In 2005 one half of personal bankruptcies were because of medical bills. I suspect the percentage may be higher by now. I don’t think that has much to do with entitlements or Democratic philosophy.

[…] from Katherine Coble. Share and Enjoy: These icons link to social bookmarking sites where readers can share and […]

I find BCM a friendly person, generally, who wants to have real discussion. That’s why I’m a bit taken aback by the use of “Democrat” in place of “Democratic.” Note to BCM: that’s a term used by people who want to insult. Is that what you want?

nm,not to go off on too much of a tangent, but I’m not so sure what you’re saying totally applies. Having grown up here, I’ve heard many a Democrat use the term “Democrat” in the context you’re speaking of. Not the young, urban hip kind, but the rural, NedRay McWherter types.

Newscoma can either confirm or rebut my assertion. I’d swear I’ve heard that phrase in rural “Democrat” circles.

So, if BCM is from around here, especially from a rural area, no harm was meant.

Just my .02 .

Kat, I’ll add one piece of anecdotal evidence to your thesis: I never did end up having to file, thank goodness, but it was partly the collapse of my consulting business following the economic decline of 2001 that finally made it necessary to start the bankruptcy process.

Not gambling, unless going into business for yourself is gambling. (I guess you could make that argument.)

And not entitlement mentality, unless thinking you could make a lot more money working for yourself is entitlement. (Yeah, maybe.)

And not divorce, unless losing your shirt after trying to start your own business in a down economy leads to divorce. (I’m lucky this wasn’t the case for me. Of course, Karsten and I weren’t married, but you get the idea.)

Hey guys,

Thanks for all the buzz. nm - thanks for the kind words - I do in fact, want discussion. The Democrat thing is more habit or preference than anything else. Seems a while back, Southern Beale or someone, commented at NiT that they would not read my stuff beyond my using that as they found it a hallmark of all that is bad on the Right. I did not mean to offend then or now. I use both Democrat and Democratic. After NM’s comment and that of Southern Beale I did some quick searches and found that most Democrats believe that Right wingers using the term are being derogatory and that the usage is heavily weighted to the Right side of the spectrum. However, per this Wikipedia article, CNN, the New York Times, the AP and other ‘”non-partisan” (snicker) sources have also used the term as I did. In any event, in order to be clear and not impede dialogue, I’ll discontinue the practice. If I have one of my increasingly frequent senior moments and forget, just refer me to my meds and I’ll withdraw the offense.

Regarding the issue - bankruptcy, I only know a couple of people that have filed. All of them have been for failed businesses. I, too, have seen the statistics that say over half of bankruptcies are for medical reasons. I find it a little odd that WaPo didn’t explicitly mention that when they referenced health insurance but maybe they were headed a different direction or maybe they forgot or maybe that’s not a valid statistic or maybe something else.

The point of the enitre post was this: The discussion referred to a number of other characteristics of people in the **state** of Tennessee for bankruptcy rates. It made it seem as if the rate was relatively uniform across the state. Had I not seen the chart, I’d have posted a quick note on the matter and moved on. However, the chart from UT shows that it is not a statewide problem, it is a SW Tennessee problem. Unless UT is lying, then the SW corner of TN is giving the rest of the state its reputation in this matter.

What is one of the demographics of that portion of the state? There are a lot of folks there that lean Left. That would imply that they would share the values and views of the Left. Have any of us ever heard someone say something like, “They’re a big company, they’ll never miss it!” or “They have insurance.” or some other phrase that shrugs off responsibility for their bad behavior and leaves the rest of the country/consumers carrying their water? Is it inconceivable that a mentality that believes that they should vote for the party that will promise to give them the most for the least amount of effort might not develop the attitude that it was “no big deal” to repudiate legitimate debt?

Of course not everyone who files bankruptcy is doing so for those motives. But is it not possible that the usual numbers of filings apply across the state and that something else is happening in SW Tennessee to make their rates so much higher than the rest of the state?

