It seems like "everybody" is doing it -- or talking about it. More than 91,000 Americans filed for Bankruptcy in May. By year end, the American Bankruptcy Institute estimates that more than 1 million Americans will file. That means one in every 100 families will be affected. And nearly 10 million Americans have filed since the turn of the century!
Is bankruptcy the way out? Not for student loans, back taxes, child support and some other obligations. But are YOU considering bankruptcy?
Do you worry about the "moral" aspects of defaulting on your borrowings?
I'd like to hear from you!
Terry Savage writes a syndicated personal finance column for the 
Hi Terry Savage,I would like to know what is the best choice when you have credit card debt, old phone bills, medical bills and other things that in destroying my credit report? A year ago I lost my job and every since then I everything I ever owed to debtors has been written off or went into collections. I have about $ 25,000 in debt total, that's not including student loans. I'm a college student, I can't borrow any money or take out loans because of my credit. I still don't have a job I'm searching, but there is no luck for me. I can't even move out and get an apartment. I just don't know what to do. I met with an bankruptcy lawyer and he told me the best thing for me to do is file Chapter 7. I don't know what to do anymore. I feel like I'm buried in dirt. Can you please give me some advice on what I can do?
SAVAGE SAYS: Well, before you file bankruptcy, call Consumer Credit Counseling Services at 800-388-2227. (That number is always on the home page at my webiste, www.TerrySavage.com)
They'll give you a free, unbiased look at your finances -- and whether bankruptcy is the real answer.
One thing for sure: bankruptcy will not erase your student loans. They'll keep accruing interest until you pay them off. So first thing, you need to go to your student loan lender and talk about consolidating your loans -- after July 1st -- to lock in current low rates.
You say you "can't move out" -- so it sounds like you're still living at home. That's not such a bad thing -- from your point of view (although your parents might not agree!) You need to live at home, figure out a job -- and pay on your student loans.
Then Chapter 7 might be your only answer. But this is not something to take lightly -- and you need to make sure ALl your debts are included in the filing. You know it will stay on your credit report for 10 years -- so even in the future it won't be easy to rent an apartment, or maybe get a job. So be sure you learn the lesson about the dangers of debt.
I was reading you’re article today and I for one have 2 rules: 1.) do not charge more that you can pay the next month 2.) Pay off the card every month. I have given those darn credit card companies plenty of interest over the years and I refuse to give them anymore. Been clean and in control for 3 years!
If you remember the Soup Nazi from Seinfeld? " No more soup for you"!
To my credit card company: No more interest for you!
BRAVO!!!
I have been clean and in control for 8 years. Sounds like drug re-hab, doesn't it? Terry here is our counselor.
Agreed, with so many filing bankruptcy or considering it, you have to wonder whether it's a sign of general bad luck, a lack of financial acumen, or an increasingly challenging economy. I guess the idea of punting ones debts is seemingly becoming more palatable.
I don't know what to do. I thought graduating with a degree and good grades would get me a decent job. But I can't even land a near half decent job. I'm in debt and drowning. I switched major my second year and dropped a whole semester and couldn't get a refund on it since it was too late. Lost my scholarships. Now in debt. 70,000 dollars of it to be precise. And I'm living on my credit card and working a half ass job just to make ends meet. My credit card debt now is 5 to 6 thousands dollar. I sometimes wonder how I got here. It hurts especially when family members ask where I'm working at or what I'm doing and I have to lie. I'm living a lie. I wish it would all end. I've thought of bankruptcy but I don't want to be bankrupt emotional than I already am. What to do?
SAVAGE SAYS: I've received far too many letters like yours, since I first wrote about the "value" of an education vs the cost a couple of years ago. Now, with my recent columns I'm overwhelmed with young people, carrying $50,000 or more in debt, with low paying jobs, and wondering what to do.
Believe me, I'm working on this. I think it is the next national crisis. Especially so, because while you can go bankrupt on credit card debt, or lose your house to foreclosure, you can't escape student loan debt -- AND the mounting interest charges.
First thing is to face your current situation honestly -- to your family and friends. You may have to move back home,to save money. The last thing you want to do is ring up more debt on your credit cards to live a lie! Or if you can't move home, you might get a job as a caretaker for an older person, or for a family with children. Yes, I know that won't pay off your debts -- but you could live rent-free and use your wages to pay down the rest of your debt.
And yes, I realize I haven't answered your big question -- what to do about that student loan debt. My honest answer is, I don't know how you can escape the mounting interest charges. The one place I can suggest is the Federal Direct Loan Conslidation program -- even if you've consoldiated already. Go to http://loanconsolidation.ed.gov/borrower/borrower.shtml
and see if the can help at least to stop the interest from mounting up.
I'll be working on this - hope to raise it as a national issue. Terry
It can be hard to stay in financial control when the economy is so rough and so many people are making less than they would like but everything is costing more. Still, bankruptcy is definitely something not to be taken lightly, especially since it stays on your credit report for so long.
I remember a friend telling me about someone who took it lightly, declaring bankruptcy because she was so in debt. Once she had made it past the years that bankruptcy stays on your credit report, she actually filed for bankruptcy again! That amazed me. I wonder how many people use bankruptcy as a short-term fix.
In any case, it's important to try and be financially responsible, but people should also take time to "pay themselves." Otherwise, they'll get bitter over all the financial constraint. Techniques such as automatically taking 10 percent of your check each pay day and putting it into savings can go a long way toward avoiding bankruptcy and having an emergency fund in case things go awry.
SAVAGE SAYS: Amen!
Terry,
Why isn't anyone talking about this???
http://www.baltimoresun.com/news/opinion
/oped/bal-op.debt10jun10,0,7237887.story
I feel like nobody cares about the younger generations anymore. Nobody cares about the future anymore including those that will make up the future. Why isn't anyone really talking?
SAVAGE SAYS: Well you've seen me talking about the problems our debt is creating for our children. But most people are too self-involved to worry about the burden. That's the centerpiece of my speeches!
Oh well, we're getting around to being concerned about our planet. Maybe our financial future will be next!