Saga of an American Bankruptcy

Many people may wonder how a person can fall into bankruptcy.  Of course, others completely understand the saga.

 In part it may be the fault of the bearer that he or she has fallen into bankruptcy. But in many cases, or partially, it becomes the fault of the society that person lives in. 

The most well known scenario is of course the person who builds up a certain life style and then loses their job or business.  Many times this is not the fault of the bankrupted person in any way. This would be a case where society was at fault.

There are cases that are more subtle though.  These are the less obvious and slower cases where a person gradually loses the ability to finance life.

Let’s use a person named Joe for this scenario.

Let’s say Joe has a mediocre job that just brings enough money so he can live on his own and make the food and utility costs.  His parents frown on him living with them.  Joe is going to need a car most likely to get to work to afford his expenses.  He has a used one.  This is a realistic scenario and not one where we can just say that Joe “can walk or ride a bike.”  Realistically 99% of Americans who are employed and trying to live NEED a car.  In this scenario Joe has good credit and one credit card.  So here is Joe with an apartment, utilities, a car, health insurance and one credit card with no balance.  He is set and living fine, only he can’t save much or anything since his expenses equal his net salary. This is a VERY common scenario in the USA. 

All is well, as long as NOTHING goes wrong.  The problem is, in life things are going to go wrong. There is a 100% chance.  So eventually Joe needs a car repair (which is rarely less than $100 now).  Then he needs new tires to pass inspection.  At some point an appliance goes out and he needs that as well. All these are basic to living in the USA.  Then he gets some disease and needs medical treatment but his insurance only covers 50% since he only could afford the lowest coverage for a single person.  In the meantime his parents and family members have birthdays of which he tries to buy small gifts for.  Then it is mother’s and father’s day, and then Christmas!  The pressure from society is to buy and buy some more, so Joe feels it too.  And then another car repair.

So what happens?

All of the extra expenses are going to have to go on a credit card! 

So now Joe has his normal expenses plus mounting credit card debt, mostly due to nothing that was his fault, or because he felt guilty.  So to pay his credit card debt he gets another credit card and uses the included credit card checks to pay some expenses.  Now he has either a larger balance or two credit card bills.  The fun has begun. 

This simply spirals out of control until bankruptcy is a real possibility in a few years.  He rarely gets a raise at work (which is common).  Joe either has to work 2-3 jobs and not have any real life, beg on the streets or to family members, or simply quit paying some bills. 

If this were a single mother imagine how much worse it would be!  The expense of kids is enormous.

He goes to a bankruptcy lawyer but bankruptcy costs $5000 to file (so I am told).  He still has some credit card checks and he uses one of those to pay.  As well Joe’s bankruptcy lawyer advises him to buy a new car, with credit (his is still good) because after the bankruptcy he won’t have to pay on it.

Joe declares bankruptcy and his credit is ruined.  The credit card and car finance companies have the mounting expenses from Joe and others doing this.  Cost for all of the other consumers goes up.  Joe can hardly be blamed. He was merely trying to make it in life as expected by any normal American.  He was not over spending, beyond what a normal American expects as a minimum in life.  Will this same scenario eventually just happen to Joe again?

So who is to blame and what can be done?  This type of thing is only going to get worse as gas goes up, and thus utility and food bills go up.  Will attitudes about money and life have to change?

The only winner in this story was the lawyer.

Leave a Comment