Can Bankruptcy be a Greater Good

[Useless]

obviously my claim was simplified. However. It is true that for-profit lending is often predatory and is used precisely for the lender to collect property.

 

[whichwaytogo47]

Unfortunately too many people are fairly ignorant when it comes to personal management and end up paying much more for things in the long run and end up in financial distress at times

Agreed. Financial literacy is lacking in much of the country

 

[VonDerTann]

“Used for the lender to collect the property?” Once again - no, 1) you are assuming (falsely) that the lender wants you home (they aren’t in that business); and 2) they often lose money on such deals, especially since many states limit a lender’s security in the event of foreclosure to the home itself, which is often trashed, sometimes deliberately so.

 

[whichwaytogo47]

Interest rates can be a direct reflection of risk. My wife and I’s credit score is usually between 820 and 830, we get the best interest rates available at all times

Agreed. We have a similar credit rating so we get the lowest rates on car loan and mortgage, but not the best terms on CC since some of those use the fake Vantage 3.0 score that were 100 points lower (only 727) on than our FICO scores.

 

[Useless]

You are saying that no lender has ever given predatory loans?

 

[whichwaytogo47]

You are saying that no lender has ever given predatory loans?

Predatory loans exists because no one else is willing to lend to really high-risk borrowers, aka maybe someone close to bankruptcy. Bankruptcy doesn’t protect one’s assets: it protects one’s income from creditors. It also gets people out of contractual obligations which really angers businesses that you stiffed by not paying your debts, thus you should do your best to payoff debts.

I support Chapter 13 for anyone whom can fulfill their obligations

 

[Useless]

that doesn’t really prove that interest is tied to risk.

 

[whichwaytogo47]

Tied to risk is over thinking, too specific.

if someone has a 1% chance of default, you may offer unsecured credit at 7% to compete with another offering 8%, another 12% with 5% back on gas and another 17% with 2% cash back.

If someone has a 5% risk of default, the 7%, 8%, and 12% loans will have no interest in extending credit. They might be able to get the 17% card with no rewards or 1% back and maybe have an annual fee or have a lower credit limit or a secured card.

 

[VonDerTann]

Well, you seem to think that ALL interest is predatory.

Yes, predatory loans happen - but they are exceedingly rare. “Predatory loans” are what borrowers usually call a loan that was perhaps confusing, and usually because they didn’t seek advice about the loan before signing. By contrast, I don’t think you could find a single instance of, say, a bank forging a borrower’s signature, and there is zero known instance of a foreclosure ever being completed where the borrower actually paid the bank.

 

[Useless]

Yes, predatory loans happen - but they are exceedingly rare.

We have to agree to disagree then.

 

[whichwaytogo47]

We have to agree to disagree then.

I think there are two types of predatory loans - one is when a shop is in business to lend to anyone regardless of credit risk: say a payday lender, rent-to-own, loans at pawn shops, or car title loans. These prey on the poor and take advantage of someone’s negative circumstances. These can have triple-digit interest rates. The other type of “predatory” loan is the ripoff loan. This is solely the fault of the consumer and not shopping around. This can occur on a mortgage, car-loan, loans on insurance products, or credit card where a person pays a higher interest rate than their credit profile would dictate.

 

[JimG]

Paying for consumer items with a credit card instead of cash always results in overspending. If a person paid only with cash, he would never spend money that he doesn’t have. And handing over cash instead of a credit card makes one think twice about whether a purchase is worth it.

The same consideration applies when you pay with your smartphone or other methods of e-payment. Not handing over the cash makes it easier to spend and to overspend.

You can’t be subjected to predatory lending if you do not borrow.

 

[farronwolf]

Banks are not in the business of owning real estate. You’ve made banks into both theives and real estate brokers. They are neither. They may by necessity have to occasionally own property, but invariably don’t want to.

They absolutely don’t want to own repossessed property. Our current house was a foreclosure.

It is 2750 sq ft brick home that was built in 1992, on 3 acres with a 1200 sq ft shop and about 1000 sq ft of deck behind it. We paid 90k for it. I made the bank put a roof on it because it had previous hail damage and I told them that I couldn’t get it insured without a new roof. I made them fix the well that was not working because I couldn’t inspect the house without running water.

During the contract period some kids broke into the house and broke all the light fixtures, busted doors, and put holes in the sheetrock. The bank gave us an allowance for those repairs, most of which I was going to replace anyway.

There was one other thing that I was going to ask them to do but our realtor, who is a very long time friend of ours said, don’t push your luck, so I dropped whatever it was.

We got a great deal, I will admit, but just reinforces that fact that banks don’t want to be real estate brokers or property managers. They are in business to make money with money not property.

 

[whichwaytogo47]

Paying for consumer items with a credit card instead of cash always results in overspending.

I agree. And it indicates either an income or a spending problem, usually both.

Being able to pay-off debts or increase savings means being able to spend less than what you make. Reaching critical mass means that the income from your investments equals or exceeds the income you had from your W-2 (wages) or 1099 (self-employed) or 1065 (partnership) income.

The average millionaire (88%) is first generation wealthy and it took an average of 35 years or their mid 50s to reach it. Even going back 150 years, it still was 84%. I don’t like the terms rich or poor because these are mindsets, whereas wealth vs broke are financial states. I’d rather be wealthy than rich or broke than poor. Feeling rich is a great way to become broke and feeling poor is a great way to stay broke.

The only way to become wealthy is to either be a member of the FIRE movement or to invest a reasonable amount of money from now to some point in the future (the further the better) and earn a reasonable rate of return. Delayed gratification is the way to avoid debt and maybe become wealthy.

 

[Canvas]

We did not give any of the people we do payroll for the option to stop the SS withholding. Due to the general nature of people spending what they take home, we felt it would cause them financial hardship at the first part of next year.

I am glad my employer passed on that one too. It was a horrible idea. The only large scale employer that I know of that is doing that payroll tax withholding is the Fed Government.

 

[VonDerTann]

Woody Allen (rarely quoted on CAF!) said it best: “being rich is better than being poor, if only for financial reasons.”