To think it's ever ok to declare bankruptcy

[jududy]

Just that? Is it ever ok . It seems to be one of the worst things people can do in society , financially.

They had debts that significantly exceeded their assets and with no sign of getting back to work that would allow them to repay the debts in a reasonable amount of time, it's often advisable to go bankrupt and start again from scratch.

The alternative being struggling for years treading water against interest and charges meaning that they pay all their income towards the debt but don't make progress towards paying them off.

There's many places where property prices dropped in 2007 and still haven't got back up to those levels (Northern Ireland and Aberdeen I believe, also anyone who's bought new build in areas that haven't seen huge house price inflation in last few years). So they don't have an appreciating asset to hold onto.

In this case it also looks like there's been an overspending issue with no contingency for loss of income etc. If he's good with money, either he's now more cautious, or it was his ex who was the spender in the relationship.

He's always going to have to declare that he has been bankrupt, but the effect on his life could be minimal. Some finance providers might refuse to take his business, but there's plenty who will, often with little or no extra cost due to his financial history, especially when it drops off his credit history (6 years from when he was declared bankrupt).

There are going to be thousands of people going bankrupt given the cladding issues for leaseholders. They've done absolutely nothing wrong and don't deserve judgement from ignorant posters.

A few bad decisions can have a devastating impact on finances - not everyone has the capacity to save for a rainy day.

Possibly also due to the effects of the pandemic. There's people who previous had well paid secure jobs with lifestyles and outgoings to match, eg pilots, who might find themselves redundant at a time where there's a surplus of other redundant pilots making it difficult for them to get back into employment at the same level, and one that they've often taken out huge loans to qualify for.

when it came to divorce ( and this is the bit I don't understand) his accountant advised that they go insolvent ( don't understand that) , suggesting to come to a repayment agreement with banks and him paying mortgage on house for a number of years after when exw would take over mortgage and keep house in total , but his exw refused so he went bankrupt .

So - they had major unmanageable debts between them they couldn’t pay. His solicitor advised they both needed to come to an agreement on the asset (house) and he should work with the banks on a DRO (debt repayment order) or IVA (Individual Voluntary Agreement, usually only suitable if you have a good job to protect etc). I’m guessing the bulk of the debt was in his name.

His wife refused to co-operate for whatever reason - wanted a clean break, not financially in her interests, her solicitor advised otherwise - so it forced the bankruptcy and the house being sold.

It’s often complicated. If I were you I wouldn’t be considering it a red flag unless he still seems irresponsible with spending, or trying to get you to join finances. It’s likely always going to be better for you to remain separate financially.

Doesn't stop a person becoming a mayor in large city... So I don't think bankruptcy is that bad on societal level

The divorce could have also been expensive. If there's been a dispute over finances that could have run up large solicitors bills, that would have added to their financial difficulties.

Why couldn't they just sell the house? That should have at least wiped out whatever they owed on it, and if the ex wasn't able or willing to buy him out, I don't think she could have stopped him from forcing sale. I'd also question why it even got to that point, because selling the house they could no longer afford should have been an obvious option when their income decreased. It sounds like the ex didn't want the house anyway.

And a home furnishing loan to top it off? You can get perfectly functional (if ugly) used furniture for free or nearly free, if you put a bit of effort into it, and that's what you should do if you can't afford new furniture and are already up to your eyeballs in debt. I would have real concerns about this guy's willingness or ability to live within his means, and to accept responsibility for not doing so.

Why couldn't they just sell the house? That should have at least wiped out whatever they owed on it

Negative equity

If someone gets into debt they know they can't afford to repay and sees brankruptcy as the way to get out of it further down the line, that is wrong.

If someone goes bankrupt and then decides it was fairly painless in the grand scheme of things so gets into unmanageable debt again, that is wrong.

But lots of people get into debt through no fault of their own. Maybe they lose their ability to work, maybe they end up in negative equity, maybe they get screwed over by the Post Office's computer system and end up having to pay back thousands they supposedly "stole" to avoid prosecution, maybe they are a leaseholder and get hit with a massive bill because the law changed and their property no longer meets the required standard.

In any of these cases the person is innocent of bungling their finances and shouldn't be treated as an immoral person or seen as cheating to declare bankruptcy - they've been fucked by circumstances beyond their control. Blaming them would be like blaming someone who has to give up driving because they got blinded in an unprovoked acid attack.

By the time somebody takes a decision to fo bankrupt they’ve already reached a point where they can’t afford to repay their debt. The alternative is to default on repayments, so creditors still don’t get their money.

@ComtesseDeSpair

By the time somebody takes a decision to fo bankrupt they’ve already reached a point where they can’t afford to repay their debt. The alternative is to default on repayments, so creditors still don’t get their money.

