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Bankruptcy for fun?

Question: The economy is a hot topic around the water cooler these days, and I've been asking co-workers across my department about their financial strategies for the coming year. One co-worker said she was "advised" to "refinance her mortgage, buy two cars, then run her credit cards up to their limits and then declare bankruptcy". I was surprised at this financial self-destructive sounding plan - I asked 'what about your credit score, what do you plan to do when things turn around, you'll be in a credit pickle!!' and she shrugged her shoulders and said -- " so what, no one cares about credit any more and we're not going to get out of this. My children will never know prosperity in our country. I might as well get what I can get". This kind of thinking contributes to the downward spiral. I told her that I thought we would eventually pull out in a few years, and the responsible people (yep, the same ones that are getting the short end of the stick these days) will have the ability to recover faster with the economy. Everyone else who said 'who cares' and financially imploded will take years to repair the damage if they continue with reckless disregard for financial common sense. Whose outlook do you think is more likely? I want to be optimistic, continue to support my local businesses, and wait this thing out -- with my credit intact. I can't imagine planning to declare bankruptcy as a strategy. I see it as a last resort. Virginia, Raleigh, NC

Answer: To put it politely, your co-worker doesn't know what she's talking about. Her point of view is ignorant, irresponsible and, there is no other polite way to put it, financially stupid. Millions of people are being forced to declare bankruptcy after losing their jobs. They've lost their homes, spent hours dealing with creditors, lawyers and courts, and now they're trying to start all over again during a vicious economic downturn. Talk to them, and then say bankruptcy is an easy option. It isn't. Bankruptcy is a safety net.

Like the details or not, the Treasury and Federal Reserve, the Administration and Congress, are struggling to prevent the economy from sliding into depression and, at the same time, set the stage for the next upturn in the business cycle. I believe they are slowly succeeding, stumbling toward solutions as the depth of the problem become ever more apparent. But even if the economic troubles continue far longer than I imagine, even if we live a reprise of the 1930s, parents can do right by their children, educating them well, bringing them up a household where maybe there isn't much, but what you have is valued.

Last, you are absolutely right. Downturns eventually open up good opportunities for those with hefty savings and good credit. Yes Virginia, you're right on all counts.

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