Chapters

News and views from Virginia Bankruptcy Attorney Russell Adams

Bankruptcy as a sound business decision

Bankruptcy as a sound Business Decision...

Consider this…the credit card companies you owe money to do not feel any moral obligation to you. In lending money, they don’t do it because you need it, or because you are a good person…they lend it to make money, as they should. They charge interest rates well in excess of the cost of the funds to them, and earn billions of dollars a year from interest, late charges, over-limit charges, cash advance fees, etc. They lure consumers in with low/no-interest offers and then jack up the rate for no reason. Why? Because they can, and because that is their business model. They want you to carry a big monthly balance (many will reduce your credit limit if you pay your balance in full every month) and will often let you skip a payment (not because they are nice, but because they earn more interest that way). If you do fall behind, they have no problem turning their collectors loose on you (and for anyone who has experienced that, you know just how “friendly” they are).

The bottom line is that the banks view borrowers as an income source, and they make all of their decisions on how to maximize their profits by making as much as they can and losing as little as they can. This is capitalism, and it is the society we live in. Many clients I meet who are in need of filing for Bankruptcy relief come to me after they have exhausted all of their assets trying to pay off credit card debt with interest rates 29.99% a year, or more. They feel a moral obligation to pay their debts, and while I admire that, I remind them that the banks are not looking out for their future – they don’t blink an eye in suggesting that you borrow from your elderly parents, liquidate your 401k, or live hand-to-mouth for the rest of your life to pay them.

Just as the banks view you as part of their business, so should you view them as part of yours, and your business is providing for yourself and your family in the best possible way you can. The banks use the laws in their favor, and so should you. If you have a choice to pay $1,300.00 a month for the rest of your life just to cover the interest on a $50,000.00 credit card balance, or wipe the slate clean and be able to save the same $1,300.00 a month for your retirement or use it to feed and clothe your family, which would you choose to do? I can tell you what the bank would do in that situation…it’s nothing personal, it’s just business.

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