Frankly, I have no idea why the statistics are what they are. As I said, maybe it is due to one of the other erudite explanations offered. But maybe it is yet another unintended consequence of Entitlements.

I have no vested interest in this one way or the other. I noticed something weird and commented on it. Let’s say I’m wrong. What other explanations are out there other than the ones covered already?

BCM

Slarti -

Thanks for the help on defense. I truly mean no insult. But I grew up in the Chicago area, did college in Kansas, grad school in Los Angeles and moved here about 25 years ago, living in Davidson County all that time. I wish I could use your generous offer of help … alas, I cannot. But I still didn’t mean offense …

BCM

Kat -

Regardless of the actual reason behind any bankruptcy filing, you’re right about one thing. I do, in fact, think bankruptcy hurts all of us.

I’m not sure how it could be otherwise. If I repudiate my debt, who ends up paying for goods and services I got but did not pay for? Either the other small business (or large corp) I owed the money to or the consumers and companies with whom they do business and to whom they pass on yet another of their costs of doing business. How is that not hurting all of us.

I saw a program last night on TV about fraud. It noted that billions are lost by companies every year and that the average US household pays about $1,000 per year as these costs are passed on. I wonder what the costs are for bankruptcy? I understand that fraud is illegal and bankruptcy is not but the impact to the economy is identical as best I can tell.

Finally, I am a small business owner. I’ve been self employed for about 15 years as the owner of two different businesses. I’ve been a sole proprietor, a partner and a corporation. I’ve employed up to 15 employees. You asked who would do what I did without the safety net of bankruptcy. I think that question sort of proves my point. I did it without the safety net. I grew my business slowly and borrowed money that I felt sure I could repay. In the event I ever lose my business, I would do whatever it took to pay those that entrusted me with goods and services the full amount they were due plus any interest and penalties for late payment. That’s just who I am. I do not expect everyone to either be the way I am or believe me when I describe myself that way. Politically and personally I beleive in personal responsibility. If I come to you and ask you to send me a load of your widgets, then you deserve to be paid for them regardless of my circumstances or what is conveniently available to me to permit me to go my merry way while you suffer for my irresponsibility or misfortune.

I understand there are different situations for everyone. Some businesses cost more to start than others. Some are more expensive to maintain. But the basic principle is sound, in my opinion. If you need more cash to start, then don’t start until you have more cash or can find some partners who do. If you need cash reserves to operate then don’t assume you’ll have all you need from Receivables, make sure you have cash on hand. If you don’t, perhaps you shouldn’t be in the business you want to be in or perhaps now is not the right time. But the attitude that I can do as I please and if it doesn’t work out I can just call “Do Over!” with little consequence is, frankly, offensive.

Would you want a spouse so cavalier about your relationship? “Oh well, if it doesn’t work out we’ll just divorce!” The point is not that people like that don’t exist. The point is that these are not people who one should be involved with. Just so in business.

Bottom line - if I tell you I’ll pay you - come hell or high water, I will. I respect you as a business person and as a “partner” in my business enough to do that. I expect the same in return.

**shiver** Sorry about the rant … this is a pet peeve …

BCM

The concept of eliminating bankruptcy is as impractical as, say, removing minimum wage legislation. They’re both two sides of the same coin that bails us out of the various imperfections of our capitalist system. You can’t remove these safety nets without making substantial reforms to the way things work.

BCM, bankruptcy doesn’t really impact us all. When someone declares bankruptcy they are getting debt forgiveness, but the people holding the debt knew the risk when they took it on.

Risk is such a good balance for the risk of allowing debt that the government had to create SBA loans as a way of providing many people a way to be able to even afford to start a business.

The securing of risk in small business loans is why I think there are not more small business bankruptcies. The medical system in this country is seriously flawed though. They cannot (and should not be able to) require the securing of risk prior to allowing debt to be created. This is why (I suspect) we see so many more medical bankruptcies than entrepreneurial bankruptcies. the debt is easier to get.

In the case of medical debt forfeiture, I think that we do all end up footing the bill in one way or another. We might as well go ahead an acknowledge that responsibility for public health and create a universal health care system.

