Jewish World Review Dec. 10, 2001 / 25 Kislev, 5762
When bankruptcy is an option
DEAR BRUCE: My home is worth between $230,000 and $250,000, and I owe about $95,000 at 8 percent. I would like to put an addition on that will cost $70,000. What is the best way to finance it? My income is $47,000 a year. - Mike, via e-mail
DEAR MIKE: The first problem I see is that the intended addition will take your current debt to $165,000, well over three times your annual income. This is a stretch. You would likely refinance your existing mortgage, probably in the 6 percent area. If you could reduce your addition cost to between $40,000 and $45,000, that would be more doable. I'm sure that if you have solid credit, you will find a lender that will approve you for the full amount. I would not want to see you saddled with a debt that would be crushing for many years. While the addition may be welcome, that type of debt is very debilitating. Walk with caution.
DEAR BRUCE: I know that you are not enthusiastic about Uniform Gift to Minors accounts. Our only son would like to set up such a plan for his 20-month-old daughter and would like us to contribute to it. He says we can give $10,000 a year without paying a gift tax. By the time our granddaughter reaches 18, there will be a large sum of money there. What happens to the money if she decides not to go to college? -- B.K., via e-mail
DEAR B.K.: First of all, you can gift $10,000 from each of you in an account without tax implications. I am not enthusiastic about the Uniform Gift for Minors Account for, what I believe to be, an obvious reason. When the minor becomes an adult, they get the money, period! While you may intend it for college, your granddaughter may have other ideas. I suggest you put it into a trust where the trustees and not the granddaughter decide how the money will be distributed. You can even write into the trust that if she or other grandchildren do not use it, then their children would have access to it. I think it is a serious mistake to put money into an account that automatically becomes the property of the minor when he or she turns 18.
DEAR BRUCE: I'm 33, single, make $36,000 a year and have $30,000 in credit card debt. I have tried to keep up, but it's out of control. I do not use the cards anymore, but the payments are overwhelming. If I stop payment, what will be the outcome besides calls from collection agencies? If I take out a loan, would that ease the strain? Is bankruptcy an option? -- M.M. Boston, Mass.
DEAR M.M: Beginning at the very end, yes, bankruptcy is an option. Whether it is desirable is another matter. The only advantage of borrowing money is a potentially lower interest rate. The problem remains that you owe well over a year's take-home pay. I suggest that you get an additional job, either part-time or full time, and devote every dime to paying off your debt. This will have several effects. You will have little time to spend money. Secondly, you will reduce your debt in a relatively short time, perhaps two to three years. Finally, unlike bankruptcy, you will be able to stand tall because will know that you have met your responsibilities like an
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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10/08/01: Annuity a poor decision
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08/16/01: Investing an inheritance
08/14/01: Government grant availability
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08/08/01: Refinancing small mortgages
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08/02/01: Refinancing dilemma
07/31/01: Annuity advice; living trusts
07/30/01: Helping kids save money
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07/18/01: Spouse responsible for debt
07/16/01: Refinancing to get investment money
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07/03/01: Converting stamps to cash
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06/27/01: Keeping an older car; dad's dead and he left everything to mom; brokers and "captive agents"
06/25/01: What's a reverse mortgage?
06/22/01: Bonds for college a bad bet; debt consolidation loans
06/20/01: Guidelines for refinancing your home
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06/15/01: Investor worries about stock loss
06/11/01: Second marriage wills
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06/04/01: Ring no longer needed; "cherry pickers"
06/01/01: Dad responsible for son's damage
05/31/01: Avoid will kits
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05/18/01: Construction and cash; qualifications for rates for first-time home buyers
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05/11/01: Gift money for children
05/10/01: Advice for seniors
05/08/01: Investing 101
05/07/01: Should I rent my house out?
05/03/01: Retired citizen wants to pay off mortgage; boyfriend/girlfriend accounts
05/01/01: Roth Educational Account explained; recouping losses
04/25/01: Parent wants to invest
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04/23/01: What is PMI and how can I get rid of it?; Credit card account services
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04/18/01: I'm an heir to an additional monthly income , but it's becoming a tax burden
04/17/01: False promises to clear bad credit
04/13/01: Back-to-back ticketing dilemma
04/12/01: Using home equity to buy a car
04/10/01: Sister wants Mom's house
04/05/01: Should I pay or stay?
04/04/01: How should we invest $40,000?
