About A Wealth of Knowledge
Financial expert Michelle Singletary answers questions about personal finance and the economy.
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Getting to the Root
Q: Here's my situation (deep breath). Due to surviving domestic violence during spring 2006, I made an emotional purchase two years after bankruptcy. I leased a gas-guzzling SUV and, by September 2007, I had to give it back, because I fell behind in my payments and could no longer afford it due to the gas prices being $4 a gallon. Well, since I broke the contract, I now owe $17,000, and I'm thinking about filing bankruptcy again. I also have $46,000 in student loans I'm repaying and about $3,000 in credit card debt, along with the usual household expenses--rent, cell phone, cable and car insurance (driving my disabled boyfriend's car). And, on top of that, I'm a single mom of a gifted and talented 12-year-old son.
Is there any help for me? I work full-time and come home with $1,700/month and about $200 in child support. But I still take out payday loans to make ends meet. Is there any assistance for me, and should I file bankruptcy again?
Bridget, New York, NY
A: Bridget, I'm so sorry you've had such a rough life. But I'm glad you were able to survive a domestic violence situation.
But you need help--and fast. Of course, you knew that.
For one, you can't keep spending like you do. Would another bankruptcy really help? I don't think so. The first one didn't. You went right back and did the same thing again.
And by the way, you can't get rid of that $46,000 in student loans in a bankruptcy. So you would be filing for bankruptcy for $20,000 in debt. That's not being bankrupt; that's being irresponsible. You have a money management and income problem.
I know that sounds harsh, but I need you to see that wiping away those debts--again--won't get at the root cause of your problems. It wasn't just gas prices that put you in trouble with that SUV lease. You couldn't afford the lease to begin with. The rising price of gas just pushed you over the edge on which you were already teetering.
Before you file for bankruptcy, the law requires that you seek credit counseling. Get that counseling, but not necessarily as a prelude to filing for bankruptcy protection. Get it because you need someone to sit down with you and help you manage the money you have coming into your household. You need a budget. You need a paying roommate. You probably need to increase your income.
So, before you bail on your obligations again, go to the National Foundation for Credit Counseling's Web site, and click on "Find a Counselor." Meet with a counselor in person, so you can get control of your money.
(Photo by Courtney Nash)