Bankruptcy is something to avoid, Mom


July 30, 2000|By Liz Pulliam Weston | Liz Pulliam Weston,LOS ANGELES TIMES

I notice most personal finance planners discourage filing for bankruptcy. Are there any situations where you think it's appropriate? I am 30 years old, earn about $45,000 a year and have more than $30,000 in credit-card debt in addition to $9,000 in student loans.

Some of the debt is the result of a gambling problem I had for a time, but the vast majority was accumulated this last year and a half as a result of a divorce and custody battle. I now have sole custody of my daughter and have trimmed my monthly expenses as much as possible, yet can barely manage to pay the monthly minimums on my credit cards.

I am seriously considering filing for Chapter 7 by the end of the year. Are there any reasons I should not do so other than the obvious black marks on my credit? How long would the marks stay on my credit report?

Your daughter is the best reason I can think of to avoid bankruptcy. Going bust will affect both your lives for longer than you think.

A bankruptcy stays on your credit report for 10 years. You might be turned down for jobs, apartments or insurance coverage because of the black mark, because employers, landlords and insurers increasingly check credit reports.

Although eventually you might be able to get some types of credit and even might be able to buy a home, you will have to pay more in higher interest rates and application fees than someone with decent credit.

The money you pay in interest will not be available to fund your other goals, such as your own retirement and your daughter's college education.

That said, your efforts to pay off your debt also will delay saving money for other goals. But taking charge of your money and your life will teach your daughter some valuable lessons about responsibility and self-reliance. What better place to learn than from a mom who faced up to her debts?

At the very least, you should contact the Consumer Credit Counseling Service in your area. This nonprofit group can help you negotiate with your creditors for better terms, as well as teach you the money management skills that you lack. You might also consider a 12-step group such as Debtors Anonymous or Gamblers Anonymous.

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