Chapter 5. Coping with a Credit Crisis

A credit crisis—being unable to manage your debts—can come on slowly as the result of overspending for many years. The balances on your accounts grow and grow; pretty soon you're able to make only the minimum payments, and then not even that.

Other times a credit crisis comes at you in a rush as a result of another financial setback—a job loss, a divorce, a major illness. Suddenly, you have more “outgo” than “income,” and you're not sure where to turn.

A friend I'll call Charlie experienced a crisis that resulted from a combination of both forces. For years, he'd made a successful living as an animator, earning as much as a quarter million dollars a year. He and his family didn't have to worry much about money, ...

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