I’ve been unemployed for the last six months, and I’ve spent most of my emergency savings. I’m having trouble paying my credit card and student loan. Should I file for bankruptcy?
–R. Charles
New York
A bankruptcy filing is not the best choice. It will stay on your credit report for 10 years and wreak
havoc on your credit score, lowering it by as much as 300 points. Furthermore, student loans are not normally included in a bankruptcy filing, unless you can prove that your payments are posing an extreme hardship, for example, you’re physically unable to work and have no means of earning income. Fortunately, you have other options. As far as your credit card goes, call your creditor and explain the situation. You may be able to work out a payment plan. If you need assistance dealing with your creditors, contact a credit counselor through the National Foundation for Credit Counseling (www.nfcc.org). A counselor will work with your card company and develop a plan to help you prevent future difficulties.As far as your student loans, call your lender and ask for an economic hardship deferment or forbearance. Payments would temporarily be placed on hold. You could also consider requesting an extended repayment plan. This would stretch out your monthly payments, making them lower. The only drawback is that you
would end up paying more interest in the long run. For more information about deferment and forbearance, visit FinAid (www.finaid.org), a financial aid Website. For information about credit and debt management, go to BlackEnterprise.com and click on the Wealth for Life tab.This article originally appeared in the February 2010 issue of Black Enterprise magazine.