03/30/01: I want to be a real estate agent; surviving siblings stocks
03/27/01: Seeking financial literacy
03/20/01: Pay off the credit card?
03/15/01: Just wait 'til you sell...
03/13/01: They're trying to give me a better car; I'm not filing
03/12/01: Timeshares not worth your time
03/09/01: Your tax protection is maxed-out; ealry birds and audits
03/08/01: How old is too old for a Roth?; laws on landlords investing your money
03/07/01: New job, old 401(k); buy v. leasing car
03/05/01: Basement swimming, anyone?
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02/26/01: Teach your daughter to be responsible
02/22/01: Go get a(nother) job; Change a traditional IRA to a Roth IRA?
02/21/01: Stocks buy a 'piece of America'; everyone needs at least $1 million worth of liability insurance
02/20/01: No hassles bring low return; 'repo' houses
02/15/01: Term insurance on what terms?
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02/12/01: Picking the 'best' lawyer
02/08/01: Who has the best mortgage rates?
02/05/01: No life insurance to cover a loan; notch babies and social security; avoiding paying a lot of tax on severance pay
02/02/01: Life insurance for regular people?
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01/29/01: A house divided; I won the jackpot --- but the IRS took the winnings
01/24/01: Sons as landlords
01/23/01: Pitfalls of buying land; cleaning up a financial mess
01/22/01: Aiming for partnership; Have investments in the child's name?
01/19/01: Roths and young people
01/17/01: Home-sellers must disclose; IRS can still get you --- even after a divorce
01/15/01: Advice on buying a business
01/11/01: Credit cards and 401Ks
01/09/01: Power of Attorney questioned
01/08/01: An 8-year-old unpaid bill
01/04/01: Accidents where the victim is responsible; health club heartache; laptop lunacy
01/03/01: Towing a new car; Must reveal my insurer's name?
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12/26/00: My dad won't make a will
12/22/00: Most work-at-home offers cater to fools; trust deed investments
12/20/00: Your son needs tough love
12/18/00: Time to move on
12/14/00: Should we move retirement account?
12/13/00: U.S. notes can be the answer
12/08/00: Series EE, I, EE, I, Oh!
12/07/00: Paying mortgage twice a month instead of once
12/05/00: IRA vs. 401(k) investing; "gofer" gripes
12/01/00: Those credit card "checks"; non-compete agreements
11/30/00: Dumped by insurers when I did nothing wrong
11/27/00: Collision insurance is a waste?
11/23/00: Rent our house or sell it?
11/21/00: Fixed or adjustable rate?
11/20/00: Debt consolidation requires discipline
11/16/00: Ten-year fixed-rate mortgages
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11/10/00: Maybe a mobile home
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11/08/00: Can I shelter my severance pay?
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11/03/00: Getting your money back is enough
10/31/00: Employment ads that make you pay
10/27/00: Reader takes on Bruce
10/26/00: Tell your kids to 'get real'
10/25/00: Don't pay 'the rascals'
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10/17/00: Young investors should start a Roth IRA
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10/12/00: Dealing with underground home oil tanks
10/11/00: Go with simple interest!
10/05/00: When property is worth more than the home
10/04/00: Put part of windfall in a Roth
10/03/00: Not paying taxes on interest from house sale
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09/27/00: Refinancing home without alerting crooks
09/26/00: Base investments on trust
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09/20/00: Diversify your financial advisers?
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09/15/00: The tax scoop on student loans
09/14/00: House buying only for the young?
09/13/00: No reason to give credit
09/11/00: Must I pay for my gifted child's college tuition?
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09/06/00: Pools can soak you
08/28/00: When the insurance company has an 'out'
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08/22/00: Paying for private school
08/18/00: Don't make huge down payments
08/16/00: IRAs for people with pensions
08/15/00: She doesn't deserve a break
08/11/00: Her shopping will ruin us
Yes, a contract means something
08/10/00: Her shopping will ruin us
08/09/00: A $1,500 car ... for $3,000
08/04/00: Time to take on the airlines
08/02/00: How can I retire at 62?
08/01/00: Cash in your savings bonds
07/28/00: Hold onto a mortgage under 7 percent
07/26/00: I want my partner to buy me out
07/25/00: Negotiate with your neighbor
07/21/00: How can I finally start saving soundly?
07/20/00: Where's my prize?
07/18/00: Getting out of an upside-down loan
07/13/00: Death is no escape
07/12/00: Multiplying dollars
07/10/00: Making sense of retirement investing
07/07/00: 'Bankruptcy does follow us around'
07/06/00: In which state should I file my income tax?
