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Should you be allowed to file bankruptcy more than once?

by J. Money on Monday, October 11, 2010

A friend sent me this link yesterday about Toni Braxton filing for bankruptcy for a 2nd time in her life. Actually, a 2nd time in 10 years!  Can you imagine?  I honestly can’t, which is why I think is why I’m blogging about it today :)

I don’t know what to make of this really.  I mean, at first its like “are you serious??”  You can’t live off MILLIONS of dollars?  That’s pretty sick. But then I bet there’s a lot more deep-rooted problems going on there and something not all that easily fixable.  So in that sense I kinda feel bad for her and think it just sucks to have all your issues broadcasted around the world like that (not that many people remember who she is all the way. If you’re one of these people, click here :)).

The thing I’m wondering about all this though, is that how it’s possible for people to keep filing so much like that? And also, is there a limit to the number of times you can go bankrupt?

I feel like 1 time is definitely fair for everyone in their lifetime. I don’t necessarily agree with it all the way, but I do know we all make mistakes and certain circumstances are better off with bankruptcy involved.  I would never wish that much debt on someone for the rest of their lives – it’s so horrible!!  If you can genuinely learn from your mistakes, and you weren’t trying to game the system or anything, I think having that as a last resort option is okay.

But more than once?  I think that’s where it starts getting shady. I almost lost my $hit when my friend’s friend did this for a 2nd time in a row – especially when I heard she then went out and blew $250 at the mall that very same night she declared the 2nd time!  People like her and her husband should never ever be able to keep filing – they’re clearly taking advantage of the situation.

I’m very curious to find out what this maximum number is.  I’m sure it varies state to state, but there’s gotta be a cut off # at some point, right?  What’s your take on bankruptcy?


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{ 36 comments… read them below or add one }

1 Renchix October 11, 2010 at 8:14 am

You can go bankrupt with your company, set up another and again go bankrupt, and maybe only 3rd or 4th time is the lucky one when you finally understand how to do the business. In a way personal bankruptcy is similar to that of busines, therefore it should be the same that number of bankruptcies is unlimited. However, I personally think that persons should be liable for anything they have borrowed, and if you have been borrowing money and buying a lot of things on credit and at the same time didn’t think how to give it back, then it is just your fault and then even one bankruptcy shouldn’t be allowed as a way out of the situation. These then usually are those cases when people are more likely to go bankrupt also 2nd time, seeing this as a good way to get away form his debts.

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2 Brent October 11, 2010 at 8:24 am

borrowing money and then not paying it back when you have the means to (ie 250 spent that night by your friend) is just plain stealing.

borrowing money with no intention of ever paying it back is just plain stealing.

borrowing money with no plan of how to pay it back is stupid and would likely lead to bankruptcy.

lending money to someone who would file bankruptcy while at the same time has the means to (ie 250 spent that night by your friend) pay back is stupid

lending money to someone who has no intention of paying it back is stupid

lending money to someone who has filed bankruptcy in the past is stupid

moral of the post here:
borrowing and lending money probably isnt the smartest thing (but what do i know, the credit card companies all have the big buildings in the big cities, so by that measure they are probably doing pretty well)

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3 Matt October 11, 2010 at 8:43 am

I’m not very clear on what filing for bankruptcy entails, but from what I understand these folks are walking away from debt scott free? Who pays that back or do the debtors just eat the cost? Perhaps a mandatory monthly or quarterly budget meeting with a financial planner after they file would help prevent multiple filings. I hate to waste more of my tax dollars on paying a financial planner to help these people but it would be cheaper than bailing them out at a later date.

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4 Brent October 11, 2010 at 8:53 am

@matt – the debtors eat the cost (they took the risk to lend and it was bad risk). Once someone starts to threaten theyll go into bankruptcy and the debtors believe them theyll start settling the debts for half or even less becuase they start to think they might get nothing.

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5 Karmella October 11, 2010 at 9:05 am

In a former life I clerked for a Bankruptcy Judge after law school – it’s federal, so while some exemptions vary from state to state, the core of it is the same. To a degree, your situation will vary depending on which Trustee you get (or judge), so that’s a little bit different, but how often/etc is the same. I finished before the big changes were enacted a few years ago, so I’m not sure what the story is now.

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6 Red October 11, 2010 at 9:16 am

From what I found on Google, you can file Chapter 7 bankruptcy as many times as you like, but the second filing cannot be within eight years of the first. So once every eight years for the rest of your life. ;)

I definitely agree to an extent that letting people file bankruptcy over and over again is wrong, especially if they’re not learning anything. Maybe they should be required to take some Financial Peace University courses before their debt can be cleared? My grandmother attempted to file bankruptcy a second time recently, and I can tell you right now if she had been able to she would have just put herself right back in the same situation again.

