The Check Is In The Mail

Divorce. Lose your marriage, lose your money. Looking state by state and city by city, SMR found a clear correlation between spousal split-ups and bankruptcy rates. California and Oregon stand near the top of this problematical list. But which is the chicken and which the egg? "Usually, divorce follows debt, not the other way around," says bankruptcy attorney Alan Nisselsohn of the New York law firm Brauner, Baron, Rozenzweig & Klein.

Self-employed business failure. This calamity isn't state specific, but the toll will rise whenever the economy slows. To support their hopes, entrepreneurs have been known to borrow against every asset they have, including homes and credit cards. If the business fails, bankruptcy may be inescapable.

You can stave off lesser blows, simply by carrying less debt. George Kinder, a Cambridge, Mass., financial planner, offers this advice for lightening your load: (1) List the after-tax cost of each loan you have. (2) Pay the minimum on your low-rate debt and as much extra money as you can afford on the debts that are costing you the most. (3) As the balance declines, plow your interest savings into yet more debt reduction. That's the highest return on investment you'll find in the economy today.

WILLIAM SLATE, TEMMA EHRENFELD and JEREMY KAHN

© 1996