Representing clients in bankruptcy, I see how the system is used and am amazed at what I assess. Bankruptcy petitioners know how to use the system to live a lifestyle they could not otherwise afford.A person can file Chapter 7 bankruptcy every eight years, but they do not have to wait that long as they can still file bankruptcy under Chapter 13 with many of the same benefits. The debt stays on their credit report for 10 years. The clients I have represented have lived very nice lifestyles in which they will continue in that lifestyle after their overextended debt is discharged in bankruptcy. I qualify what I am opining here and limit it to those filers who repeat the process. Bankruptcy can be a miraculous tool for those who learn from the process and start over and continue on the track to financial success, whatever that may be for that individual. I am not discussing those clients.
I am discussing the clients with grand houses, even multiple house with expensive personal belongings and vehicles, who file for bankruptcy. In the bankruptcy action, these types will reaffirm the debt on one of those houses and vehicles, give the furniture a deminimus value and discharge the credit card debt. With the extra expense gone, they will be able to live a comfortable lifestyle with credit available.
The petitioners to whom I refer know how to use the system and where to look for and obtain credit to start over even after the bankruptcy is on their credit report. It is a myth that one’s credit score cannot get better following a bankruptcy. It can improve by paying bills on time. Credit card companies and banks will provide high interest credit cards and loans to persons with bad credit and if that credit is used wisely, it can be used to improve one’s credit score. So these people will build their credit score back up over time and slowly start back in the same financial cycle. They will likely always have money problems as often times, they cannot help what they do, seemingly consumed by an insatiable desire for material possessions to quell their unrest.
In the end, who pays for this? Hard working individuals subsidize these bankruptcy write-offs. The hard working individual who lives within their means and keeps up with their bills, pays via taxes and increased insurance rates and prices to name a few. The temptation to use credit they cannot afford to pay is strong. If one considers that it is near to robbing a bank, it is clear that such a pattern is not the ethical choice to follow.