you can't even afford to pay the taxes on that? I know back in the day, credit card companies would often write off a debt they considered un-collectible, you got a black mark on your credit report, and that was it. But nowadays, the gov't comes after you, saying that forgiven debt is now taxable income.

And, the gov't isn't as easy to shake off as a credit card company.

 

[arebelspy]

I wonder what happens nowadays when a debt is charged off and forgiven, but then gets reported as taxable income, and you can't even afford to pay the taxes on that? I know back in the day, credit card companies would often write off a debt they considered un-collectible, you got a black mark on your credit report, and that was it. But nowadays, the gov't comes after you, saying that forgiven debt is now taxable income.

And, the gov't isn't as easy to shake off as a credit card company.

Maybe their income is so low the standard deduction would help take care of some of that forgiven debt?

 

[Rustic23]

For those looking back in history, you also have to look at the average household income in time. The $2,000 in question represents about 4% of the average household income today, maybe a little less. When I started working I made $6,000 a year, and the average income was about $7,000. That would mean the figure I would have to come up with was $280. I don't believe we would have had a problem doing that then or now. In fact it might have been a little harder then as credit card were not as popular.

 

[wolfbay]

It's not surprising to me. The government is a reflection of the majority of Americans. Government has been living beyond it's means for 40 years and could not raise $2000 in an emergency without borrowing or printing the money. Someone said that in a democracy we get what we deserve and I'm afraid we will.

 

[DblDoc]

Someone said that in a democracy we get what we deserve and I'm afraid we will.

Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.

- Winston Churchill

DD

 

[GregLee]

Most months I receive no credit card bill, so when I use my CC it is a minor nuisance because it adds one more bill to my household, even if it is a small one.

Probably, your CC company would be happy to extract money directly from your bank account, and maybe even stop sending you bills. (I was recently notified by my phone company, which is paid automatically with one of my CCs, that they would henceforth add a surcharge to each bill that was not paid automatically.) Down with paper.

 

[arebelspy]

It's not surprising to me. The government is a reflection of the majority of Americans. Government has been living beyond it's means for 40 years and could not raise

This reminds me of something I read a month or two ago when the federal gov was getting close to the shutdown and they were arguing over the budget, and they had just reached their compromise.


"Philip Greenspun wrote a blog with up with a novel solution to understanding Congress's solution to the federal deficit problem. He's just divided the numbers by 100 million. The results?

'We have a family that is spending $38,200 per year. The family's income is $21,700 per year. The family adds $16,500 in credit card debt every year in order to pay its bills. After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated. So now the family will have to borrow only $16,120 per year.' "

 

[wolfbay]

This reminds me of something I read a month or two ago when the federal gov was getting close to the shutdown and they were arguing over the budget, and they had just reached their compromise.


"Philip Greenspun wrote a blog with up with a novel solution to understanding Congress's solution to the federal deficit problem. He's just divided the numbers by 100 million. The results?

'We have a family that is spending $38,200 per year. The family's income is $21,700 per year. The family adds $16,500 in credit card debt every year in order to pay its bills. After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated. So now the family will have to borrow only $16,120 per year.' "

Amusing and true.
Rand Paul introduced a bill that would cut deficit spending over a 5 year period. After the 5TH year revenue would match spending. Of course the debt would not go down at all over the 5 yrs and actually would be added to each year. He got 5 senators to support him. To the mainstream cutting spending is "crazy" and absurd unless it doesn't cut their special interests.Of course when we bailed out the banksters how can we cut anything.They're going to kick the can down the road as long as possible but it's going to end very badly.

 

[MasterBlaster]

Amusing and true.
Rand Paul introduced a bill that would cut deficit spending over a 5 year period. After the 5TH year revenue would match spending. Of course the debt would not go down at all over the 5 yrs and actually would be added to each year. He got 5 senators to support him. To the mainstream cutting spending is "crazy" and absurd unless it doesn't cut their special interests.Of course when we bailed out the banksters how can we cut anything.They're going to kick the can down the road as long as possible but it's going to end very badly.

The way I see it is that we can do something relatively sensible now. Or we can wait until the debt burden is unbearable and have worse solutions forced upon us Greece-style in a but a few years.

The head-in-the-sand approach won't serve anyone. And it will come before the decade is out.

 

[GregLee]

To the mainstream cutting spending is "crazy" and absurd unless it doesn't cut their special interests.

Count me in the mainstream. The rationale for balancing the budget is a naive analogy between household and government finance, with no real evidence behind it, and is just being used as an excuse to reduce programs which benefit our society's less fortunate.

 

[FUEGO]

From you and me maybe but what about the changes in bankruptcy that protect credit cards? I haven't paid close attention since I am not a candidate for bankruptcy but CC companies (and the outfits they hand over deadbeats to) can follow you for life now, can't they?

The law changed not long ago that allows credit card creditors to challenge discharge of debt in BK by claiming the debt was incurred by fraud (ie the debtor incurred the charge without the intent to repay). Credit card debt is still generally dischargeable though. And at the end of the day, if a debtor doesn't have anything to pay a judgment, then they just can't pay it. Can't squeeze blood from a rock.

