Good morning everyone and thank you for joining me in the Breakroom. We have had a pretty crazy week ranging from the Silicon Valley invasion of the Pentagon, the murder of a prominent CEO of the insurance industry, and caps limiting overage charges through banks. In many ways, I think it does feel like a month in which there is a Friday the 13th. That is right, if you haven’t noticed yet, today is the final Friday the 13th of the year. Anyone here superstitious enough to tread lightly on today? I might not be superstitious but I am a little stitious, though not enough to keep from leaving the house.
But enough about all that, I know you are really here to learn about what happened at the office this week.
You may recall that last week, it was revealed Michael had been working a second job which implied he has been having money problems. Unfortunately, he laid it all out in the open this week. Turns out Michael had around a dozen credit cards, each with a staggering amount of credit charged to each one that he has been trying to work off. I am not sure that Michael really understands how these cards should work because all he was hoping for was for a new card to come in the mail that he could he transfer his credit over to. This is a very real practice and can get dangerous if you are not careful. Many credit cards advertise how you can transfer existing balances over to the new card because there will be no interest or fees for so many months. While you think you are getting a few extra months to come up with the money, it becomes easy to keep on spending in that time and you are in the same place you were before. I sense that is how Michael has ended up with so many cards, constantly moving his charges throughout the various cards. As someone who loves to shop, let me tell you to not let yourself get caught up living outside your means.
Now that Michael has quit that second job, he is stuck trying to come up with a means of solving his money problems fast, and this leads to him asking various staff for their insight. Naturally, he decided that Kevin would be the best option to talk to first. Rather than financial advice, he went to him asking about gambling advice because he knows Kevin partakes in gambling at times. By advice, Michael was actually hoping to recreate movies where Kevin knows of a boxer who is going to take a dive. Surprisingly, he is not connected to such instances but did recommend Michael try the mob. I believe most financial advisers who recommend against trying to gamble your way out of debt.
It was then Creed who tried to help Michael out by recommending he declare bankruptcy. Michael was hesitant because this is bad news in the game of Monopoly, but Creed points out that game does properly represent real life. Take the “Get out of Jail Free” cards, in reality those would cost thousands. Inspired, Michael goes out into the bullpen and cries out to us all “I declare bankruptcy!” This is not how you declare bankruptcy and the whole process is much more complex than Michael understands.
This is a big topic and I am not a professional accountant or lawyer but I will try to give a high level description as I am researching this myself. Simply put, to declare bankruptcy is to legally petition assistance addressing that you have debts which you can no longer pay for. This would be a last resort in most cases when you cannot properly pay them back in the current situations. Michael is incorrect in his interpretation because this does not inherently remove all of your obligations. While it is possible some of your debts may be wiped clean, the majority will be set up with more manageable payment plans. This process can often assist with liquidizing some of your assets so be prepared to have everything you own looked at. To actually do this, you might petition a court with the necessary paperwork. While it is possible to do this yourself, it is always recommended to hire a lawyer who specializes in this to walk you through the process. Additionally, just because you file the paperwork, it is possible to be turned down but your lawyer would be able to have a better understanding as to if this is a risk. Additionally, this will have lasting ramifications for you for many years. It will typically have a significant impact on your credit score and this can result in you being unable to secure loans for awhile.1 The best recommendation I have about even considering this as a step is to speak to a professional. Your tax advisor or accountant would be a good place to start and could often recommend an appropriate lawyer that you could speak to. While declaring bankruptcy has been able to help so many people, it can also make your life very difficult so that is why it’s best to see if that is your only option2.
Oscar, being an accountant, was well aware what Michael was doing and he was quick to point out that Michael didn’t do anything. And this was Oscar got sucked up in attempting to help Michael with his situation. Michael blamed the situation primarily on how Jan has his credit cards, but an investigation into the purchases by Oscar revealed the real reason. He found purchases which include a core blaster workout machine, multiple copies of Best of the Muppet Babies, and professional bass fishing equipment. It seems Michael has not been careful with his spending and that was the real reason behind the credit card debt. Oscar does his best to breakdown where the error is, using PowerPoint to show that Michael’s spending is primarily considered “things no one ever needs” and that his best option is to work with a debt consolidation specialist. This is a real profession, for those who may be in need of one. Typically, you would provide them with all of the information of your debts and they could arrange for more agreeable payment plans with them. Then, you would normally pay this specialist who then dispenses the payment between your debts. This is seen as a better alternative to bankruptcy and although it can still ding your creditor score, it will bounce back much faster. This is absolutely the best option for Michael, unless he really can track down a boxer guaranteed to take a dive. But when Oscar contacts Jan to let him know about the situation, Michael seemed unwilling to admit his screwed up. Instead, he ran out of the room leaving Oscar trying to explain to Jan what happened.
Jan showed up and actually went after Michael. Turns out, they ended up having a pretty good conversation and Jan really helped him. Michael was hoping to run from his troubles but Jan explained how debt can follow you around the world, which it really can. And while she didn’t admit to what they were, she did have ideas on how they could work this debt down.
I am sure we may see some of these ideas soon, but I feel a bit part of it may be tied to hiring a debt consolidator as Oscar recommended. Or maybe Jan will actually get back to working and bringing in an income.
And that was what happened at the Breakroom! I hope everyone is watching their spending, especially this close to the holidays, but if you are concerned then please reach out to the professionals.
Have a great weekend, stay warm, and as always, I’ll see you around the Breakroom.
- (n.d.). Bankruptcy. United States Courts. Retrieved December 12, 2024, from https://www.uscourts.gov/services-forms/bankruptcy ↩︎
- (n.d.). Bankruptcy. IRS. Retrieved December 12, 2024, from https://www.irs.gov/businesses/small-businesses-self-employed/declaring-bankruptcy ↩︎
