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Bankruptcy
Debt is something we all face. Be it the credit cards creeping slowly up, or the student loans we have been carrying for a while looming over us, debt has become a factor of life for the vast majority of people pursuing an artistic career. And, of course, it is not just actors and artists who are dealing with this situation. You can hardly turn on the news without hearing about foreclosures, the credit crunch, and the shear burden of debt that the majority of this country deals with on a daily basis. So imagine this. You have been upside down for a while (meaning that your living expenses outweigh your income), and the amount owed on the credit cards is growing steadily. Add to that a car payment, and some student loans, and suddenly things seem out of control. You feel buried under a mountain of debt, and panicked about how to get out from under it. Then, suddenly, one word flashes through your mind - “Bankruptcy!!” You see ads all the time about how easy it is, how quickly it can be done, and who will do it for you. It all seems to make sense... relief at last! Now you can start afresh... a new life... ... except. Except your credit report goes back for seven years, and having a bankruptcy on there will mean you will not be able to get a credit card, let alone a car loan or a mortgage, at anything less than punitive rates, if at all. Then there is the problem of lifestyle and education. If you are living in such a way as to find yourself considering bankruptcy, that fundamental issue is not going to be resolved simply by having your debt removed. Let’s say you are earning $100 per month less than you need to, and then you declare bankruptcy. Even after your debt has cleared, you will still be earning $100 per month less than you need. In other words, you have dealt with the symptom (the debt) but not the disease (not earning enough money). So what is the answer? The first thing, obviously, is to get right side up (ie work out how to earn more than you spend) through a combination of forecasting and developing money making ideas (please see our website for articles on both of these topics). The second thing is to put in place a solid debt plan. This involves looking at each of your creditors, working out which of them should get the most attention, then paying the minimum on all the others and something extra on that one card. This will pay down that one card quicker and, once it is payed off, you will then have substantially more money to roll over onto the next debt, and so on. The benefit of putting a solid debt plan in place is that creditors will be very willing to deal with you favorably if they know you are handling the problem responsibly. This means you should be able to negotiate better rates, easier payments, or whatever you need, if you are able to show them what you are doing to get out from under your debt. This way, not only are you reducing your debt, you will be actually improving your credit score at the same time. What sounds better: five years debt free with a fantastic credit score, or 5 years debt free (assuming your are able to do it) and unable to borrow money to buy a car for anything less than 20% interest? We know which one we prefer, and we hope this article has helped outline some of the things you could be doing to help avoid bankruptcy, and all the problems that come with it. |
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May, 2012
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