The number of bankruptcy filings is hitting a record high — no thanks to Westwood's Rae Ann Turner. Though struggling under $20,000 in credit card debt and an 11 percent mortgage, she is getting back on her financial feet.

        And she has avoided bankruptcy.

        Ms. Turner chose credit counseling instead of seeking court protection. Like a Chapter 13 bankruptcy, she has restructured her debt and is making payments.

Credit counseling has helped Rae Ann Turner keep her house and car, and she has avoided having to file for bankruptcy. (Tony Jones photo) | ZOOM |

        But unlike a bankruptcy, her credit is not ruined. And she's learning money-management lessons that will help keep her from future financial troubles.

        “I'm making good on my debt, and I didn't have to file for bankruptcy,” Ms. Turner said. “Bankruptcy is very embarrassing.”

        It also stays on your credit report for up to 10 years. Mary Hurlburt, director of education at Consumer Credit Counseling Service of Greater Cincinnati, said people who have filed for bankruptcy may still get loans — but often at interest rates above 20 percent, compared with rates under 10 percent.

        “People are being advised to take bankruptcy because it's an easy way out,” she said. “But it will come back to haunt you.”

        Still, such outcomes don't seem to be deterring many Greater Cincinnati consumers from choosing bankruptcy. Filings in the Tristate jumped 34 percent for the first six months of 2001 compared with the first half of 2000. After falling for two years, bankruptcy filings appear to be on a record-setting pace.

FACTS ABOUT BANKRUPTCY

Pros:     • Might halt any foreclosure, repossession or garnishment actions by your creditors.     • Clears up your existing debts either through a repayment plan (Chapter 13) or through a discharge (Chapter 7). Cons:     • Even if you file bankruptcy, you can still lose your home to foreclosure or your vehicle to repossession if you cannot make the regular monthly payments.     • It's part of the public record. Anyone can look you up and find out you filed for bankruptcy. It might even be published in your local paper.     • You have to give up control of your assets to the court.     • Someone you don't know will make financial decisions for you.     • The filing stays on your master credit report for life and can be reported on your consumer credit report for up to 10 years, making credit difficult and/or expensive to get.     • The filing has to be reported forever on some loan, insurance and job applications.     • It might disqualify you from certain high-level, financially sensitive or security-sensitive positions.     • It doesn't address the issues that led you to bankruptcy.     • It doesn't do anything to help you avoid making the same mistakes again.     • The emotional distress can stay with you forever. It will always be your secret.     • Bankruptcy alone is not a total solution for many people. Even if they file bankruptcy, they still often cannot meet their monthly financial obligations.     • Bankruptcy lawyers will not help you regroup your life and find the resources necessary to begin a new and more positive financial future.     — From debt counseling agency Myvesta.org (formerly Debt Counselors of America)

        Most point to staggering consumer debt — $1.59 trillion, according to the Federal Reserve — for pushing so many into bankruptcy.

        Ms. Turner admits that she got in over her head financially when she recently got married and bought a house. She and her husband chose a mortgage with no closing costs and no down payment, but a whopping 11 percent interest rate. Conventional 30-year mortgages now generally run under 7.5 percent.

        Then her husband lost his job. And then his car broke down. And Ms. Turner started paying living expenses with the credit card.

        “We finagled to an extreme point,” she said, explaining how her credit card debt jumped from $5,000 to $20,000. “But this was debt we legitimately earned. ... Nobody twisted my arm to go spend money.”

        Such finagling — transferring balances, borrowing from friends, late payments — should be early warning signs of financial problems, said Nancy Hess Judy, spokeswoman for debt counseling agency Myvesta.org.

        Consumers in trouble should first try talking with their creditors directly. Then go to a counseling agency for impartial assistance.

        “Don't be afraid to ask for help,” Ms. Judy said.

        Agencies such as CCCS and Myvesta.org work as a liaison between consumers and lenders, sometimes negotiating deals that help people repay their debt. Ms. Turner said her accounts are closed, but interest and fines have been frozen. She's making one monthly payment straight to CCCS.

        “I'm not writing a bazillion checks and not worrying about a bazillion different due dates,” Ms. Turner said.

        Some lenders also see credit counseling as a negative mark on a credit report, but not as harshly or for as long as bankruptcy. With landlords, employers and insurance companies increasing their use of credit reports, Ms. Hurlburt warned that keeping credit histories clean is more important.

        “There are alternatives” to bankruptcy, Ms. Hurlburt said. “Bad credit and bankruptcy hurt lives.”
   

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