laz
10-13-2004, 11:15 AM
By GLENN RAMBLER
For The Daily News
If you're deeply in debt, you may be considering bankruptcy.
It sounds so tempting to have all your debts erased and all your burdens lifted. If you're waking up in the middle of the night worrying about money, it may seem like the only answer.
However, one thing to remember is that bankruptcy will only take care of certain debts. The court decides which debts to erase and under what terms. Also, a bankruptcy judgment will not erase a tax lien against your home or reverse a car repossession.
One of the major shortcomings of bankruptcy is that it does not address the reasons why you had financial difficulties. Filing bankruptcy is like taking a painkiller for a backache. It may stop the pain for a short while, but, unless you treat the underlying cause, the problem will resurface again and again. Today, there are better options to solve your financial problems, no matter how impossible your situation seems.
Bankruptcy should only be considered in the most severe cases and is not typically the best solution to a typical debt problem. Why? Bankruptcy will stay on your credit report for 10 years and on your court records for 20 years. And it will follow you the rest of your life.
For example, if you apply for a loan, job, insurance or other items, you may be asked, "have you ever filed for bankruptcy?" This can negatively affect your future employment situation and carries with it a negative stigma. Plus, over the first 10 years you will probably pay back most of the debt you walked away from by paying a higher interest rate for the higher-risk exposure to the lender, and you may pay higher costs for other needed living expenses. Also, you will have more difficulties obtaining credit and securing a loan.
In my last column, I addressed credit-card debt and the potential impact it can have if you use it to stretch income. In almost all cases, people filing for bankruptcy have had financial difficulties that were caused by misuse of credit cards. It all starts with self-discipline and making decisions that can improve your life, not your lifestyle.
Bankruptcy is oftentimes about accountability and responsibility; if you have used credit unwisely, you will pay the consequences.
So where do you find help? The first place to go is not to the bankruptcy lawyer; they are technicians. They understand the law and how to complete the forms, but they are not trained to advise or counsel people on financial problems. Three steps you can, and should, take are: seek expert financial advice; look at debt-management solutions; and utilize online publications. You will ultimately be the one who decides what is best for you.
Finally, whatever you decide to do, don't make your decision quickly or without researching all the options. You didn't get into financial trouble overnight, and getting out isn't going to happen that fast, either no matter what anybody tells you.
Rambler is vice president of business and services for the Lebanon Federal Credit Union. His column on financial literacy will appear monthly.
For The Daily News
If you're deeply in debt, you may be considering bankruptcy.
It sounds so tempting to have all your debts erased and all your burdens lifted. If you're waking up in the middle of the night worrying about money, it may seem like the only answer.
However, one thing to remember is that bankruptcy will only take care of certain debts. The court decides which debts to erase and under what terms. Also, a bankruptcy judgment will not erase a tax lien against your home or reverse a car repossession.
One of the major shortcomings of bankruptcy is that it does not address the reasons why you had financial difficulties. Filing bankruptcy is like taking a painkiller for a backache. It may stop the pain for a short while, but, unless you treat the underlying cause, the problem will resurface again and again. Today, there are better options to solve your financial problems, no matter how impossible your situation seems.
Bankruptcy should only be considered in the most severe cases and is not typically the best solution to a typical debt problem. Why? Bankruptcy will stay on your credit report for 10 years and on your court records for 20 years. And it will follow you the rest of your life.
For example, if you apply for a loan, job, insurance or other items, you may be asked, "have you ever filed for bankruptcy?" This can negatively affect your future employment situation and carries with it a negative stigma. Plus, over the first 10 years you will probably pay back most of the debt you walked away from by paying a higher interest rate for the higher-risk exposure to the lender, and you may pay higher costs for other needed living expenses. Also, you will have more difficulties obtaining credit and securing a loan.
In my last column, I addressed credit-card debt and the potential impact it can have if you use it to stretch income. In almost all cases, people filing for bankruptcy have had financial difficulties that were caused by misuse of credit cards. It all starts with self-discipline and making decisions that can improve your life, not your lifestyle.
Bankruptcy is oftentimes about accountability and responsibility; if you have used credit unwisely, you will pay the consequences.
So where do you find help? The first place to go is not to the bankruptcy lawyer; they are technicians. They understand the law and how to complete the forms, but they are not trained to advise or counsel people on financial problems. Three steps you can, and should, take are: seek expert financial advice; look at debt-management solutions; and utilize online publications. You will ultimately be the one who decides what is best for you.
Finally, whatever you decide to do, don't make your decision quickly or without researching all the options. You didn't get into financial trouble overnight, and getting out isn't going to happen that fast, either no matter what anybody tells you.
Rambler is vice president of business and services for the Lebanon Federal Credit Union. His column on financial literacy will appear monthly.