Now I know that everyone who leans the slightest bit to the right is dead set against universal health care, but removing profit from the public health equation would save us all a lot of money. When someone defaults on a medical debt we are not only covering their ass on the cost of the service, but also on the profit. (Yes, I know the settlements are often much lower than the actual debt, but if we were not covering the profits, the companies would not be profitable.)

Chris -

Forgive my ignorance. I’m not sure what you are saying or what your rationale is for saying it.

Are you saying bankruptcy is a good thing? A desireable thing? If so, please explain how it is good. Or at least explain how the good it does outweighs the bad I stated it caused.

From here it sounds like you all ARE saying bankrupcy is an entitlement. I should be able to repudiate my debt at will and everyone else should be willing to endure the societal and financial costs involved. Is that what you’re saying?

BCM

Jackson -

Why must it be that the person taking the risk knew the risk when he took it on? Why is it not, “I know the promise I am making to you that my word is good and I will honor that promise?”

What makes your argument better than mine. I can make it really easy for you. If you are a businessman, would you rather do business with me or with a guy that thinks like … well, like not me?

I thought so. Because even if you are right and bankruptcy doesn’t hurt us all, it sure as heck hurts the guy who lost money because he trusted a man who told him he would pay for the goods he got.

Another way of looking at this is that bankruptcy permits people to take and use things without paying for them. Were I to wander into a hardware store and pick up a few things and walk out, they’d arrest me. What I did was a crime! Practically speaking, there is no difference between that and repudiating debt. You are stealing from the man you promised to pay but now won’t. Other than that the government says you can do it.

But even the government realizes that bankruptcy in the US is bad for us. In 2005, it was so concerned with the bad consequences of the practice that it passed laws making it harder to actually accomplish.

Your comments on medical bills are interesting. Interesting in that you do agree that we all are impacted by that in some way and thus, we should go ahead and generate another entitlement - universal health care - to address the situation. I cannot disagree more. But that’s a discussion for another day.

And your statement on the SBA is interesting. Are you saying the government was required to start that Agency? To enable people to start a business? As if entrepeneurship and self employment is some sort of Right? Or as if each person who wants to be self employed is entitled to be assisted in that endeavor by the government?

Truly, the more we talk, the more I think there is a large group of usually rational people that actually DO believe this is all a matter of entitlements.

Please help me. Explain to me how I’m wrong …

BCM

First off, I am a business man. I own a brick and mortar retail clothing store and I am about to own two. Who would I rather do business with? The one I perceived as less risky and who I could mitigate my risk with the most. That is the very core of how I evaluate business dealings. The banks do it the same way. As do the landlords. As do the equipment vendors. Promises are worth very little and as such are rarely the basis for business loans (i.e. unsecured loans).

You are not talking about actual loss, you are talking about perceived perceptions. There are lots of honest people who would never default on a loan who find themselves defaulting on a loan. It has nothing to do with intentions.

As for the SBA, what I am saying is that bans are so good at identifying risk that there are many (likely a majority of) Americans who cannot qualify for a small business loan. The Us Government made a decision that in order to keep the economy vibrant we need some of those people to be able to start businesses. An SBA loan is not an easy thing to get, but it is a great resource for people who have a solid business plan but do not have the assets or track-record needed to secure a traditional business loan.

The SBA is not there because it is every American’s right to be able to start a business. The SBA is there because it is good for the US economy for dedicated individuals to be able to start a small business.

Likewise, a healthy “working class” is imperative for a strong US economy. If we want to stay competitive in the world, we have to stay healthy. It is just like mother’s tell their school-aged kids, in order to do well in school you need a good night’s sleep, a good breakfast, and a healthy body.

It is interesting that you are choosing to use the word “entitlement” so much. You see, that is a key word from the right. It is actually a little detrimental to the open dialog you seem to be after. So let’s talk about what entitlement means (not being condescending, just making sure we have a common vernacular).

