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What would happen to financial obligations in a currency crash?

Discussion in 'Financial Cents' started by Beano, Apr 18, 2013.

  1. Beano

    Beano Monkey

    I realize the importance of getting out of debt when preparing for the coming economic collapse. What I don't know is, why. What will happen regarding everyone's recurring obligations in the event of a currency crash? My rent, car payment, credit card payments.....not to mention my child support and alimony payments.This is a big question mark right now as I prepare.
  2. tacmotusn

    tacmotusn Mosquito Sailor

    I had similiar concerns. First off you most likely have secured debt and unsecured debt. A car or house is secured debt. A credit card balance no matter the size, usually is not secured debt. Often if you have a large credit card balance, every lender in the nation will try to get you to wrap that debt into a home equity 1st or second mortgage because then it will become secured debt with the property you mortgage being forfeit should you not be able to pay. Although my credit card balance was the highest interest, I paid off my mortgage 1st. Under florida law they cannot now take my house PERIOD! My car loan will soon be paid off next. Last will be that credit card which is with an out of state credit union. Hell if we have an economic collapse, it is member owned and operated. How many of them will still be solvent. Will the credit union even survive. Just my opinion, but in a post SHTF it seemed the safest place to still have debt. I am trying and want to be totally debt free!
    tulianr likes this.
  3. Beano

    Beano Monkey

    Same here dude. I am struggling under the joint debt my first marriage saddled me with, and my new wife and I have made it the highest priority to get out from under. We go astray sometimes, because we're somewhat young, but we do what we can. Prepping has taken front stage for me, as the consequences of not eating would outweigh those of owing someone money. Good point about the banks' solvency, or lack thereof. I wonder if our landlord would evict us.
    tulianr likes this.
  4. Donldson

    Donldson Monkey+

    All I can say is don't make assumptions. You don't assume things will continue going good forever, but you shouldn't assume they will fall apart in any specific way either. I was only in high school during Y2K but I know there had to be plenty of people who stopped paying on debt or maxed out credit cards on preps, then woke up Jan. 1st with quite a bill still to be paid.

    Renting could be a problem in any breakdown. Right now if you stopped paying rent there are months of hurdles they would have to jump through to evict. If something happens to the system however you could be at their mercy. I would say as long as you live there try to keep on as good a terms as you can and if SHTF and you stay put make sure you are the first to help them with anything. Make them want to have you around.
    tulianr, Yard Dart and Moatengator like this.
  5. larryinalabama

    larryinalabama Monkey++

    Its a good topic, several scenearos exists.

    First of all I would make becoming debt free part of my preps. Ive been debt free for a real long time and it has been my biggest help <except God> in some real hard times.

    If someone is able to hack and destroy the banking computer systems how would anyone know if you have debt. Then how would you prove you have any money in the bank, everyones screwed in this deal.

    If we simpley go into a massive depression which is likley being debt free is only to your advantage.

    If we go into total chaos I really dont know what debt will become, you can bet the US gooverment wont pay back what they owe.

    As far as child support it doesnt exist in 3rd world countries and its likley men will be taking care of our children because mothers tend use them as pawns, without child support and welfare dollars a whole lot of women wont want their kids.
  6. Yard Dart

    Yard Dart Vigilant Monkey..... Moderator Site Supporter++

    Two words "Debtors Prison" if things go bad and the government does not get re-established properly- who is to say that there is not some governmental form of punishment to take care of unpaid debtors which forces you into incarceration due to your lack of payment, or they just try to give you to the debt holder as a slave..... never know how it could play out. Best bet is to get to zero and take that weight off your shoulders when it comes to any debt. Child support and alimony is another deal, if the SHTF there won't be any means to collect it most likely, but it will also be your least concern at that time. I agree with @Donldson when it comes to rent, you need to be indispensable to the land owner or you will be at there mercy....
    Brokor and Mountainman like this.
  7. Beano

    Beano Monkey

    Good point, YD, but what about a situation where the dollar is worth nothing to no one? Will people continue working, getting paid in Bernanke's confetti paper, and in turn paying the same amounts to creditors? I tried researching what happened during the Great Depression on this front, but haven't been able to find anything. I guess I'm trying to figure out what the mechanics of this would be for people on a personal level. Which is, of course, all theoretical.
  8. Yard Dart

    Yard Dart Vigilant Monkey..... Moderator Site Supporter++

    I think it truly depends on what [shtf] happens and what the duration of the issue is, to determine what is affected as far as records, who is left to enforce or collect, and your give a d*mn factor.....
  9. Airtime

    Airtime Monkey+++ Site Supporter

    In my mind prepping is for much more than a total SHTF situation. A tornado (been there) loss of employment (been there) fire (been there too) as well as regional riots, power outages and numerous other events can be a diaster for you but leave the bank records intact. Good prepping involves assuming NOTHING happens in your favor. So you should plan that your bank folds but the institutions holding your debt don't.

