Debt’s what you get when you fall in love

QUESTION: Help! Debt collectors have been calling me incessantly demanding payment of my outstanding debts, which have grown to a surprising high level because of interest and penalties. The sad part is that while I do want to settle my debts and get rid of these pesky collectors who threaten me with law suits, I cannot because the size of my debt has grown beyond my capacity to repay them. What advice can you give me?—asked at “Ask a friend, ask Efren” free service available at www.personalfinance.ph and Facebook

Answer: There are three basic things you can do, according to the law of man, to get rid of your debts. One is through suspension of payments. This means you will allow your creditors to haul you to court, if they have not done so already. Then you present the court with a plan to restructure your debt.

Please note that Article 3, Section 20 of the Philippine Constitution states that “no person shall be imprisoned for debt or non-payment of a poll tax. But creditors can still bring you to court to demand and enforce payment of your debts. Plus, if you issued checks to repay your debts, you will be subject to Batas Pambansa (B.P.) 22, the law that penalizes the making or drawing and issuance of a check without sufficient funds or credit and for other purposes.

B.P. 22 punishes “any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.” The penalty, at the discretion of the court, is imprisonment or a fine or both.

Back to the solutions, restructuring means you will create a schedule of repayment over a long enough period to allow affordable periodic payments of your debts (as opposed to having to pay all of your debt one time). If the majority of your creditors who own three fifths of your debt agree to your restructuring plan, the court will approve it.

What if your creditors do not approve of your restructuring plan? Your second option is to go for voluntary insolvency where you will surrender all of your assets to the court and ask the judge to distribute your assets to your creditors. Of course, you will have to prove that what you surrender is truly all that you have.

What if you yourself refuse to surrender your assets and persist in hoping there will be “manna from heaven” that will save you at the last minute? Well, if your creditors get tired, they might just file for involuntary insolvency where they will petition the court to have your assets distributed to them.

Please note that with those three options, you and one of your most treasured assets, your name, will be dragged to court. That record can be debilitating especially if you will need to borrow money in the future.

But look closer at what I have just written. Did you see something unusual? Read the very first line of my answer. I wrote, “There are three basic things you can do, according to the law of man…”

The best solution really is to follow the law of God.

It is written in Matthew 5:25: “Come to terms with your opponent in good time while you are still on the way to the court with him, or he may hand you over to the judge and the judge to the officer, and you will be thrown into prison.” Don’t make the mistake of doing TNT or tago nang tago (i.e. constantly hiding). It will only make matters worse.

Once you have settled your debts, find out what got you into the rut. Many times, debt’s what you get when you fall in love with material things, even those that are sugar-coated, so to speak, with the proposition of making life easier to live.

Never again let the tectonic plates of debt drown you in a tsunami of financial woes.

If you want to know more about debt management, we have available free tools at www.personalfinance.ph. Know more about the practical application of Matthew 5:25 at www.personalfinance.ph/good.html.

(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, seasoned investment adviser and bestselling author. Questions about the article may be sent by SMS to 0917-5050709 or e-mailed to [email protected]. Learn more about personal financial planning, attend the 52nd RFP Program starting Feb 20. To inquire, e-mail [email protected] or text <name><e-mail><RFP> at 0917-9689774.)