In which case they can and do petition to make someone bankrupt. Once you're in that situation, the outcome is often out of your hands.

If it wasn't OK, the law wouldn't provide it. Bankruptcy is giving a second chance. You've got debts you can't reasonably pay, so sell nearly everything you own, pay what you can, and start over.

Of course it's not something to be done lightly, which is why there's a whole legal process to it. You can't keep your house or even a car that isn't an old banger, and good luck doing any more borrowing for several years. But if it's necessary it's necessary.

The alternative would be forcing people to make debt payments for the rest of their life, just for one mistake or even something that wasn't mainly their fault. Ensuring that if they ever try and get a better job the pay rise is just taken off them. (So, reckon such a debtor would get a better job?) Making sure their children grow up in poverty. Neither the debtor nor the children even being able to get given a present because it must be turned over to the debt collectors. Is that what you want?

I'm willing to have my mind changed, but I don't see how it's morally different from theft. Someone else offered goods or services in return for payment; you took the goods or services but didn't pay.

Theft legally, and I argue morally, requires intent. Forgetting to pay at the supermarket isn't theft. Picking up the wrong person's phone by mistake isn't theft.

Most people don't intend to run up bills and skip paying them by declaring bankruptcy. For credit, people plan to pay back but circumstances change. For unexpected bills and liabilities, like all the fire safety stuff in flats, well, they were unexpected and often unexpectable.

Agree it isn't exactly theft, but there are cases where the reckless attitude to borrowing without any sensible plan to repaying the debts begins to look very close to it.

It's good that regulators have cracked down on payday lending and other forms of unethical lending, but (IMO) even some of the high street banks look a tad irresponsible by encouraging people to take out credit for dreams and luxuries, and there's way too much normalisation of being in stacks of debt - see some of the financial products marketed at students and financially vulnerable young adults.

There are also cases like those described upthread, who fully understood their debt obligation and had a clear plan to repay what they owed, then had severe bad luck, illness, changes in circumstances. Bankruptcy is there to protect them and it's very often the right (and only) choice, and that shouldn't carry stigma. No-one wants to go back to debtors' prisons, right?

Of course it is OK. If it's bankruptcy and starting all over again versus what... debtors prison? Suicide? Abject poverty?

Then yes it's ok

YABU.
My dad had to declare bankruptcy a few years ago, was so horrible seeing him so stressed as he didn’t want to be in that position and it’s not an easy choice to make!

The accountant will have suggested an IVA, which is often used as an alternative to bankruptcy if there is a property involved and the insolvent wants to keep it. IVA is also a formal insolvency process - if he was at the point of needing a formal debt solution and his ex wouldn’t agree to the IVA plan he almost has no choice but to pursue bankruptcy instead. This scenario isn’t uncommon.

I used to work in insolvency. Very, very few people go bankrupt lightly - usually they are ashamed and desperate and have been struggling along in painful circumstances for years and years before taking that step. Or they have had a serious life changing event and can no longer afford their credit commitments. Or they have been irresponsibly lent to in the first place - no one on a 20k income should have 3 x £20k loans and 7 credit cards and a 100% mortgage - and that wasn’t uncommon to see!

I interviewed hundreds of bankrupt people over a decade and I’d say I came across perhaps 5 who were trying to use the process dishonestly, and a handful more who tried to hide meaningful assets. I interviewed far more for whom the process genuinely was a life saving event though.

It also changes the way you can participate in society financially, as many people have pointed out, for quite a long time afterwards.

@safariboot I think you're right about intent, that's a helpful way of looking at it.

I struggle with the concept of an unexpectable bill. Clearly there are things in life that come out of the blue, and nobody could be expected to have foreseen the exact circumstances. But everybody knows that something unexpected is going to crop up - that's the point of savings.

If your budget is so tight that you can't afford to save anything, then you won't be able to afford debt repayments either and so you don't really intend, in a meaningful sense, to pay.

I guess they got into negative equity . She was insistent on staying in house with children which he agreed with 100% but didn't want the mortgage so he offered to pay
Mortgage amd other loans as they were on his name despite being joint , for a
Number of years and then she would take over amd keep house . She refused . He went bankrupt on advice

I'm still confused. If his suggested plan was for him to make payments for several years until she took them over, then obviously he thought he could afford to make them for those several years. So I'm sceptical that he truly couldn't afford to just keeping making them for longer than that. And if he could have afforded to pay his debts but just decided he'd rather declare bankruptcy, that seems like a red flag.

That notwithstanding, if I were you, I'd be less concerned about whether and why he received advice to go into bankruptcy and more concerned about how he came to be in that situation. I know it's tempting to blame the ex-wife, but if all the loans were entirely in his name, it can't really be her fault.