A buddy of mine says he is going to declare bankruptcy soon. He says that his wife already did once recently and that his mom has declared bankruptcy twice in the past. He said that your credit takes a hit for a couple of years, but after that, you can build it back up again. He makes it seem like it's  no big deal

But I guess my question is, is it really that simple, painless, and easy with no major consequences?

He said it costs around $500 to file. But after that, its like just flipping a switch and starting over

Am I missing something here ?

Google has a better answer. Bankruptcy isn't simple, and it trashes credit for more than just a couple years.

I would also ask your buddy if he is a man of his word and encourage him to pay what he agreed to borrow. Eliminating debt by bankruptcy increases prices for the rest of us who pay our debts.

There are better ways. Has he considered taking Financial Peace University or listening to Dave Ramsey audio or reading his books? He posits simple steps to getting back on the right track.

Even if he does go through with bankruptcy, your friend will likely be in the same position again in the future if he doesn't change his habits and relationship with money. Sounds like he surrounds himself with people who make very bad decisions with money.

Sounds like your friend is stupid, as is the rest of his family.

How many times have they hit the reset button thinking they're getting ahead and sticking it to the man, yet are still broke?

It blows my mind how financially illiterate Americans are, even at the age of 60.

+1  have him read up on Dave Ramsey he was a millionaire then went bankrupt.  It does something to your spirit and should be avoided.

My ex run up a bunch on cards in her name (1 had me as authorized,, never seen/touch card).. she ran off and file bankrupt on everything prior to divorce

Low and behold I get IRS-1099 from 2 places (1 each yr) that I end up having to pay tax on the gains, and they report on my credit report

My credit took hit for couple yr,, but I didnt carry cards, I paid all my own..  got a loan and paid it (Credit Union),, score coming back up.. Have a Cabela card, but it now Capitol One,, one of the folks that 1099 me.. but  I only use it couple time a yr per Clark Howard and pay it off.

In reality, for those who abuse the system, yes it is that simple.

Once you file bancrupcy, you can't file again for 7 years. Creditors know this, so they instantly give you credit again because you have no way out of it for 7 years.

Your credit does take a hit, but if you're going to abuse the system that won't bother you.

All it means is the credit you do get will have high interest, but if you're just treading water for 7 years to file again, who cares.

My wife and I ended up having to file bankruptcy ten years ago when our son was born. we had a bunch of debt from being young (credit cards, school loans, home mortgage, car loans, etc.)

Nothing we weren't prepared to pay for, but basically treading water living paycheck to paycheck.

Our son was born with a medical issue that necessitated 3 surgeries in the first 6 months of his life.

He was also born in December and our medical deductible reset Jan 1.

Combined with the fact that our health insurance was a high deductible plan with the first $10,000 due out of pocket.

After the spike with the medial bills piling up we talked to a few financial advisors and all said bankruptcy was our best option.

We were scared, how do we keep the house, the cars, all the other stuff we had that we weren't prepared to lose?

It ended up being a joke, IMO, we kept everything and didn't have to pay anything other than the $1000 the lawyer charged.

We kept the house, 3 vehicles, two ATVs, all the wife's jewelry, all my firearms, etc.

The credit rating did take a hit, but like I said earlier, it's very easy to still get credit.

Having been through it, it is a system very easily abused just like welfare, unemployment, etc. and there are very few downsides to using it, especially if the goal is to abuse it.

Even having used it, I'm still torn. It was a great system for us, just like hitting the reset button. But seeing others abuse it, using it comes with a stigma that is hard to get rid of.

Thanks for all of the info. I have considered having a talk with him. I just hate sticking my nose in other peoples business. I have heard of Dave Ramsey. Maybe Ill look into that idea more, and maybe send him his book anonymously. Id like to remain friends with him, without overstepping my boundary. But as someone mentioned,  surrounding yourself with others who make poor financial decisions sure doesn't help.

Thanks again everyone.