But at the same time, I can’t say people should only be allowed one bankruptcy if no one is there to teach them to change their behavior. For my grandmother, her issues with money stem from growing up in poverty. She buys things and surrounds herself with them because it brings her security. She would need some therapy to get over her behavior, and who’s going to pay for that? She’s certainly not going to initiate it since she doesn’t think she has a problem.

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7 Rachel211 October 11, 2010 at 9:26 am

Huh. I always thought you could only do it one time too. I could MAYBE understand a time limit of like every 25 years or something, because nobody is really even the same person after that amount of time, but 8 years? For most people that is WAY less time than it would have even been for them to even pay off the debt they accrued if they would have tried. That’s not fair to anyone.

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8 Everyday Tips October 11, 2010 at 9:27 am

I can’t believe Braxton has filed twice- yikes!

I wish there were the resources to require financial education/counseling as a part of the first bankruptcy filing. Spending habits can be hard to change for some if they don’t know the right way. Yes, everyone knows to not spend more than you make, but without essential tools, people may not know how to change a life of spending. It may be how they deal with their emotions, who knows.

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9 Jesse October 11, 2010 at 12:44 pm

When I was too young to even understand what bankruptcy actually was, aside from the general feel that it was a huge no-no, my parents were trying to sell a home and an interested party proudly stated he had been through bankruptcy three times previously.

There are people out there proud to take advantage of the system, but what can ya do about it! It’s wrong, they know it, we know it, but they will keep on doing it.

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10 MoneyMan @ FinancialOdyssey October 11, 2010 at 12:45 pm

I have a problem with bankruptcy the first time. I don’t think its fair that someone can just wipe the slate clean and start over, nothing else in life works this way so why should money be any different. At school if your grades aren’t that great you cant file school-ruptcy and start all over. I’m a believer in dealing with your mess the old fashioned way and not finding the easy way out.

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11 FrugalRichLife October 11, 2010 at 1:17 pm

I agree w/ Red, these people need to take financial courses or have some type of psychological counseling if they’re repeated offenders. Something isn’t “clicking” mentally with them regarding their financial situation or they are truly uneducated when it comes to money. They need professionals to help resolve the root of the problem instead of using bankruptcy as a bandaid.

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12 J. Money October 11, 2010 at 3:09 pm

Yeah, more financial education would be at least *something* to hopefully help out. Usually don’t work if it’s forced, but maybe it’ll wake some people up and get them to CARE? I also like the once every 25 years idea. It’s true, we are different people every few decades!

All I know is that I’d do whatever in my power never EVER to file bankruptcy ever ever ever. We can’t predict the future so who knows what is coming up down the road, but as long as we’re increasing our savings and financial smarts hopefully we’re all getting far far away from that likelihood! That $hit scares me to death man. Bleh.

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13 Refugees on a Budget October 11, 2010 at 3:10 pm

Ugh.. this subject makes me beyond mad. My sister in law and her husband filed for bancruptcy about 5 years ago.. they are thinking about doing it again. Agreed, my husband and I are not very responsible with our money either, but not having intention to repay money you borrowed is called STEALING. We’ve gotten into an argument about a ton of times. Guess the bottom line here is that everyone should be allowed to do it only once, as the current system makes it way too easy on people, which is why there are so many repeat-offenders….

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14 Talar October 11, 2010 at 3:53 pm

The only bankruptcy that even makes sense to me are the medical ones and even those I wish someone was doing some analysis to try to figure out how these people fell through the cracks. Did Medicare/Social security disability have a problem? Did their personal insurance cut them off or not cover something? Etc…

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15 Erin October 11, 2010 at 3:59 pm

Anyone know how many times Donald Trump has filed for bankruptcy? I think it’s three times officially and a couple more times he threated to file, but settled the debt with the banks and wound up giving half the casino over to the banks. People really line up to be an apprentice to this guy?

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16 Jenna October 11, 2010 at 4:01 pm

You think one time would be enough of a wake up call. Although, people go to rehab more than once in a lifetime. Sometimes, we are slow to learn.

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17 Yana October 11, 2010 at 4:55 pm

I have never filed bankruptcy and think it is something that should be an absolute last resort. I’d say that anyone that does it twice should never get credit again. I would always make an exception for bankruptcies that are solely the result of medical bills/expenses. Nobody can afford them, and if they can live long enough to file multiple times for medical alone, let them do it. Not everyone wins the medical/medical insurance lottery.

