Loans Answers

The Other Side of Bankruptcy

Question: From time to time there are posts asking whether they should file : bankruptcy or not. Here is the other side of the coin. For the past : 18 years we have run our own business. It is our sole source of : support and given that we are paying education costs for myself, DH, : and our two oldest as well as having two younger children at home, you : can imagine how far we must stretch funds. Yesterday, DH was at the : office and got papers that one of our customers to which credit had : been extended had filed bankruptcy. It is a large account and : unsecured credit so the likelihood of seeing any money from the : proceedings is next to zero. This money will definitely be missed and : we will have to find someway to compensate for it. Adding insult to : injury, this news came on top of the news that cheques written by two : other customers hyad bounced so it really was not a good day, business : wise. A lot of small businesses are the real losers during a : bankruptcy, at least here and many of the people claiming bankruptcy : know this. Of course there are instant fees from our bank account for : fees which we must try to collect from the two cheque bouncers. It is : also costly to try and collect a debt before bankruptcy is filed; : those fees are paid up front by the business. Of course, there is : always the option of not extending credit and refusing cheques but in : the long run this does not help the business. It is also not fair to : pealize the 95% of your customers who are honest and will pay their : bills. Now, I understand that bills can pile up and it seems like you : will never get them paid but bankruptcy should, IMO be the absolute : last resort. In our case, we would have even accepted 50 cents on the : dollar rather than losing it all and I’m sure a lot of other : businesses would do the same. Unfortunately, most businesses : especially the small businesses cannot afford to just take these kinds : of losses. In case anyone is wondering, the dollar value of the : bankruptcy loss is $1650 and cheques which may or may not be collected : and additional $500….how many people do you know who can take this : kind of a loss in one week? The sad thing is, that within 3 or 4 : years the bankrupt person will again be able to get credit despite the : fact that it is supposed to stay on their record for 7 years. IMO, : bankruptcy rules do need to be overhauled here. Just another : perspective of the bankruptcy issue….

Answer: It’s too bad that people use bankruptcies to escape their responsibilities, instead of trying to make things right. Businesses have to find a way to recoup the losses, which usually gets passed on to the consumer in the form of higher prices. Another negative effect is the “few ruin it for all” mentality. I have not run across any credit lenders these days that don’t pull credit reports at the drop of a dime. The only winners of this practice are the credit bureaus. Businesses have to pay a fee each time they pull a credit report, and for frugal customers like us who pay our balances off each month they rarely ever recoup the cost. In addition, innocent people’s credit reports are needlessly damaged by inaccurate reporting agencies and careless credit bureaus. It’s too bad this has become a necessity.

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