AFM reader, “EZ,” sent me an email with a link to this op-ed piece that was recently published in the New York Times. The op-ed piece was about how the bankruptcy process should be easier so that “American families torn apart by the economic upheavals of the last two years…” (Ronald Mann’s words) can move on with their lives.
EZ’s response was quite good:
Good Morning Sir,
I just read your Op-Ed piece in the online NY Times. I disagree with your premise as summarized by your last paragraph.
â€œSuch a bold reshaping of the bankruptcy system would provide Americans immediate respite from crushing debt and the ceaseless emotional and financial pressure that comes with it. Then they could turn their attention to finding new jobs, moving into housing they can afford and caring for their families.â€
I believe making it easier to declare bankruptcy would only put more pressure on citizens who are responsible, pay their debts and taxes, and positively contribute to our economy and country. My wife has been in the mortgage business for nearly 30 years and she thinks your idea is wrong headed. She has experienced people, well before the meltdown, who had declared bankruptcy and waited 2 years to purchase another house. Inevitably, when she told them they were purchasing too much home for their income, they would respond by saying that if they couldnâ€™t make the payments, they would declare bankruptcy again. A lot of folks have lost jobs or are experiencing reduced wages through no fault of their own but many more people who used their homes as a bank to pay for vacations and new cars or who bought homes they really couldnâ€™t afford are in trouble by their own volition and irresponsibility. If we make it simple to declare bankruptcy, these people will use it as a financial turnstile to once again live beyond their means at our expense.
Take a look at the US savings rate over the last 10 years. So many were living paycheck to paycheck, not planning for a financial misstep. Also look at the lifestyles of these same people. New cars, houses they could not afford and vacationing like there was no tomorrow. Too much credit, not enough responsibility. And yes, there are others that share the blame. Congress, banks, regulators, credit ratings companies and overpaid CEOâ€™s. But at the end of the day, it was the consumer who purchased homes, cars and vacations they never could afford.
Why do you think people should not honor their debts and commitments? Who made them buy the house they could not afford? By the way, just because a homeowner is underwater on their mortgage doesnâ€™t mean they cannot afford to keep paying for their home. It just means they cannot use the home as a bank anymore.
I truly do not mind helping people who are in need. But I do mind when someone tries to make me help someone who lived irresponsibly and is now looking for a handout(that includes corporations). Making it easier to declare bankruptcy punishes those of us who lived frugally and responsibly. In this area, I believe my wife has much more experience than you do. So many times she told borrowers they were trying to get a mortgage they could barely afford. Most times she was told that they did not care and if my wife would not do the loan, they would find someone who would. My wife lost a lot of business that way.
First sentence of the second section of the Declaration of Independence: â€œ We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.â€ It only guarantees the Pursuit of Happiness, not happiness itself.
Have a Great Day!