I’ve known a couple of people who have filed bankruptcy. A close friend of mine did so for the second time in 10 years recently. Before she did it, I tried to get her not to do it. I told her to call the companies she owed money to and tell them the way it was. Which is that they could be paid something, or paid nothing. She could not do that. What I find a bit odd is that this friend thinks that it is immoral to not pay your bills or try to reach a bargain, or to get away with anything without filing bankruptcy. It is as though bankruptcy is not only legitimate, but a morally good thing to do. I on the other hand would avoid bankruptcy like the plague, but wouldn’t have any problem suing a bill collector for breaking the law. To my friend, my way of thinking is immoral.

A couple I know filed bankruptcy because they coudn’t stand the collector calls. I told the female half that she should not speak to the collectors. She said she couldn’t not answer the phone. They filed while buying their 3rd financed car in about 3 years, and kept the most recent new vehicle purchase. Within a year, they got a mortgage. I don’t know how that worked out, because we lost touch.

Bankruptcy is a game, a subgame to the main one in a society that lives on imaginary money. I guess some people like playing it.

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18 CityFlips October 11, 2010 at 7:35 pm

um….no. you should not get to file twice. you should not go blow money when you file. bancrupcy is serious stuff. maybe you should be assigned to personal finance school and have a parole officer who reviews your bank statements for a few years too!

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19 Tom Ajava October 11, 2010 at 8:52 pm

The maddening thing about Braxton is it isn’t like she just got caught off guard with the Great Recession. No, she owes millions to…Neiman Marcus, Four Seasons Hotel, American Express and the like. This is not exactly someone who saw their home lose value when the market collapsed!

Should people be allowed to file more than once? Yes. One of the top reasons for filing is related to unpaid medical bills. If you go into the hospital for anything more than a week, reading the bill when you get home will put you back in the hospital!

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20 David Damron October 11, 2010 at 8:57 pm

To say I am exhilarated that someone (YOU!) decided to write on this topic would be a huge understatement. When I heard this, I was shocked. How could we let her do some BS like this. Now, I know I stand on the liberal side of things, but I even agree that twice is ridiculous. Thanks for bringing this to plenty of peoples attention…

David Damron

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21 Jaime October 11, 2010 at 10:18 pm

Nope. I can’t feel sorry for someone who is bodily able and healthy. She should have learned from the first time. Celebrity culture is very interesting, because they’re surrounded by decadence they don’t expect bad things to happen to them, not usually.

It seems that for celebrities their huge paychecks usually come to them in their 20s & 30s, I hate to say it but for most of them their huge paydays are in their youth because they use their looks to make money especially if they’re models, actresses, female singers. I’m not picking on celebrities that are female, as I’m a woman myself, but lets face it they do use their looks as part of the celebrity package.

Its usually the comely celebrities who score the huge paychecks, not the “average” ones, & they just expect those $20 million paychecks to continue and when they don’t, they don’t deal well with it. Sometimes I’m fascinated by people who make a lot of money and spend it all. Its just weird to think how someone could make millions and go bankrupt. I personally don’t get it.

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22 Jaime October 11, 2010 at 10:34 pm

forgot to say, it seems that people who file for bankruptcy expect someone to save them, the government, god, etc.. No magic fairy is going to wave a wand and make finance problems go away, and even if you do believe in god, shouldn’t people practice wisdom?

Even the world’s religious texts say to avoid debt and be wise with money, I mean its not like the deity that people believe in is in their body and handling their actions. You can’t always expect someone to come and save you. I know religious people like to say that because of god, they got a bonus, an extra paycheck, a friend paid back a debt,etc. I just call that luck, but what if they continue to be foolish, luck can’t always get you out of debt.

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23 Yana October 11, 2010 at 10:58 pm

The thing is, Jaime, that bankruptcy IS like waving a magic wand. With it, you get out of paying your debts. That’s the way it is. Has nothing to do with gods.

Making millions and then going bankrupt is mind-boggling to those on the outside. But I think the problem is just magnified with the income of people like that. The problem is: not managing money, not valuing money, not seeing money the way it has to be seen in order to succeed, and thinking that money is to spend. And it sounds dumb, but I think some people do not know that if you spend money, then you don’t have it. That is why lottery winners go broke. They think they are rich. They think that rich people spend money, and CAN spend money without ceasing to be rich. To that I have to say LOL! If you don’t have megabucks coming in continuously, along with a guarantee (no such thing) that it will continue, along with resources like health care (no guarantee there either), you cannot spend money like it doesn’t matter. It matters only because that is what makes a capitalistic society go ’round.

