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A Friend Declared Bankruptcy

August 11th, 2013 at 07:54 am

I just got a call from a friend of mine who I haven’t spoken with in a while. Among other news, she told me that they’ve just declared bankruptcy. It made my heart sink. I’m friends with her because I’ve known her husband for 21 years; we used to share an office (we are in the same profession and went to grad school together). We do the same thing (architecture), we are the same age, we moved to the city we live in on the same day. We got married within a year of each other, and we have children who are within a year in age.

I feel simultaneously incredibly sad for them, but a little angry, too.

They make less than we do, but by my calculations the amount more we make is spent on private school (which they don't have - they live in the best school district) and savings. It would be tight, but we could live on what they make.

When we shared an office, he'd get boxes once a week from Patagonia or lululemon or he'd get expensive skiing gear including new skis. His wife takes the girls every week to buy Barbies and Hello Kitty.

I don't think that anyone should ever have to go into debt for medical bills (that should be an automatically forgiven in my opinion) but he doesn't have any debt like that. This is purely overspending debt. I don't understand bankruptcy very well, but is this debt now just erased? (I understand there are consequences - but he is self employed and has a house so no need for a credit check in the near future; I guess he has to stop juggling his zero-interest credit cards? Does he lose his cards? Does he lose the ability to get another credit card- this would clearly be a good thing for him).

His wife said that bankruptcy made sense because they don't have any assets. (Maybe their equity in the house is very low? They get to keep the house, though, right?)

I am struggling to be more compassionate about this.

7 Responses to “A Friend Declared Bankruptcy”

  1. snafu Says:

    It would be wonderful if people lived within their income, saving for the future and their retirement. In China for example, there is very little credit available and families keep bonds strong by combining income to fund important expenses. In the last two years a middle class has emerged with access to credit cards and mortgages for a teeny percent.

    How awful it must feel having worked 21 plus years and have the court confirm you have no assets. It gets tricky with employment since employers/contractors avoid working with folks whose financial situation screams 'irresponsible.' I'd be mortified to have borrowed and then leave creditors holding the bag...wouldn't you?

  2. Buendia Says:

    You're right - I would be mortified, too; that definitely puts it in perspective. And you're also right that if his clients somehow knew about his situation, they would probably not want to work with him. Which might be why he has residential clients (who usually don't check on these kinds of things) and I have public entities as clients (they ask for my liability insurance certificates and have access to all of my business records).

    He is a close enough friend that I could approach him about how their budget works (they may not have a budget) and ask if he wants some help, excel spreadsheets or whatever I can offer.

  3. Wino Says:

    This is only too common in today's world. Many people I know spend irresponsibly, then expect to be able to "do over" and start fresh.

    I am curious why you think that medical bills should not be paid. I mean, housing is a need, too. Should architecture and building costs be likewise forgiven? Or should that money come from the money fairies like medical payments? Sure, it is compassionate to say, "You had cancer. You aren't responsible for the payments," but the makers of the chemo drugs probably want to be paid. And the makers of the hypodermic needles. The power company is probably not forgiving the hospital for the electricity. Then, the doctors and nurses probably want to eat at least once or twice a week, which usually requires money. Even those who keep the hospital clean and sterile probably like getting paid, too, and don't work for free.

    Medical bills are why we get insurance while we're healthy. If you didn't plan in advance, then you cannot expect others to cover for your irresponsibility.

    Your comment is a symptom of what is wrong with our country nowadays. At least you show some hope in your comment about being mortified by bankruptcy. That's just another face of the same problem.

    Until we get back to people being responsible for their own decisions, then our country is going to continue on its downward spiral. By the way, "being responsible" means both paying for your bad decisions as well as profitting from your good decisions. How would you like it if they make laws that say, "You're both architects, so you have to give 10% of your money to him since he doesn't have any." Of course, he doesn't have any because he bought frivolous things, but it won't matter to the enforcers. Rules are rules, and you just lost out.

    end (yet another) rant

  4. Buendia Says:

    Without getting political or starting an argument, I have to respectfully disagree.

    My opinion is there should be a social contract regarding healthcare, and that no one should end up with huge debt due to medical bills.

    Also, I know a lot of people who have health insurance but still go broke from medical bills (to me this is just not acceptable - the insurance companies take in premiums and for some people they make money and others they lose - but overall they make plenty of profit).

    I agree with you that people need to be responsible for their own decisions. That's what my original post was really about: he is a close friend who has gotten himself into a deep hole but I am angry that his debt is just wiped out and yet he still keeps all of those luxury items (not to mention the money he owes me for past rent but will never pay).

  5. ceejay74 Says:

    Thank you so much for sharing that info about Vanguard on your recent post. I was peddling Vanguard to my personal finance discussion group Sunday, but I realized I didn't have a ton of sources. I'm going to be collecting evidence for or against Vanguard wherever I can find it to make sure my loyalty to them is justified. This is a very reassuring post.

  6. LuckyRobin Says:

    It can be very easy to be resentful of folks who walk away from their debts when those debts were caused by overspending. I was very angry about SIL and ex-BIL declaring bankruptcy for their careless overspending while we struggled for years to pay off $175K of out of pocket medical costs (despite having okay insurance). It took me a long time to let go of it.

  7. Buendia Says:

    Hi Robin,

    That's exactly what I'm talking about - how can your debt from medical costs ($175k! insurance companies make me seethe!) and theirs from overspending be the same? But I think you are amazing and much better off having let go of it. My friend owes me money for rent from a few years ago which I have figuratively and literally let go of, and I am sure I will let go of the other feelings, too.

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