This email from a reader spoke of desperation:
I’ve seen your blog in Inquirer.net. And I am one of those people who is trying to fix my life. I’m an accountant, but seems like I am terrible in handling my finances. Last year was the worst year of my life. I incurred huge debt, credit cards & personal loans, due to wrong decisions that I made.
I am now haunted by my creditors. I defaulted in payments, but I am starting now to pay them one by one. Since I incurred loans in different banks and credit card companies, they are charging me huge interest and some are already threatening to sue me in court. I’m willing to pay them all, but I can’t give it in one payment. I want to go on with my life. I have a happy family and I don’t want them to be affected with my problem.
The only solution that I know is to get a single loan to repay all of my debt. But how? I already have a bad credit history. No bank would trust me again. – David (not his real name)
Chinkee Tan, author of “Till Debt Do Us Part” sent this reply:
You are one of the few thousands of Filipinos who are in a credit card trap. I have also counseled a woman in the past who had over 1.2 million in credit card debt from 16 credit card companies.
Allow me to share with you some practical things that helped my other clients to get out of debt.
1. Pay more than the minimum.
Bite the bullet. Paying the minimum only prolongs the agony. Besides, it’s precisely what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Remember in paying off your debt, it is not in the amount that is more important it is in your willingness to pay.
2. Cash out your assets.
Let us look at your list of assets. Maybe you own jewelries, property or anything of value that you can sell. Sometimes we are too emotionally attached to the stuff we have it is so hard to dispose and let go. Maybe the practical question to ask is “Are the jewelries and properties earning more interest than what the credit card company and creditors are charging?” If the answer is ‘no’, then it is time to make the hard decision and sell them because you will generate more when you sell rather than keep your dead assets.
3. Talk to your family and friends.
Perhaps your family or friends could float you a loan. Unless they are your enemies it is time to be nice to them and be friends with them again. Best to keep things on the straight and narrow by using a written agreement. You should clearly establish the interest and repayment schedule in writing to avoid misunderstandings and hard feelings.
4. Renegotiate terms with creditors.
This one, most people are not really aware of. This is where I am going to spill the beans. Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you’ll have no other recourse but to declare bankruptcy. Ask for a new and lower repayment schedule; request a lower interest rate; and appeal to their desire to receive payment. Faced with the prospect that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss. Believe me it works!
5. Seek legal advice.
It is time to seek legal advice if the creditors are threatening to sue you or harassing you that they will go to your office and report you to your HR or superiors. Yes, we may make dumb decisions that led us to debt. But we are not criminals who are running away from the responsibility if we have plans to pay back what we owe. Talk to your lawyer and ask for legal options on how you can walk out of this.
David, hope this helps. May God bless you and may you find solution to your situation.
*Chinkee is one of the speakers in our Take Charge of Your Money personal finance seminar on August 2, 2008, 1:30-5:30 at the AIM Conference Center in Makati City. We only have 100 seats and they are filling up fast. If you are interested in joining (there’s a P250 fee only until today. P300 starting on Monday), you may email register (at) iluvlearning (dot) com.
July 18th, 2008 at 5:44 pm
http://www.hsbc.com.ph/ph/cce/faq.htm
Bankruptcy
As a final resort, if you have no surplus income for repaying your creditors, or no income at all, you may have to file for bankruptcy. This is a very serious step. Your creditors may appoint an external trustee, to whom you will have to submit regular reports on your financial affairs. Or they, and the courts, may contest your bankruptcy petition, and scrutinise your debts and assets, especially if they suspect fraud.
Declaring bankruptcy becomes a matter of public record. More generally, many employers request a credit report when considering job applicants. Declaring bankruptcy would therefore affect your employment prospects and future opportunities. In addition, local newspapers often carry listings of bankruptcy, which could cause you embarrassment with your relatives, friends and neighbours.
July 18th, 2008 at 3:46 pm
Hi David,
Try to borrow from SSS, Pag-Ibig or GSIS if you have not yet availed from these institutions.
It might also be the time to start a even a very small business which would give you additional earning power, which you may use to help you pay off your debts.
Starting a small business does not necessarily require a huge capital. You just need to be creative.
To have some idea, try to search “domz products” in google.
Goodluck to you.
July 18th, 2008 at 1:45 pm
i’m not bankrupt or something, but how does it work? hehe. maybe it’s a good topic for a new post salve. hehehe.
July 18th, 2008 at 11:41 am
pare, get an SSS loan or borrow from your company’s pension fund.. how much ba debt mo?
If its in the millions and you don’t have assets to cover it.. file for bankruptcy na.