United Bank & Trust Blog

Marilyn Buka

There has been a wave of bankruptcies in the past year, some because people were irresponsible, but mostly because they’ve been backed into a corner by the economy. For instance, someone loses a job and they start using credit cards to keep up, and suddenly they’re in too deep.

We’re seeing people in bankruptcy we don’t usually see. Seniors, for example. They’re retired and have seen their investments shrink dramatically, but they still have expenses; so again, they use credit cards. The problem is that the home equity loans they may have used just aren’t available anymore because of falling home prices. Many times, bankruptcy is their only solution.

Bankruptcy affects us all — whether through tightened loaning restrictions, to banks having less to loan, to credit card companies passing on the costs of defaults. But the important thing to remember is that it’s not the end — you can emerge from it more money-savvy than you were before.

In recovering from bankruptcy, my number one rule is: Take It Slowly. Take a common sense approach. Make a budget, and figure out how to have more money coming in than goes out. Get one credit card, period, and pay it off at the end of every month. Try to pay cash for purchases. Start a savings account and pay yourself based on your budget every month. Take control of your finances, realize that you have to make concessions, and plan for the unexpected. Save up for big purchase or for holiday and birthday gifts. Don’t let yourself get into a financial bind again because you suddenly have to buy a new set of tires or refrigerator.

We don’t like to deny loans, but sometimes we have no alternative but to deny the loan request. We don’t do anyone a favor by overburdening their finances. When we must deny a loan, I’ll sit down with the client and a budget sheet to help them understand, and perhaps show them how to budget better.

Times have been hard, but hopefully, we’re all learning lessons about fiscal responsibility. Hopefully, we’ll all emerge from this more willing to save, to budget, and to make wise choices.