Can You Spare a Dime?

Can You Spare a Dime? was Originally Posted on April 21, 2005 by lavarock

Today, President Bush signed into law, a sweeping reform of the bankrupcy law. It essentually makes it harder for people to declare bankrupcy to avoid paying debts.

I have to admit not having read the 500 page document yet!

“The act of Congress I sign today will protect those who legitimately need help, stop those who try to commit fraud and bring greater stability and fairness to our financial system,” Bush said.

The financial services industry says that it is too easy for people to escape debt by declaring bankrupcy.

My take on this? It is too easy to get credit! Think about it… the credit card companies start at the high school and college age kids to get them “hooked” on credit. Hooked? Do I really mean HOOKED? Yup! They try to sign up these poor people as soon as they can KNOWING that most kids are not worldly in financial matters and if they can’t pay, Mom and Dad will…

Why don’t we teach kids how to balance a checkbook? Why don’t we teach them about savings and checking and interest?

Have you received financial information about how to take out a home equity loan to pay off credit cards? Do you know how stupid an idea that is?

Credit card debt is what they called un-secured debt. That is, you never put up anything (at risk) as guarantee that you would pay back the money. If you fail to pay, they can hound you, they can hurt your good name, they can take you to court… but that is about it. They cannot take your car, they cannot do much.

Now let’s look at a home mortgage. Now when you took out a mortgage on your house, you agreed that if you did not pay it off, the bank (or mortgage company) can move you out and then sell the property to pay off what is left on the loan. So if you don’t pay your mortgage, you will lose your house.

Now think again. Why would you convert a debt where they can’t take anything, into a debt where you lose your house?

So when you start to have financial problems, make sure that if nothing else gets paid, your house payments get paid first. Then you pay off your car and student loans, etc. Credit cards are the last thing you pay. Yes, they may still hurt your name and credit, but at least you will have a roof over your head and be able to drive to a job to pay off those debts.

If you have lots of credit card debt, My favorite consumer advisor (clarkhoward.com) http://ClarkHoward.Com says to pay the minimum on each card and put all the rest of the money you can towards the card with the highest interest rate. Also, he says not to call and cancel a card which you still owe on. Many companies can raise your interest rate a lot higher. Just cut the card up and pay it off. When you get it paid off then close the account.

Another thing to remember is that if you continue to carry a balance on credit cards, you are spending too much, not that you don’t have enough cards….