Bankruptcy or Bailout?

That is the question.  A few years ago, 14 actually, I had to face this question myself.  I had begun my study of computers and how they would work in a school setting and because the school district was not interested in funding my work, I began to take leave’s of absence and reduced pay in order to accomplish my goals.  At the same time, I wasn’t really aware of how much it cost to live my regular and spendthrift life on a reduced pay check.  Add to that the beginning of an unsettling divorce and looking back I can see why things began to crash.  One day I looked up and realized I was $36,000 in debt and paying out $700 a month on my credit cards just to make the minimum payments.  It wasn’t pretty.  But I got a temporary bailout when I decided to force my school district to buy out my contract.  I immediately paid off the credit card bills and set about finishing my studies.  However, money in this case didn’t solve everything.  And I really didn’t do the next thing, cut up the cards.  So within a year, I found myself in the very same spot.  Now divorced, sans job, and $36,000 in credit debt.  Bankrupt in other words.

I paid off what I could and entered Chapter Eleven.  It was a bitter bullet to bite.   This time though I had learned that I needed to pay attention to my finances if I wanted to live a normal life.  It took all of the ten years of forgetfullness that you get with such a bankruptcy to earn back my credit standing to the point where I now have no debt and FICO of 780.

So today’s credit bubble burst has a unique interest for me.  What is strange is that I found myself in the curious position of arguing in favor of the bailout last week.  That was when Bear Stearns got its $30 billion and J.P. Morgan stepped in.  I took the position that instead of giving one lender the money it should have been used to relieve all the people suffering through foreclosures.

But that was sort of a knee jerk reaction to the thought that the wealthy were again getting a boost while the rest of us suffered.  Which may be the case but it isn’t my concern.  No one bailed me out.  I got into debt because I was stupid about my finances.  No one else to blame.  I paid for it with a complete loss of credit and ten years of not being able to apply for a rental, buy a car, buy a house, apply for a job, or anything else without the fact of my bankruptcy getting in the way.  During that time I taught myself how to budget, how to rebuild my credit reputation, and how to start my financial life over. 

It was tough, it’s still tough because even though it is supposed to be forgotten after ten years, some of the lesser credit reporting agencies still list it. 

So do I want the government to bailout the foreclosed homeowner?  Hell no.  Do I want them to bailout Bear Stearns.  Hell no?  The only bailing out that I want our government to be involved in is the one that takes us out of the war in Iraq. 

Will things be tough for those people foreclosed, those lending institutions that fail, for the country as a whole to recover?  Yes.  But do I think we will be stonger and better for it?  Hell yes.

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