Wow, Suzie Orman really told an 81 year-old woman, who earns only a fixed $600 a month from social security, to make sure she protects her FICO score and continue to pay the minimum balances on her credit cards. In the Oprah Magazine this month, Ms. Orman was asked, “After taking out cash advances on her credit cards, my 81-year-old mother is out $8,000. She lives on $600 a month from Social Security and cannot keep paying on this debt. Can you advise me on how to proceed? How do I get her out of credit card debt?”
In response to this question, where clearly the Debtor’s income was protected, and there was no reason to believe based upon the question that any assets would be attached, Ms. Orman responded: “It’s fruitless to try to talk your way out of this; the card issuer has every right to expect repayment. To regain control of her debt, have your mom keep paying at least the minimum due on the monthly credit card bill. On-time installments are vital for protecting her FICO credit rating. That’s important because if her score is at least 700, she has a good chance of being able to transfer the entire balance to a new card with a lower interest rate. Many card issuers offer zero percent interest for the first year when you move your balance to their card. At CardTrak.com, click on Credit Cards, then choose Balance Transfer to find issuers offering the best deals. But only sign up for one card—multiple applications made at the same time can actually hurt her credit score.”
I would like to say that I cannot believe that Ms. Orman would give such bad advice, but in all honestly I can believe it. I have watched her show on and off and read a few of her articles, many of which drive consumers to the same advice. So Ms. Orman’s great advice is basically, try to make payments that you can’t afford at the expense of possibly not paying for medical bills or food, in the hopes that some other unsuspecting creditor will extend this woman more credit to transfer the balance and pay a lower interest rate for 6 months. This is yet another example of why you should speak to a qualified consumer debt attorney who understands the legal ramifications of different courses of action, rather than a talk show host or even just friends.
Had this Debtor come to me, I would have reviewed her situation in a bit more detail before handing out any advice. In all fairness, I understand Ms. Orman did not have that luxury, but even still if I believed the Debtor to be judgment proof, presuming she had no assets that could be liquidated by the Creditor, I would have advised her of several options, none of them though would have been to make minimum payments. Trying to save your FICO score at 81 years old, just to abuse the system by taking out a new credit card, is absurd!
This woman could possibly file a Chapter 7 bankruptcy and discharge her debt. If she did this, her income would be protected. Another option would be to obtain third party funds and settle the debt for a small lump sum. She may, frankly, stop paying and wait to go to Court and even be able to challenge the validity of the debt. However, Ms. Orman did not feel it necessary to inform her reader of any of these options.
It just goes to show you why it is always better to speak to a licensed professional attorney who has an obligation to tell you about all of your options, then a talk show host or author who is more concerned with selling her books then looking out for the true interest of those who rely on her advice.
Attorney Michael Goldstein first published this article on the history of bankruptcy on the Phillips Law Offices Consumer debt blog March 21, 2012:
When people hear the word bankruptcy, they often say to themselves, “what is it?” Many people believe that the concept of debt relief is a new or modern topic, and often times, people view the term as a dirty word or with a negative connotation. The truth of the matter is simply the complete opposite. In fact, the idea of filing bankruptcy is as old as the United States of America itself and a very interesting historical topic when viewed in its full context.
Taking a broad look at this topic, debt has been an issue for centuries. In the distant past, it was a crime to not repay creditors, and as a matter of fact, in England in the middle-ages there were debtor’s prisons for those who were found guilty. The standard procedure back then was; if you couldn’t pay your debts, the King would throw you into jail. Debtors would then stay in jail until they were able to repay their creditors, which of course stopped them from being able to work to pay off the debts.
Luckily, things have changed a little bit over the past few hundred years, throughout England and everywhere else, including the United States of America. Looking back to the beginning of our country, bankruptcy was such a hot button topic when the Revolutionary War ended, that the right to file for bankruptcy protection was incorporated into the Constitution. In fact, it is first seen in Article I, Section 8, Clause 4 therefore, as early as 1801, we had bankruptcy laws in the United States of America. The concept of bankruptcy was so important to our Founding Fathers that they gave congress the power to create bankruptcy courts and regulations in Article I and Article III of the United States Constitution, the earliest legal document in our country’s history. The Founding Fathers thought the right to bankruptcy was so important that they provided for it at the beginning of the Constitution, rather than burying it in the end of the document.
Debt relief is something that our Founding Fathers knew was going to be part of the economy. It has been a part of our economy for years, it is not just something new in the last few decades when people started getting and using credit cards, but rather it has been around since the inception of our country. Had the idea of debt relief been so appalling to those drafting our very first set of laws, it would not have been made a part of the Constitution. If it was not so important, the Federal Government would certainly have removed it from the laws and not sponsored it again and again. Congress would certainly not have amended the rules in 1978, or again in 2005 to add more complexities and protections to the law of bankruptcy, under Title 11 of the United States Code.
