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 20th, 2008 at 5:30 pm
Hi!
This is not related to the current post. I just need an answer to a recurring question on my mind.
I have heard of an investment in a provincial country club: 200K for two years that will earn the investor 3% (or 6K) a month (NOT per annum). It seems too good to be true. Is this a scam?
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July 20th, 2008 at 4:30 pm
Hi David,
I pity on you. I have the same experienced as you experience right now. But I already paid my debts. I advise if you can get a help from your friends and relatives (you and your wife) or selling some of your properties, if you may have. I think that is the best solution, other than file bankruptcy. The bank or the credit card companies will make a way to taint your personality or even your work might get affected. Think about it my friend! You are not different with the excon that has a record if you listen to the so called “bank lawyers” of course there is a laywer’s fee if you get their service. As I said the best solution is help from you and your wife’s relatives or even your trusted friends. Don’t be shy to ask their help.
July 19th, 2008 at 1:36 pm
I disagree with the suggestion of taking out another loan either from SSS or somewhere else. Unless you have the means to pay back, no more borrowing.
File for bankruptcy. This will give you more time out from your creditors. Or talk to them how they can reduce the interest rates with a promise of amount to be paid every month.
Sort out your sources of funding, sell some of your stuff that you don’t need and live very very frugally. Cut off vices unneccesary habits. Key here is to pay pay pay until everything is erased.
Good luck. There is light at the end of the tunnel.
July 19th, 2008 at 1:22 pm
Hi David:
The only solution to your problem is face your creditors in court. Just follow the following legal advise:
a. Credit Card Debts: Most credit card companies toss their uncollected loans/bills to a Collecting Agent who will threaten you will lawsuits if you are unable to pay. we lawyers are reluctant to handle cumbersome credit card collection cases for the simple reason that proving them in court are too tidiuous and time consuming for a very little pay. It takes time and the result are uncertain. Cases will only end up with a decision that can never be implemented for reasons that judgment debtors have no properties to levy against. What I am saying here is from the practical point of view. Let your lawyer handle a credit card lawsuit and, while the case is pending, you cannot be obliged to pay for the amount demanded by the companies. The same amount demanded may not be the same amount proved in court. Cases takes years to finish in court. By the time it is finished your financies may have already improved.
b. Bank Loans (No collateral): The same as above. While the case is pending for years you will be worry free. By the time it is decided, your financies may have already improved, or your lawyer may settle for a much lesser amount (only the principal). As bank lawyer, I know how the ballgame is played. They can recommend a write-off if the defendent has really no assets to levy upon or recommend payment of principal only if necessary. Banks have a ceiling of 5% of their fortfolio for bad loans. Only a bank-lawyer’s recommendation is necessary to write these off as bad loans.
c. Bank Loans (With Mortgage): If you cannot pay your loan, your bank will only run after your collateral. But if your collateral is defficient, they will file a simple case for “Sum of Money” to recover the defficiency. Again, this is a last resort remedy and bank lawyers can easily recommend a “write-off” if you have no other assets to levy upon.
If you fear that your other “free” assets will be levied by banks, “transfer” them to another name. Leave the mortgaged assets for banks to foreclose. Save your “free” assets. This is your only option. Your credit status is already tarnished but your credit woes will kill you if you remain “unwise” to handle them. Engage a lawyer experienced in banking, not just plain lawyer who will screw you just the same in the end. I have handled similar cases in the past and my clients painted back a happy smile on thier faces. Good luck!!!!!!
Your buddy,
Rimlaw
July 19th, 2008 at 12:56 pm
My husband and I stopped charging on our credit cards, started to spend cash, and paid out our cards one by one, starting with the least amount. We started this last quarter last year and we’re credit cart debt-free!
Do Google Financial Peace University.