    Dave Ramsey has some good books and courses that are proven to lead you down the most effective path to financial freedom based upon a lot of financial and behavioral research. Check out his Financial Peace University program. It will give you good guidance with a solid success record.

    Donldson, Beano and Yard Dart like this.
  10. Yard Dart

    Yard Dart Vigilant Monkey..... Moderator Site Supporter++

    Dave Ramsey is awesome- I have been struggling with the envelopes for years though... some day's they drive me crazy but in the end the method works!!
  11. Donldson

    Donldson Monkey+

    I have helped my supervisor run a Financial Peace class at his church and 100% agree it's a great start to getting things in order. He has one of the best programs out there IMO. It was actually quite funny when we discussed life insurance, we had an agent start to argue that his advice was wrong. It's a long story I won't go in to, but I'm pretty good at math and Mr. Ramsey won that fight.
  12. larryinalabama

    larryinalabama Monkey++

    The only thing I subscribe to on the Ramsey program is becoming debt free. Ive herd him give some horrible advice to hurting people on the air, one account was a feller inbetween jobs who was going to borrow a couple of thousand dollars to keep all his bills current, long term that naturally wouldnt work but he was healthy and simply inbetween jobs. Ramsey told him to quit paying on his house and cars and credit cards. That advice likeley cost the family several thousand dollars to sterighten out once he gained employment.

    When Gold was 400$ and rising Ramsey said PMS were a horrible investment, meanwhile the stock market <which Ramsey subscribes too> crashed 3 times while gold steadly rose to 1700$ over a 10 year streach. Hed also say that buying a farm tractor is a bad investment because the value is half of your annual income, when infact tractors are almost as good as money ing the band, they seem to hold there value.

    Id say get 6 month worth of supplies, then work on getting debt free.

    Being debt free is a huge plus in good times and bad times.
  13. Brokor

    Brokor Live Free or Cry Moderator Site Supporter+++ Founding Member

    Exactly. This is the only reason I entered this thread.

    Debtors Prison. Don't think it's a fallacy or some theory, either. Some debt you *might* be able to escape. I'm not counting on it.
  14. Airtime

    Airtime Monkey+++ Site Supporter

    I hear ya. I had a similar reaction when I first started listening to him but the more I listened and heard some of the detail in his answers it started making more sense. The key is his advice is taylored for what the typical person will do. So for the guy between jobs, Dave said don't borrow more money likely because he had seen the same situations hundreds of times and in the strong majority of those times when the person borrowed more the situation just got worse.

    Ramsey says to cut up your credit cards and never use them and when there are points you can earn he says that is even worse. He states their research shows that using a credit card is just too easy and people simply spend more than if they use cash. I'm sure he is right. However, I use a Discover card all the time - I pay it off each month, haven't paid a dime in finance fees in years, when I study my Discover spending reports, there isn't a thing I wouldn't have purchased if using cash (mostly fuel and food) and I get several hundred bucks back each year. But that is not the normal behavior and Dave's advice is based upon normal, typical behavior.

    Tractor... I bought one, a used older one and I agree it won't devalue any more and probably will actually appreciate now. But it is not super reliable anymore. If I were farming for a living (we share crop our farm land out), then I'd require large reliable equipment which means modestly new. The technology keeps changing too and what was right 8 years ago isn't now. Look at soy bean planting. 10 years ago everyone drilled beans and the John Deere 750 drill was one of the top dog drills. With the advent of better hybrids and row planting technology, now lead farmers have shifted to narrow row planting of beans and the value of used JD750 drills dropped significantly. I consult for an engine company and our engines get better and more efficent almost every year. My brother works for a Ag business development/consulting company that helps farmers move from farming 3000 acres to 30,000 acres. Their customers do very well and they tell the farmer to not buy tractors, lease them.

    I have some gold -- not so much as an investment to grow but as economic insurance. I didn't get it at $400, it was higher but compared to my various stock funds, 401K funds, IRA, Roths, etc. when you figure the buy price is above spot and the sell is below spot, all but one has done as good or better than the gold inspite of the several crashes. I went to an Edward Jones seminar last fall and they showed data showing the same thing.

    The adivce my brother's firm offers farmers and my investment brokers' advice is not based upon one or two guys experience but upon analysis of the numbers and hundreds of data points of experience. And does it apply to every situation, nope. Are there examples that defy the advice, yep. But for the typical situation, over the long haul, their advice is usually right.

    As far as I can determine, maybe incorrectly, Ramsey works the same way. Just my observation.

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