Donning The Mona Lisa Smile
Question: I have too much debt right now. It is not really through irresponsible spending that my debt rose. There was a medical emergency in the family and I had to resort to credit card borrowings to settle the hospital bills and buy some medicines. The debt I contracted was sizeable. Since I could not pay the initial amount, I resorted to borrowing from other cards to pay previous lenders. I kept repeating the practice until I found myself borrowing from small lending firms that lent easily but charged much higher rates. The total amount has ballooned to unmanageable levels and I had been missing payments for several months now. Collectors are calling nonstop. I am so stressed and depressed right now. Can you help?—asked at “Ask a friend, ask Efren” free service available at www.personalfinance.ph, Facebook and SMS.
Answer: Of course, I can help. But first know this. To put your mind at ease, know that our Constitution provides that nobody can be imprisoned for nonpayment of debt or poll tax. However, you can still be imprisoned if you violate the provisions of one or both of two laws, the Bouncing Checks Law and Access Devices Regulations Act.
Based on your situation though, it seems there was no intent on your part to commit fraud. While this does not mean the two laws I mentioned will not apply to you, at least you have a fighting chance in proving that you have no intention of running away from your creditors.
Here’s what you need to do. Second, keep the lines of communication with your lenders open and updated. Document all of your conversations and agreements, if any. And when I say document, write them out, sign them and mail them to your lenders and the collection agencies they hire. Make sure somebody from their office receives your snail mail. You must also be sure to write to the most current collection agencies hired by your lenders as the latter have the practice of changing collection agencies every so often.
If it is credit cards you have trouble with, try to see if the Interbank Debt Reduction Program of the Credit Card Association of the Philippines can apply to you. You can check out http://www.ccap.net.ph/?p=623 for the details of the program. Do note that you will need to apply with your credit card lender and that applying may get your name listed in the negative file information system shared by financial institutions. If your name is listed there, you will have difficulty borrowing again or even opening a checking account. Plus, your name never gets taken out even if you are able to eventually fully pay your past due amount.
Third, when you ask for restructuring, ask for a partial debt condonation, lower interest rates and/or long repayment periods. Your total monthly amortization should not be greater than 30 percent of your monthly net take home pay. Your lenders and collectors are people too, even if they are initially acting on a strictly business basis. Your sincerity will melt their stony facade.
By now you are probably wondering why I started with the second thing that you need to do. That is because I wanted to end with the first and most important one, and that is to offer all of your difficulties to Him who said, “Come to me, all of you who labor and have been burdened, and I will refresh you.” (Matthew 11:28) Do so and you will immediately don the Mona Lisa smile even before you start step two.
Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines. He is best-selling book author of Pwede Na! (A Complete Guide to Personal Finance) in 2004, and is the chairman and president of the Personal Finance Advisers Philippines Corporation.
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