okay, another example:
replyYou hold Enron stock. You’ve been taxed 5% annually on the holdings for the past 5 years. To pay the tax, you decided to take out a loan instead of selling shares to pay the tax (you want to stay invested).
Someone discovers Enron is a fraud, the stock goes to $0 and you go bankrupt because you can’t repay the loans you took out to pay the tax on a (now worthless) asset.
Were you smart, you'd have used your enron stock as the collateral in which case both you and the bank get screwed if the value goes to 0. You default on the loan, you don't have to go bankrupt in this case. Your credit takes a hit for 7 years.
replyBut yeah, if you take out a loan against your home and the housing market collapses and you lose your job (ala 2008) you can end up destitute. The stock market is always a gamble and this doesn't make that better or worse.