Further, deadbeat consumers have lots of protection under the Fair Debt Collection Practices Act. Statutory damages on a strict liability basis for violations by "debt collectors". The CC company itself can keep calling deadbeat debtors, but collection companies cannot if the debtor writes to them asking them to stop.

 

[ERD50]

Count me in the mainstream. The rationale for balancing the budget is a naive analogy between household and government finance, with no real evidence behind it, ...

Hmmm. OK, so maybe the analogy to household finance is flawed. A household can't print money.

But aren't there still consequences to increasing our debt? I'm not so good at wrapping my head around macro-economics, but there are increasing interest payments, probably need to pay increasingly higher rates as our debt increases, and if economic growth slows, where is the money going to come from? It seems like a death spiral to me.

... and just being used as an excuse to reduce programs which benefit our society's less fortunate.

I see this little morality play from a different angle. Let's ignore for the moment that I think many of these programs actually hurt the poor rather than help them.

As I see it, if 'we' (the voting public) determine that 'our' (taxpayer) money should support these programs, then 'we' should be willing to pay for the programs.

It strikes me as immoral to say that we support these programs, but only if future generations (who can't vote on this) pay for the programs. That's far too easy. So 'we' don't want the sacrifice of paying, 'we' just want the superior tone of being able to say 'we care' and 'we want to help people'. As long as the money to do so comes from elsewhere. That's how much we care, huh?

-ERD50

 

[GregLee]

As long as the money to do so comes from elsewhere.

I'm not sure I can interpret the "elsewhere" source of money. Guessing from context, maybe the money for various government programs would come from "here" if it could be traced directly back to tax collections, but otherwise, it comes from "elsewhere"? Or "elsewhere" is those "future generations"? I just have never understood the logic for saying that if current taxes don't pay for government expenditures, that future generations will have to.

 

[ERD50]

Or "elsewhere" is those "future generations"?

Yes.

I just have never understood the logic for saying that if current taxes don't pay for government expenditures, that future generations will have to.

OK, who then?

We can't just spend any amount over our income for an extended period of time (or Congress would!). There is some finite limit to it. So when the interest payment rise and take up all the oxygen in the room, there is no more charging it to the future. It can't grow forever. Some future generation down the line has to pay, and we are currently paying for past deficits (while simultaneously pushing it forward).

-ERD50

 

[GregLee]

OK, who then?

I don't necessarily accept the implicit premise that some specific group has to pay. But at any rate, it's not my responsibility to say who. You're the one who says future generations must pay; the burden is yours to prove it.

We can't just spend any amount over our income for an extended period of time (or Congress would!).

Why not? (And I have some bad news for you about whether Congress is doing that ...)

There is some finite limit to it. So when the interest payment rise and take up all the oxygen in the room, there is no more charging it to the future. It can't grow forever.

Why can't it grow forever? What's this "oxygen"?

 

[FreeAtLast]

Unbalanced budget, unbalanced congressmen. Perhaps it looks balanced to them.

 

[Rustic23]

GregLee,
I had a rather long reply, but deleted it. Your logic is so illogical it is not worth it. Do you really think that what happened In Germany, Greece, Argentina, Spain, Portugal, Ireland, and other countries can not happen to the US?

As a citizen, I say it is your responsibility to say who is!

 

[GregLee]

Do you really think that what happened In Germany, Greece, Argentina, Spain, Portugal, Ireland, and other countries can not happen to the US?

You tell me. Can it? Will it? How do you know?

 

[Gone4Good]

Government is not like a family, let me count the ways:

1) Government doesn't die of old age
2) Government can carry debt balances in perpetuity
3) Government should spend more when times are bad
4) Government should spend less when times are good
5) Government has enormous control over the amount of its revenue
6) Governments can generally run fiscal deficits every year and still improve their fiscal position (as long as the primary deficit is smaller than the real growth rate less than real interest rate on its borrowing)

The idea that government finances should be run like a family budget is preposterous.

 

[BLS53]

I wonder what happens nowadays when a debt is charged off and forgiven, but then gets reported as taxable income, and you can't even afford to pay the taxes on that? I know back in the day, credit card companies would often write off a debt they considered un-collectible, you got a black mark on your credit report, and that was it. But nowadays, the gov't comes after you, saying that forgiven debt is now taxable income.

And, the gov't isn't as easy to shake off as a credit card company.

There's an insolvency provision relating to debt forgiveness, that eliminates the debtor's tax liability. And the debtor doesn't have to file bankruptcy to get it. A statement showing that liabilities exceed assets is all that is needed.

That being said, 1099C's are usually only issued when a debtor settles for less than the full amount of the debt. Issuing 1099C's, renders debts uncollectible and makes the debt unattractive to debt buyers. As long as collection activity is ongoing, there's no requirement to issue 1099C's. The original creditor charging off the debt and taking a loss for tax purposes, is a separate issue from debt forgiveness and issuing a 1099C to the debtor. These debts are sold over and over, and never die. Whether they're legally collectible is another story.

 

[Gone4Good]

As I see it, if 'we' (the voting public) determine that 'our' (taxpayer) money should support these programs, then 'we' should be willing to pay for the programs.

I agree. And it would be wonderful to have that debate.