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24 StackingCash October 12, 2010 at 1:38 am

I’m jealous of those who go bankrupt but have the money buried in a safe somewhere. I totally agree with Brent’s comment above. It’s the creditor’s fault for lending money to a risky borrower. If they didn’t have credit they cannot go bankrupt :)

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25 Lauren October 12, 2010 at 9:59 am

I read an article on the BBC website that Toni Braxton filed for bankruptyc because of medical bills. She was having heart problems and she had to pull out of her concert series in Las Vegas. We all know artists make a lot of money off those shows. I also don ‘t think she ever fully recovered from last bankruptcy. I agree with you guys that people who file for bankruptcy should be required to go through financial counseling. On the other hand, if these silly people want to screw up their credit, let ‘em. I also think that these celebrities need financial planners. They need to learn not to spend a bunch of money on fancy cars, expensive clothes, million dollar chains, and homes. Why do you have Gucci sheets and furniture when you can only make money doing coon music for so long? I don’t get it.

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26 Jaime October 12, 2010 at 4:56 pm

Yana you shouldn’t expect someone to magically fix your finances. That’s what the point of my post was. That’s why I’m glad they made it hard for people to file for bankruptcy. People need to take responsibility for themselves.

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27 Sandy @ yesiamcheap October 12, 2010 at 8:41 pm

Bankruptcy isn’t an option for me based on the debt that I have so I have to suck it up and pay. I wouldnt even consider it really as I almost view it as a bit of a failure. To do so a second time? Fuhgetaboutit. There’s no way.

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28 Evan October 12, 2010 at 11:48 pm

This should not be a government problem (i.e. legislation preventing multiple bankruptcies), rather you have to ask who the hell is lending them the money for the debtor to underwater?

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29 J. Money October 14, 2010 at 10:53 am

@Refugees on a Budget – I know, it is kinda like stealing :( Except you DON’T GO TO JAIL!! You just get a slap on the hand and do it all over again…..arghhh….
@Talar – Agreed. Medical stuff is an exception for me too – although I don’t know how to separate that out from the other kinds of bankruptcy? I guess it’s just a morality thing to me.
@Erin – HAH! you know, I LOVE The Apprentice and I’ve never thought about the fact Trump’s filed so many times…. am I a walking contradiction? I once heard that his daughter was pointing to a homeless guy once, and Trump told her that the homeless guy had more money than he did – cuz he was so much in debt. Pretty interesting…
@Yana – It’s a horrible game :( And when it comes to real estate and walking away from your home and stuff it affects SOOOOO many people too! Not just businesses. Real life people who lose value in their home because their neighbor couldn’t control their money.
@CityFlips – I like that idea ;)
@Tom Ajava – I didn’t read where it all came from, but that is pretty sick if true.
@David Damron – Glad you liked! :) Figured if I found it interesting others might too.
@Jaime – Celebritydom is sooooo different! Not that I know from experience, but I will one day ;)
@Evan – I know! HOW do people keep getting so much credit after all that stuff?? I really don’t get it. Guess it’s the faults of the very companies and stores getting screwed in the end. Crazy.

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30 Melissa October 18, 2010 at 3:53 pm

I’m kind of on the fence about this one. I feel like it should all depend on the situation. Back 9 years ago my husband and I were put under financial hardship. It wasn’t that we were silly or stupid with our money though. He had a good job, I was working a decent one but it was temp/seasonal and I was close to leaving for maternity leave with our first child. He had normal bills, a car note, mortgage, utilities, and a credit card that really got us into hot water. We used it for necessary things, but we got to a point where we just couldn’t pay what they wanted us to pay any longer and we were being harrassed by the company when we would offer what we could. My husband spoke to an attorney friend who suggested speaking to a bankruptcy attorney. After discussions with them we were advised that filing was a wise decision for our situation. Because the card which caused the majority of the problems was only in my husband’s name…he’d gotten it not long before we married…and we wanted to not place our home or car under the bankruptcy, it was decided to not place me in the bankruptcy in hopes of salvaging my credit (which wasn’t great, but not as bad as my husband’s at the time). After filing things got better…until a few years ago. My husband got sick, and was out of work for over a year. We only had my income to fall back on, which isn’t much ($11 an hour FT), we were struggling…couldn’t keep up with the mortgage, luckily we didn’t have a car note, and had a really hard time even buying groceries. We went to the state for help…tried for food stamps and welfare. We’d never applied for them before, and were informed that my $11 an hour was making “too much” for a family of four. We batted the possibility of having to file bankruptcy again…but ultimately decided not to. It’s been hard……REALLY hard….and stressful…and our marriage has nearly fallen apart many times over it….but we’ve kept up, and now things are better after he’s been back to work for nearly a year now. We STILL have our months where I bawl my eyes out over the stress and worry of how we’re going to take care of everything we need to. We cut out nearly every uneccessary expense, we hardly ever eat out, we don’t have cable, cut down to just the cells with the lowest possible monthly rate we could get for our usage, etc., but I STILL say that the process where every case is looked into should be in place. It’s unfair in my eyes to watch hard working responsible people hit really hard rough patches where they’re doing everything they can and still can’t seem to float, then be denied with really the last resort they have. I feel if someone can prove they’ve not handled their finances badly but still got caught up in something bigger than them they should be given another chance to file. Sometimes the reasonings behind the debt are truely out of their control.