Entitlement in the way you are using it means a government program that provides benefits to people who meet the qualification requirements. My understanding of how the Right uses the word is to imply that the qualifications for said benefit is laziness. Still, there are not many on the Right who are willing to publicly come out and say that NO ONE should be able to qualify for government benefit programs, so the discussion must simply be about what those qualifications are.

So, what do you think the qualifications for bankruptcy should be? Or do you believe that a US citizen should be able to get in debt so deep that they have no option but to starve to death on the streets?

That was a rhetorical question; I know you don’t believe that. Now, even the US Government knows that bankruptcy in some circumstances is required. They were so concerned with it that they actually passed laws stating how people could qualify.

Also, let’s not kid ourselves that the 2005 bankruptcy legislation was all about reducing bankruptcy. A large portion of it was reorganizing who would get paid first and how much of which kinds of debt would be forgiven.

You wanna know a way that I can make a ton of money real fast? By running a successful business on a certain risk/reward equation for years and then drastically reducing my risk without restructuring the rest of my business. The 2005 bankruptcy legislation made some people very rich while by allowing some other people to be very poor. Some of those people on the losing end are people who under no circumstances would ever default on a debt. Sometimes, things are just outside of your control.

I am not arguing in favor of declaring bankruptcy, but I am stating clearly that it is a necessary evil for the American dream to persist.

sorry the line breaks didn’t take.

One more thing.

Because even if you are right and bankruptcy doesn’t hurt us all, it sure as heck hurts the guy who lost money because he trusted a man who told him he would pay for the goods he got.

Absolutely not. If the person lending the money did not understand the risk then they had no business doing the deal.

The exception to that rule is that the 2005 bankruptcy legislation made it more likely that the small business owner is the one getting screwed, but you can take that up with your people, not mine.

There are lots of honest people who would never default on a loan who find themselves defaulting on a loan. It has nothing to do with intentions.

Agreed. It’s not a situation most people would choose to find themselves in.

You know, it strikes me that the superior attitude that comes across from folks who are dead-set against assistance programs such as welfare and bankruptcy is the real entitlement.

Bankruptcy is one of many “escape valves” built into our legal system so that people who make mistakes are not permanently removed from being productive members of society.

BCM, thanks for the clarification. I would have been very unhappy to think that you were being deliberately offensive.

As for bankruptcy as an entitlement, I agree with John Lamb about its purpose. I’ve seen people who would have been willing to shoulder a lifetime of indebtedness to pay off creditors (in cases of debt they had no control over) but who couldn’t get creditors to agree to payment plans; on the other hand, I’ve seen people amass debt with no realistic hope of ever repaying it, who seemed to me to be taking advantage of the system. But, you know, just because some people cheat it doesn’t mean that you get rid of bankruptcy as an option, any more than you get rid of exams in schools because of cheating.

As for the recent bankruptcy “reform” act, it exists so that crerdit card companies can get at the head of the debt collection line. Since they already are permitted to charge usurious interest rates because of the ‘risks’ they face by issuing credit indiscriminately, this move to eliminate their risk is pretty disgusting.

I’ll just say, that when my dad went into business with his mother in 1970, he had no way to foresee that one day, Super Wal-mart would make an illegal land deal with the city in order to come into our hometown in the late 1990s, and then proceed to systematically run him out of business, forcing my parents to lose their business and their house, and be left with no income and more than $1 million in debt.

The 2005 bankruptcy law was a door slammed in the face of small business, and I’m still not sure its effects have been fully felt. It’s a very punitive law, and while there are certainly some people who declare bankruptcy to escape rampant personal overspending, the stats bear out that this is only a small percentage of actual bankruptcies.

Don’t get me started, people.

[…] Our very own Blue Collar Muse has once again stirred the hornets nest, resulting in a great comment debate over at one of the local Tennessee blogs. […]

You won’t find many people more familiar with bankruptcies in Middle Tennessee than Chapter 13 Trustee Hank Hildebrand. Every single Chapter 13 case here passes under the supervision of his office. He comments here on Tennessee’s distinction as the state with the most bankruptcies.