Editor's Note: Do you have a question about your finances? Crosswalk.com welcomes financial columnist, Deborah Nayrocker. Deborah will be answering selected readers' questions in her monthly column. To submit your question, email us at: moneyquestions@crosswalk.com.  


Dear Deborah,

My brother and his new wife are struggling to meet their monthly bills. They have school loans, apartment rent, medical bills, and credit card debt. She is employed with a local bank as a teller and he was laid off and has been looking for work for about a month now. He is getting unemployment but not much. They are wondering if they should file for bankruptcy or look into debt consolidation. Do you have any advice for them? Thanks so much! - Nicole

No one can know for sure what the future may hold, but careful planning can help position us for changes down the road.

Nicole, you say your recently married brother has been laid off for about a month and he's struggling to pay his bills. Bearing in mind that this isn't an easy situation, one's first reactive conclusion should not be to go for debt consolidation or bankruptcy.

Too many people today are looking for miracle cures for their financial ills. Even though consumers see the symptoms of their money problems month after month, many choose to ignore the symptoms, hoping that somehow things will magically improve. There's no miracle cure for getting out of debt. Getting out of debt takes time, a manageable payment plan, and discipline.

When consumers sign credit card slips agreeing that they will pay for their purchases later, they are obligated to pay. If students take out loans for college expenses, they sign with a promise to pay back the lender for that amount in full. When people have an agreement saying they will repay, they have a moral responsibility to repay the lender.

So how can your brother and his wife navigate through the rough waters until he's employed again?

  1. Make a list of the very bare minimum expenses: food, utilities, rent, monthly school and credit card payments, medical expenses, etc. Cut out any and all discretionary spending to meet monthly bills. (If consumers don't drastically reduce lifestyle expenses, it will be harder to keep up with the bills).  
  2. Talk to lenders directly and ask for lower payments until more income is coming in. To better handle the medical bills, ask for payment reductions and an extension of time for payments while the husband looks for work. Call the credit card issuer and ask for a lower rate.  Negotiate with creditors. (Sometimes lenders respond better with a third party).
  3. If it's still difficult to pay the bills, get professional assistance with a nonprofit  counseling service for Budget Counseling. The National Foundation for Credit Counseling (NFCC) is a national nonprofit network of agencies at about 850 U.S. locations. Consumer Credit Counseling Service (CCCS) offers FREE and confidential budget counseling with NFCC certified counselors. The counselors work with you to analyze your income, monthly expenses, and debts. (Note: CCCS Budget Counseling services are NOT the same as their Debt Management Program).
  4. Your brother's wife can check into the possibility of working overtime.

Bankruptcy usually isn't the answer to money troubles. It is important to know that lenders usually think the vast majority of bankruptcies are done as a matter of convenience instead of necessity.

Filing for bankruptcy doesn't mean one's money problems are over. According to Wall Street Journal, the latest legislation makes it more likely that middle-income Americans "will end up paying back at least some of their debts if they file for personal bankruptcy" (WSJ, March 2005). These debts cannot be wiped away: alimony, child support, fines, most taxes, and student loan obligations. Also, "would-be filers must undergo credit counseling within the six-month period before seeking protection from creditors" (WSJ, April 2005). The bankruptcy stays on the credit report for years.