It seems more and more people are either going into retirement, thinking about retirement or are in retirement. Some of them well well into retirement, and are unable to keep current with unsecured debts like credit cards.
So if you are in this situation you may be asking, “what is the best thing for me to get myself free from all of this debt and stress? Should I file bankruptcy?”.
Maybe you are in a situation where you’ve got six months to deal with what amounts to an underwater mortgage after having taken out a second and a whole bunch of credit card debt, $25,000 of credit card debt.
So, in this scenario, you have limited income between social security and a limited pension of $2000. And, say your home is underwater by tens and tens of thousands of dollars, and credit card debt of $25,000.
And you have six months to retirement. Meeting those minimums is going to be impossible!
So, why wait? In this situation and in many people’s situation, for six more months, and I don’t care if you’re approaching retirement in five years, ten years.
You are not going to be able to earn income in the same way that you were leading up to your golden years, to your retirement years.
And you should try to reserve as much of your finances as possible in that situation because your earning potential is limited.
So, regardless of whether you’re going into retirement in six months or six years, in this situation, $25,000 worth of credit card debt can be wiped out for, if you’redoing a Chapter 7 bankruptcy, anyway, about $1800 (the national average cost).
If you’re in some of the coastal cities, it might run a little bit higher. As you get inland, you can start to look at total cost for a Chapter7 being more like $1500.
So, doing a debt settlement for let’s say, half of the 2$5,000 is $12,500.
Compare that with filing bankruptcy at $1,500 and obviously, on a dollar basis, on a cost basis, that route, because it’s unaffordable. Again, we can’t afford to keep payments going, so that’s a foregone conclusion. This way there is no repayment anymore.
So you have to weigh, okay, well I can settle maybe for less and assuming settlements for half, but you can actually settle for much less than half.
Now, let’s look at the mortgage.
It’s never going to happen if say you’re $80,000 in the red. So you’re completely underwater on that and probably won’t bounce back in your lifetime really, just being honest.
Maybe you are in a situation where you have limited equity in your place, maybe $5,000, $10,000 of equity.
Maybe that’s worth hanging onto but if you can shed an unaffordable mortgage and a second mortgage in the process of a bankruptcy, and find a more affordable living situation, do it absolutely.
Because remember, your earning potential is going down. You’re not thinking of your home as an asset if it’s underwater and you have no chance at getting even or building equity.
It’s something to shed. It’s a dead weight. And that’s a hard decision to make and I get it.
Relocation, giving up on something or a condo or a home that you’ve lived in for many, many years and the neighbors and things like that and then maybe for others, it’s just not that big of a deal.
So, should you file bankruptcy as you head into retirement? Absolutely, unequivocally, yes. And actually you should file it years earlier and preserved some of your earnings and savings as you move into retirement.
This way you’re going to remove all the stress through the bankruptcy and not holding onto any misconceptions about needing your credit for anything.
Right now you need your cash, and so I hope that you make an informed decision, talk with a bankruptcy attorney and get informed about what that means for you.