07/03/00: When to diversify assets
06/30/00: I'm buying my dad's house
06/29/00: How social security seniors should invest
06/27/00: Waiting before re-establishing credit
06/21/00: Insuring an older car
06/19/00: Take the money and run!
06/16/00: Utility company incursion
06/15/00: Insurance settlement is no bargain
06/13/00: A straightforward form of bankruptcy
06/08/00: In the computer's clutches
06/07/00: The trouble with tenants
06/05/00: Do I really need title insurance?
06/01/00: The truth about nursing home insurance
05/30/00: Keep mother-daughter loan simple
05/25/00: CDs for security, not investment
05/24/00: Battling with collection agency
05/22/00: Are callable CDs a waste of time?
05/18/00: Building a college fund
05/16/00: Even death brings no relief
05/15/00: House is 'worth' what's offered
05/12/00: Borrow from Mom and Dad?
05/11/00: Your heirs, your choice
05/09/00: Mutual-fund investigations
05/05/00: Credit cards vs. debit cards
05/04/00: Lawyer are good for something
05/03/00: The binding nature of contracts
05/02/00: You know you are in trouble when ...
05/01/00: Can primary residence be rented out?
04/28/00: A full refund after five years?
04/25/00: Get a homeowner's title policy!
04/24/00: Beware of errors in your favor
04/18/00: $10,000 limit on gifts
04/17/00: Invest or repay student loans?
04/13/00: Beware of Internet auctions
04/11/00: Six percent is a pittance
04/10/00: Married couples should share windfall
04/07/00: How not to blow an inheritance
04/06/00: Get genetic screening for Tay-Sachs
04/05/00: Beating the look-back period
04/04/00: Providing for retirement
04/03/00: Readers disagree on time shares
03/30/00: The road back to good credit
03/29/00: Pre-tax dollars in IRA taxed later
03/27/00: Gambling on business ventures
03/22/00: Old cars as hobby, not investment
03/20/00: Tax on foreign gifts?
03/16/00: How to buy government bonds
03/13/00: Buying treasury instruments
03/09/00: Subcontractors must pay S.S.
03/08/00: Real-estate lawyers are essential
03/07/00: Don't expect compensation for ideas
03/06/00: Too rich for a Roth IRA?
03/01/00: Is time-sharing a scam?
02/29/00: Paying for nursing-home care
02/28/00: Rely on a real-estate lawyer
02/23/00: Keeping child's money safe from divorce
02/16/00: Just how important is a 401(k)?
02/14/00: Shaky partnership buying house
02/11/00: Protection by residential zoning
02/09/00: Benefiting from a reverse mortgage
02/07/00: Ensure your insurability
02/04/00: Absurd community zoning laws
02/02/00: Money or securities?
02/01/00: Can we KO a custodian?
01/31/00: Why sell a home you love?
01/26/00: Everyone needs a will
01/25/00: Will splitting stocks affect rollover?
01/24/00: Should early retirees contribute to SEP?
01/21/00: Strategies for paying off debt
01/20/00: Is 15-percent growth achievable?
01/19/00: Selling a second home
01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
01/13/00: Who gets the house?
01/11/00: It all depends on size of estate
01/06/00: Check references before hiring an advisor
01/04/00: Savings bonds a bad investment
12/31/99: Out of state ain't that great
12/29/99: Warranty rip-offs
12/27/99: Checking up on investment handlers
12/23/99: Options good only when company's strong
12/20/99: Capital gains tax sometimes best
12/17/99: Don't give up your nest egg
12/15/99: Small-claims court no panacea
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12/10/99: Services provided must be paid for
12/06/99: How do we minimize house-sale gain?
12/06/99: Maximize your tax shelter!
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12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
11/18/99: Students can work and learn
11/16/99: Value is what will sell
11/11/99: Y2K: No big deal for real estate
11/08/99: Real life is tough luck
11/03/99: The right time to cash a savings bond
11/01/99: Slow road for savings accounts
10/29/99: What do you want from insurance?
10/27/99: You have a right to see your tax forms!
10/25/99: Why own a house at 65?
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10/20/99: Love, honor -- and separate credit
10/18/99: Find the value of your stocks
10/15/99: Property lien prevents trade
10/13/99: Clear up debt, only then tie the knot
10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
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09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
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09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
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08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
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08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
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08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...