If you declare bankruptcy, will everything be OK in a few days, weeks?

[autorank]

If you declare bankruptcy, will everything be OK in a few days, weeks?
By Michael Collins



The crazies in the United States House of Representatives would have you believe it were so. They say fix that budget before we'll raise the debt ceiling. If we don't get our fix, they announce, there's no deal. We'll just default until things get straightened out. (Image: George Romero)

Let's see what would happen to you or me. We are unable to pay our bills, unless we tap a special line of credit that we've used in the past, one that has never failed us. We'll have to raise some money and cut some expenses too.
Snip
What would happen to us? We would certainly hear from federal attorneys and the bankruptcy court. We lied to gain the stay. That's more than just inaccurate representations. It's fraud, a prosecutable offense. We would also hear from the creditors and recipients of our funds. They would demand restitution for damages based on any demonstrable harm from our fraudulent default.

More: http://www.economicpopulist.org/content/if-you-declare-bankruptcy-will-everything-be-ok-few-days-weeks

[Mimosa]

1. Interesting topic, Autorank

many of us have had debt difficulties which make us grovel, make us drop paying for health insurance policies for example, while we pay for debt settlement since we fear bankruptcy. I for one know nothing about bankruptcy. I fear it more than the Last Judgement. I'd love to learn something. Like can a person keep one's house if one owes the IRS for taxes he or she can in no way afford to pay?

[WhiteTara]

3. I was deeply indebted to the IRS

some years ago and they work with you. You can make an "offer in compromise" to settle.

[lunatica]

5. My tax lady is soon going to help me make an Offer in Compromise

The IRS will work with you if you can prove you simply can't pay them. An Offer In Compromise is when you basically offer them a much smaller amount in lieu of paying them the larger amount. Of course you have to prove it like you prove to a mortgage company when you get a loan. The IRS knows your assets and your salary and can easily verify what you pay. They really do work with you because they know when people can't pay.

Do not fear bankruptcy. When you finally have to declare it it helps you keep your basic assets like your house. You lose your credit but you also end up legally not having to pay it either. You can go to a paralegal and for $150 dollars (an amount set by law) you can find out everything you need to know and they'll help you get all the necessary paperwork together. It costs something like $299 to file bankruptcy in the courthouse and you only have to show up in court once and you get a court appointed Trustee who you don't even meet. That's when you get to face your creditors who can question you. But, nowadays people show up in droves packing the courtroom while creditors stay away. They don't even bother anymore. I did it all without a lawyer and was granted the bankruptcy. They call it 'discharging the bankruptcy'.

There are debts you have to pay even when when you declare bankruptcy. They're student loans and child support and alimony. Those don't go away when you declare bankruptcy.

[autorank]

6. Doube standard

We get the lecture on paying debts, not over spending from Congress, very self righteous. But when it comes time to pay up,
they think it's a tool, not a primary responsibility.

I researched the new bankruptcy law and it's a tough road for those claiming it. It's much better for creditors and they
break all sorts of rules - 50% of primary creditor claims in federal bankruptcy court, according to a huge study, are missing required documentation. But they get their way.

They just need to pay up and treat the OBLIGATION as separate from the policy question. Then they'd act like we were their equals.

[ejpoeta]

2. I can tell you that even if you do declare bankruptcy, it will ruin your credit.

Your rates to borrow money, if you CAN borrow money is through the roof. I have not had to do it, but I have a relative who has done it.... twice. This idea that we can just not pay our bills and nothing will happen is bs. Anyone who has even been late on a bill can attest to that. Be late on a bill and it can affect your credit rating and your interest rates. My credit is crap because when I was younger I was broke and had trouble paying some bills. My husband has built his credit back up, but it wasn't easy.

Granted, this is the government, so I guess they are different somehow... But the fact remains, if they don't trust that you will pay your bills, then they will make you pay more if you borrow money.

[KharmaTrain]

4. Depends On How Fast You Start Paying Back...

Nothing makes a creditor happier than to know you're going to be paying...no matter how you do it. On August 2nd this country doesn't completely run out of money or have nothing left in the bank account. Some, if not all the creditors will be paid in full (or whatever is owed)...the real hurt will be on government services who will be either closed or furloughed. The problem gets worse as time goes along as the debts will continue to pile up and there'll be less money to pay the creditors...but that's months, if not years, down the road.

Not passing a debt ceiling bill by August 2nd will be bad...interest rates surely will rise and the dollar will lose some value, but the dollar still remains strong around the world and I doubt we'll see people stop using them due to this. The problem won't be solved in this Congress and I suspect we'll see them find ways to kick the can down the road and past the next elections.

[autorank]

7. You're right. They WILL kick it down the road

http://www.bloomberg.com/news/2011-07-27/u-s-banks-bracing-for-downgrade-don-t-see-panic-in-repo-credit-markets.html

One problem is the disruption in the world credit markets. There will be a lot of adjustment and that will screw borrowers of
what little credit they can get, in a bottom up sort of way. Main Street will bear the brunt.

Obama is behaving like a chief executive in this instance. This should be routine. The danger from the Republican antics and
cynicism is of some sort of preemptive movement that really disrupts things or a growing panic like situation. Even the former
sucks.

The creditors will be happy to get their money, since they know we have it and theyll get paid. But it makes us look bad. Plus
it gives too much power to Moody's, which did a no-contest/repair deal with the form CT AG on a fraud charge. What qualifies them
for anything?