Can you afford your Cobra?

Gerri answers viewers questions on expensive Cobra payments, filing bankruptcy and loan modifications.

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By Gerri Willis, CNN personal finance editor

NEW YORK (CNN) -- QUESTION 1: I know that Congress is considering extending the unemployment benefits, but what about Cobra? That has been a godsend for my husband and me. Instead of paying $1,100 a month, we only pay $434. My husband has been laid off since December of 2008 after 22 years with a newspaper company. --Dawn, Ohio

Well, Dawn. The House did pass an extension to emergency unemployment benefits for people who live in places where unemployment tops 8.5%. For folks in those areas, benefits could be extended for another 13 weeks.

However, a lot of the stimulus provisions -- like the Cobra subsidy or the extra $25 added to paychecks --they're still set to expire at the end of this year. It's unclear if these provisions will be extended.

QUESTION 2: I am 61 years old, have been self-employed for 20+ years with my own retail business. I was doing pretty well until 2 years ago. I ran up an approximate debt of $85,000 plus two loans of about $120,000. I have never been late ... but the economy is killing me. I am considering filing for bankruptcy on the unsecured debt. Please, advise. -- Teri

The Small Business Administration has a number of counseling programs that are free to folks with their own businesses. Counselors can help you analyze your finances, give you advice on how to deal with creditors, how to increase your profits and they'll let you know if bankruptcy seems to be the only option for you and how to go about the process. To find an SBA district office near you, go to sba.gov.

QUESTION 3: I've been living in my property for five years and I've always been on time with my payment. I am having trouble making my payment this month and I'm thinking of applying for the loan modification. How is it going to affect my credit score? -- Alan

A loan modification is a great way to save your home from foreclosure. However, your credit score might suffer depending on how your mortgage lender decides to report it to the credit bureaus.

Many lenders are reporting loan modifications as "partial payment plans", which is considered negative by the FICO score. That will change in November when lenders will start reporting them as a "loan modification under a government program", which is not considered negative by FICO according to John Ulzheimer of Credit.com.

So if you want to modify your mortgage loan then it might be a good idea to wait until November so you can avoid any negative impact to your FICO scores.

-- CNN's Jen Haley contributed to this article. To top of page

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