Credit: A Tale of Woe

It was especially nice in the rain coming home last night, soaked to the bone, after 10 innings of baseball.

I work in bankruptcy, plus I've lived a couple years now, and I know a couple things.

1. Don't have more than one credit card: Someone called me today and left an urgent message, asking me to call them back, saying it was an "emergency". When I called it turned out the guy was denied credit at Home Depot and he wanted to know why. Sure he only declared bankruptcy 5 years ago, but he already had 2 credit cards again.....

Don't have more than one card. You will not be able to pay them back. You will not be able to resist using it. One is enough. Bringing me to my next point...

2. Don't have too high a limit: Really, let's say you have a $5,000 limit. When do you think you will pay that off? The day you die, that's when. Don't do it. If they increase your limit, bring it back down. That thing you need today, if you do need it, you'll still need it tomorrow.

3. Don't use your credit card to live: When you look at your bill, be able to account for SOMETHING substantial. If you carry a balance, as I think everyone I know does, have something to show for it. Go on a trip, buy a car, buy a piano. Let's say you spend $1,000 over three months on crap. At the end of the 3 months, you again have no money and now $1,000 in debt to boot.

4. Don't declare bankruptcy: It happens too often, just don't do it. There are very few situations where you HAVE to declare. Someone called me yesterday saying he was 86 and needed to declare bankruptcy as someone was getting a judgment against him for $5,000. A judgement is HARD TO GET and it MEANS NOTHING. The company still has to know where you work and where you bank. Let's say they get a judgement, they know where you work and where you bank. As a single person you're still allowed to make almost $1,800 a month before they get to touch a cent.

Let's say you're on welfare. No creditor can collect against welfare. They will call, encourage you to pay, threaten, they can do nothing. NOTHING.

5. If you do declare bankruptcy, don't be a sucker: Too many people come out of bankruptcy broke. Once you know you are bankrupt you cannot make too many financial decisions that won't be undone when you file. So the day before you know you're bankrupt, put money in a locked-in RRSP with a designated beneficiary or a life insurance policy.

6. Don't expect a free ride: If you declare bankruptcy, you will have problems. Want your GST refund? No. Want your income tax refund? No. This is not a free ride.