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The Debt Adviser

Deeply in love and deep in debt

Dear Debt Adviser:
I am seriously in debt from an outstanding car loan, credit card (not bad), student loans and a few other small amounts. The total amount is high due to my student loan (about $25,000). I cannot get a credit card unless at a very high rate and my car loan is through a family member's name. I am about to get married in four months and my soon-to-be wife has outstanding credit. Would it be advisable for me to file for bankruptcy before I get married or ride out the storm for a few years into my marriage? Thank you for your advice!

Dear Tony:
Whoa, Tony! Slow down a bit.

Bankruptcy is the place you end at, not where you begin. Let's take this one step at a time.

Because you are getting married soon, you and your fiancee should sit down together and have a serious talk about your finances.

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Money is one of the top five things about which married couples fight. Start off your marriage communicating honestly about what each of your attitudes is about money. You may be a spender, she a saver. Discuss financial influences, opinions and beliefs regarding money. The time you spend talking about this now will save you huge amounts of time arguing about it later.

In addition, as you are the one bringing debt into the marriage, you need to know how much you owe and have a plan about how you will pay it off. Make paying off your debt one of your first financial goals.

Begin by creating a spending plan. Write down your monthly expenses including: rent or mortgage; car payment; utilities; student loan payment; credit card payments; food; gas; and all other expenses (including your upcoming wedding). Once you know how much you spend each month, compare that figure to your income for the month. If your expenses are more than your income, you need to cut spending.

Include in your plan a way to reduce your debt load as quickly as possible. This may mean giving up some extras now, but you will benefit in the long run by paying off your debts faster and paying less in interest charges. Another thing to consider is that with today's low interest rates, you may be able to consolidate your student loans, effectively refinancing them at rock-bottom rates.

It goes without saying, but I'm going to say it anyway: Do not buy anything else on your credit cards. Your goal is to pay down your debt, and you cannot do that very effectively if you are continuing to add to your balances.

Consider bankruptcy only after exhausting all other alternatives. Your situation sounds like it would be a better idea to face the situation and pay off those debts. Normally, student loans do not discharge in a bankruptcy and the amount outstanding on the car loan will still be there. It sounds like too little gain for the pain involved in a bankruptcy. A chapter 7 filing will be on your record for 10 years and will also affect your ability to get insurance, security clearances, jobs, promotions and access credit at market rates for a long time.

One thing that may help during this time of tightening your belt and paying off debt is to get together with your fiancee and write down your long-term financial goals. These may include planning for a new home, starting a family, going on vacation, building an emergency savings fund or saving for retirement. Knowing that you will be able to reach these goals after you have gotten yourselves out of debt will make it easier to sacrifice to make those payments now.

Continue to use your spending plan after you have paid down your debt. Plan for major purchases and try to avoid spending future earnings on consumable purchases.

Congratulations on your upcoming wedding!

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.

-- Updated: Jan. 13, 2004

See Also
Special Report:
Money and marriage
Love and money quiz
A debt-reduction plan that works
Financial advice glossary
More Debt Adviser stories

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