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31 Khaleef @ KNS Financial October 19, 2010 at 7:36 pm

No! They should be required to meet with an adviser at least quarterly until they prove they can be trusted on their own. And this is after the first bankruptcy! They should not be allowed to file twice (I’m actually up in the air about once), because then they are just gaming the system. Even if they aren’t doing a whole lot wrong…too bad – you can’t just have a free lunch at everyone else’s expense (then it isn’t free)!

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32 J. Money October 24, 2010 at 9:31 pm

@Melissa – Awww, I’m so sad you all are going through that! :( I really really appreciate you sharing your story with us though and giving us another perspective to think about. Much harder to leave things so black & white, ya know? And I think you’re right – every situation should be looked into and consideration be made depending on the circumstances. You guys hang in there! I’ll send a prayer and hope it makes it over ;)
@Khaleef @ KNS Financial – I think meeting with an adviser is AWESOME. In fact, I wish every single person in the world had to have a one-on-one every 10 years to make sure they stay on track! Can the gov’t do that for us? :)

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33 jenny February 22, 2011 at 5:14 pm

I can say, i am one of those people that unfortunately claimed twice in ten years. I had cancer when I was 22, and went through a divorce at 32. It wasnt easy to choose, but I was trying to pay my bills, & I was consumed with debt. My first bankruptcy was only medical bills, nothing else. The second was a variety of debt, mostly credit that I used to move out, sell our home, get food on the table. I had no money & was desperate. However, I also seen ppl abusing this, as said before. It’s the same as the welfare system, lotsa pl rely on others to pay their bills

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34 J. Money February 28, 2011 at 7:44 pm

Oh wow, sorry to hear about all that :( I hope things are starting to turn around for you Jenny! Thanks for sharing your story with us.

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35 SunnyGurl September 19, 2013 at 7:15 pm

I can understand how you all could agree against bankruptcy. Those that do it solely to take advantage of others, and the opportunity to do so,are wrong to do it.
As for me, I did it and have no choice as well. My partner cheated on me, after he opened hardware accts (my fault for allowing my name to be on them too)and then leaving me to try and pay all his dept, plus the house, car, and utilities, no way I could do it on my own, I took out a second mortgage, to try pay off the debt he left me, and after 5 yrs, i was still spinning my wheels just trying to get food to eat.( I raised 3 children alone with out any outside Govmt assistance. But, I did get a grant, and went back to school, and then took 2 more classes to become certified in healthcare, to make a better living for myself, and dont you know, right after i passed all my state exams, and started working a new job, 6 weeks in, a Male person was traveling way too fast, and lost control of his car, and hit me in a headon car collision.(he totalled my vehicle) (Oh, HE had NO Insurance) I was taken to the hospital, long story short, here I am still recovering , been on my back for over 5 months, lost all muscle mass, and learning to walk again after having a metal plate and a dozen screws installed in my rt foot, Behind on my house, and they are going to foreclose next month. I ran the race, and just when i thought I was going to win, i got knocked down, in a real bad way. Some people have no choice. Im thinking about it again. I dont have any charge cards at all. Just the house. I dont know what to do.

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36 J. Money September 19, 2013 at 10:28 pm

Oh my gosh I’m so sorry to hear – that is horrible!! After you were rocking it too! Jeez… I don’t know what to say :( Except that you sound like an incredibly strong woman, and that you have to do what you have to do to get to that next step. Which hopefully includes being back to healthy again! I will say some prayers for you and your family. You guys really have been through a lot, so sad :(

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