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 22nd, 2008 at 10:30 pm
Don’t make out a loan just to pay off your existing loan. That’s is suicide.
Live within your budget. Cut all unnecessary expenses such as cable, eating out, no aircon, commute if your find your gas expensive.
Live within your means and it is going to be a difficult life for you. Accept this. Once you finish your debt in 3 or 4 years time, then that’s the time you can start building your savings.
July 21st, 2008 at 1:19 pm
Is there a bankruptcy law( debts) in the philippines ? Thought its only here in the US. Please let me know, I wanted to know too.
Thank you
July 21st, 2008 at 12:51 pm
Hi All,
Wow! there are so may replies. Thanks. I’m the one that wrote the letter. I’m really in my worst (oh not that worst coz I still have my job & my family) situation now.
To Rimlaw: Your reply has given me enough courage to go on. Thank you very much. How can I contact you? I think I need your services.
Here is my situation:
1. I have a huge debt - around 300T-400T from diferrent banks & credit cards company.
2. 50% of my debts are already overdue. Some already gave me a final demand.
And all, to give you an update, I applied for another personal loan. If these loan is approved, my problem is already solved.
July 20th, 2008 at 11:05 pm
most people are caught in a debt trap for some reasons they made and have to live with it. even philippines is allocating 40-60% national budget for debt servicing. say you file for bankuptcy, how long does it take and how much does it cost. will all your debts be written-off so you can have fresh start.what are the statistics on filing personal bankuptcy in the philippines?
July 20th, 2008 at 5:31 pm
I used to have credit card debts when I was in the Philippines. When I came to Dubai to work, I did not turn my back on it. Having a (slightly) bigger salary now than I used to, I estimate I was now able to pay off the debt faster. I e-mailed the bank to send me an updated credit card statement, to which they happily referred me to their collecting company. As Chinkee mentioned, you can negotiate terms with them as they would rather collect on a discount than not collect anything at all. After 5 months of installments, they gave me a certificate stating that I was free from liability.
If I were you, work out a strategy with the banks for easy payment terms. That said, you should not use your cards anymore. You should also think of shifting to a job with higher pay or an alternative source of income.