Fresh Start, Another Try

fresh at bat

A fresh swing, you get 3 swings, not one.

A fresh start is recommended by a financial columnist and author.  Helen Olen answered a shame about bankruptcy question at “Ask the Bills,” the personal financial advice column at Slate.com.  Link here:

http://www.slate.com/articles/business/the_bills/2016/03/ask_the_bills_i_went_bankrupt_and_my_friend_keeps_shaming_me_not_cool_right.html

The advice seeker had some personal struggles and made some questionable decisions; a personal bankruptcy followed.   The advice seeker asks, “How do I tell people not to pity me when they find out I filed for bankruptcy.”

It sounds like the advice seeker did a Chapter 13 bankruptcy which typically involves paying back secured debts over a 3 to 5 year time plan while on a strict budget imposed by the bankruptcy judge.

I liked the answers from Ask the Bills columnist Helaine Olen, “You’re using bankruptcy exactly the way it should be. The law permits us a fresh start after we get in over our head financially. There is no bankruptcy clause that says you need your friends’ and neighbors’ approval.”  Olen emphasized the fresh start aspect, how debt can be onerous beyond reason, and we don’t need our friends and neighbors approval for a bankruptcy.

Lastly she holds Donald Trump’s four business bankruptcies up as a role model; personal or business, it is often the “smart” thing to do.

Shame for You but Not for Me

 

The large banks, financial firms, and large landlords use shame as a social force to pressure us to always pay our debts and forgo the use of bankruptcy.  But, but, but the large banks and even non-bank financial firms use bankruptcy when it is good for them.

In late 2009 Morgan Stanley “jingle mailed” five San Francisco office building back to it’s lender, Blackstone Group, just two years after agreeing to purchase them.  A month earlier it defaulted on office buildings it owed to Barclays Capital. Additional large commercial landlords which have defaulted on original loan terms include Taubman Centers, Simon Property Group, Macerich Co., Tishman Speyer, and Vornado Realty Trust.

In addition to bankruptcy, the large banks and non-banks use bailouts from the government to avoid bankruptcy.  In 2008 Wells Fargo Bank, Bank of America, JP Morgan Chase, Citigroup, Bank of New York, and many other banks and credit unions received tax paid bailouts.  Bloomberg estimates the total spent to help the banks and non-bank financial firms was 7.7 Trillion dollars!  Partial list here:

http://money.cnn.com/news/specials/storysupplement/bankbailout/

Non-bank firms bailed out included Goldman Sachs, General Electric (it had a very large financial services division), General Motors (also a large loan division), AIG Insurance, Fannie Mae, and Freddie Mac.  Without this “free money” most of these firms would have declared bankruptcy.  As an individual, if the Federal Government had offered you a similar offer of “free money”, say a $500,000 gift or loan at 0.25% interest, that would have more than bridged your financial problems and allowed you to avoid bankruptcy.

Don’t let banks, large landlords, and financial service firm lay a guilt trip on you.  They default, and use the bankruptcy laws when it makes good business sense for them.  Personally, don’t feel shame for doing what makes good sense for your own financial situation.