Dear Mary: Please give me some tips on how to bounce back from bankruptcy. Will this have an effect on future employment opportunities? – Emmaline
Dear Emmaline: Pay your bills on time; never be late. Don’t have big sales. Don’t ask for a lot of credit. Never use more than 30 percent of your credit limits. Never let a credit card balance go from month to month. Above all, let nothing prevent you from saving 10% of your net income.
Many states allow employers to require credit reports from prospective employees; it is the new reference of the character. Your bankruptcy could hurt your employment opportunities. The same goes for applying for a mortgage or life insurance. This probing question of “Have you ever filed for bankruptcy?” Will demand truth and honesty.
If you are diligent, your credit report will soon reflect a definite change in behavior and your new lifestyle. This will be obvious to anyone who takes a close look at your credit report.
Only time can neutralize the effects of bankruptcy. After 10 years have passed it will be much better as it can only be reported by credit bureaus for 10 years. Unfortunately, the sting will probably never go away completely.
Dear Mary: We are thinking of filing for bankruptcy. We owe $ 30,000 in credit card debt plus $ 1,000 in unpaid medical bills.
Every month we are falling further and further behind because we have a mortgage payment of $ 2,500, monthly bills, babysitting, groceries, gas, and so on. I know things aren’t going to work out overnight, but can you please help us get some relief – quickly? – Ron
Dear Ron: My heart goes out to you. I also had financial problems. You should know that your problem is not the result of medical bills or a large mortgage payment. Your problem is credit card debt. It may seem like the medical bill has pushed you over the edge, but it’s the credit card debt that’s such a problem. You are addicted to spending money before you earn it.
Bankruptcy will not solve this problem. Quick fixes don’t teach us much. You borrowed the money and spent it freely, and now you have a moral obligation to pay it back. I believe you are ideal candidates for credit counseling. My best advice is that you contact the National Federation of Credit Counselors on their website or by calling 800-388-2227 today.
If it’s any comfort to you, my credit card problems at one point were more than three times yours. It took 13 years, but together my husband and I paid back every penny including interest and penalties – no concessions. It changed my life.
Dear Mary: My husband and I got really deep this time. At the time, we thought it was a good idea. We bought a franchise, financing the initial cost using our personal credit cards.
The manager we hired was incompetent and untrustworthy. Now we have $ 250,000 in credit card debt.
We are trying to get out of this problem and we have no more working capital to get things done.
We can’t find anyone who will give us a consolidation loan. Please respond quickly; we are sinking fast. – Desperate
Dear desperate people: I wish you had written before embarking on such a dangerous path. Instead, you broke almost all the rules of self-employment: you went into business with borrowed funds; you hired employees before you were profitable; you thought of credit as “working capital”. Should I continue?
I will say that if there is one thing you did right, it was not to take out a home equity loan to finance this nightmare.
Even though your unsecured creditors may scream and scream, argue and harangue, they cannot take your home. And they can’t eat you. But they can sue you if you fail to keep up with your minimum monthly payments, which would be an even worse nightmare.
Bankruptcy might be your only recourse. You might be relieved of this burden by bankruptcy, but discharged debts don’t go away. The rest of us pay them by raising prices.
It pains me a great deal to suggest that it is probably time for you to consult a bankruptcy lawyer.
Marie invites you to go to Every dayCheapskate.com, where this column is archived with links and resources for all recommended products and services. Mary invites questions and comments to dailycheapskate.com/contact, “Ask Marie.” Tips may be subject to tips.everydaycheapskate.com. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of Every dayCheapskate.com, a blog on frugal living and the author of the book “Debt-Proof Living”.