So I hear on the news today that more people than ever, especially youngsters, are considering bankruptcy:
Can't say it comes as a great deal of surprise. After all, when whole countries are defaulting on their debts, you know things are really, really bad.
What spurred this particular rant however, was the way it was portrayed on TV, with presenters and guests alike putting on sad faces, nodding gravely, tutting at how awful this whole situation was and urging people to seek advice before taking this drastic step, how it would ruin their credit ratings and therefore lives for at least 6 years etc...
But is it, and will it? Let's turn this thing around for a moment.
What is credit rating? Quite simply, it allows lenders to decide whether you are a credit risk or not, whether they should lend you money or not. That's it. It's a tool by lenders, for lenders.
Can you live with a credit rating that has been trashed? Simple answer is yes.
Should you live with a credit rating that has been trashed? Why not? It is, after all, just a few steps up from hiding or cutting up your credit cards. If you don't trust yourself not to fall for the next bargain you can't afford, then I assure you that not being able to get it on credit soon puts perspective on whether you really need it.
So, onto bankruptcy, the surest way to ruin your credit rating for the next 6 years...
First of all, forget the moral argument. I have had a bellyful of unscrupulous, dishonest companies telling me that *I* have a moral obligation to pay up when they are not prepared to treat me with the same amount of morality, adding charges at the slightest mishap, using dubious methods to collect and what not.
So, with this in mind, I am going to argue that (for example) for a student who nowadays is expected to get into £20+ K of debt before they even start earning, bankruptcy is THE solution: You finish your studies, collect your final diploma, vacate your digs and walk into the nearest bankruptcy office, and get rid of that big burden of debt. Fresh start, from scratch, that iniquitous burden off your shoulders. Yes, you won't be able to get a car on HP, or a loan, or a credit card, or a store card... and that's supposed to be a bad thing? How exactly? Seems to me that, if anything, it will teach you to live within your means. Either you can pay for it and you buy it, or you can't and you don't.
Yes, I am aware of the flaw in my reasoning, that is my example student has had to borrow in the 1st place if he wants to be able to study and that goes counter to the "don't buy if you can't afford it" argument, but as far as I am concerned, learning should be free, so if you have to go through the student loan loop to get on the ladder, then it's fair game to borrow and default. You want to force people into paying for something that should be free, don't come crying when they use the system to get out of that burden.
We live in a society where the concept of being well-off has become perverted; it's not how much money you actually have, but how much credit you can get, and the sooner we learn to correct this vicious thinking, the better off we will be, as a nation and as people.
Spot on. I felt the same when I heard it on the radio. So, their credit rating is trashed - that's a GOOD thing, it means that people who cannot handle debt (because of a variety of reasons - that's for a different time and place) won't be 'allowed' to get any more debt.
ReplyDeleteSounds like a good thing to me, hardly a life-ruining thing to have happen. I haven't had any debt for around 10 years, and do you know what? It makes life so much easer not fearing the postman.
You know I also agree ... if all those students followed that path then there would be a generation of people "lost" to the credit industry ... hopefully this gap in potentially lucrative revenues would cause many to go out of business and the rest to clean up their act.
ReplyDelete