With the good comes the bad and unfortunately, the internet is infested with so called “experts” dishing out so called “advice.”
I have seen one too many financial “experts” discussing bankruptcy in the worst possible light and perpetrating the myths and misconceptions surrounding the bankruptcy process.
No wonder there is a stigma surrounding what in reality is a positive financial step to getting a fresh start.
While I usually take these Q&A sites with a grain, today I read one that got me slightly heated.
“Bankruptcy can make you seem out of control!”
This individual wrote in here that she had approximately $12,000 in credit card debt while her husband also has an “extreme” amount of debt in his own name.
She goes on to say that she is about to lose her job and that she is “extremely stressed.”
I have no way of determining whether bankruptcy will work for this woman or her family. There is simply not enough information provided.
I can easily say that given these facts, bankruptcy should definitely be on the table and is most likely the best option available to get this woman (and possibly her husband) out of debt.
More importantly, it would eliminate the extreme stress she is under and provide her with a fresh start.
So, lets see what Mr. Bucci advised Maggie to do.
“Determine what your reduced income will be, provided you are able to collect unemployment insurance.”
Okay, this is sound but logical advice given to someone about to lose their job. This advice does nothing to address her original question of how she can deal with her debt and reduce the stress in her life.
“Make decisions on what bills you can cover with your reduced income.”
Again, sound but logical advice. Given that most Americans are spending 50% of their income on housing and transportation, I’m guessing whatever income Maggie has is going to be going towards the necessities.
“If you don’t have enough money to make the minimum payments on your credit card accounts, contact your credit card issuers. …Ask about hardship programs that may lower your payments temporarily.”
This is all wrong. It assumes that being able to just make minimum payments on credit card accounts is financially sustainable. Maggie and her husband clearly have a lot of debt prior to her unemployment so simply making minimum payments is not going to get her anywhere.
He advises Maggie to contact her credit card issuers to inquire about “hardship programs.” In my nine years working with consumers, I have never come across anyone enrolled in a “financial hardship program” granted by a credit card issuer.
“Keep records of the date and time of your calls and to whom you speak.”
This is also sound advice and something that most struggling debtors do not do. Bill collectors must abide by the Fair Debt Collection Practices Act (FDCPA).
The FDCPA is a Federal law that protects consumers from abusive debt collection practices.
While wise, keeping detailed call logs will do nothing to solve Maggie’s financial issues.
There is some other “interesting” advice strewn throughout Mr. Bucci’s answer, however, he does save his best advice for last.
“Finally, I suggest that you seek professional help from a nonprofit credit-counseling agency and a bankruptcy attorney to help you find the best solution.”
Image courtesy of herval (Flickr).