Bankruptcy and Retirement Planning

If you are over 50 and still paying on significant credit card or medical debt you should consider bankruptcy as a retirement planning tool. Unless you can easily retire the debt by negotiating a settlement you are likely never going to be free of the debt. Your current plan is setting you up for an unhappy and underfunded retirement. It may end up that you cannot retire at all.

This is a very difficult and stressful decision and if you find yourself in this position please ask for a free consultation. You may need compassionate help facing the realities involved. Many fine people struggle with the idea of filing a bankruptcy and do not drag the facts out into the open until far too late.  We simply put our heads down and keep working, we keep trying despite years of evidence that progress is not being made.  The costs of this “plan” are more than financial; there can be emotional and even physical consequences.

You cannot help anyone or achieve anything if you become seriously ill or die from financial related stress.

If you are like many people you know this deep down but continue to battle away because you are an honest person who generally pays your bills. Realize that you have likely paid what you borrowed many times at this point.

If you have not managed to pay off significant unsecured debt, you have to accept that it is likely never going to be paid off. You are setting money on fire by making minimum credit card payments.

Here is an example of the math:

If you have $20,000 of credit card debt at 19% interest it would take you FIVE YEARS of $518 monthly payments in order to pay off that debt. That’s assuming you can even make the payment each month, that nothing else goes wrong  and that you don’t need to borrow more. You will have paid $31,080 on that debt.

Compare what happens with a bankruptcy and planning. Instead of paying the debt over 5 years, what if you put that same $518 per month into an IRA? You would  have, assuming a very reasonable 6% return on your investment(s), almost $40,000 in retirement savings. It comes down to $31,000 lost as compared to $40,000 gained.

This is really a modest example because many have credit card debt that is more than this, at higher interest rates and many if not most people who are in that spot will at some time during the five years had to default on the credit card.

You may have helped adult children, or had an illness, or done any number of normal moral things with the credit card funds you borrowed. You are now in a spot that it is unlikely you can get out of.

Many  of my clients who come to me in the decade before their anticipated retirement know exactly what I am saying all too well. But, out of fear and a sense of morality refuse to consider the idea of bankruptcy for many years.

The reality is you are looking at 10-15 more years of work if you are 50 years old when we do the analysis. Will that money, whatever “extra” you can put together each month after basic expenses go to build a future? Or will it go to a futile effort at staying on top of debt?

Your money should go to a retirement plan and it should start going there immediately. You’ve worked hard and saved and helped others. It’s also true that you’ve probably paid back what you borrowed many times over the years.

It is time to look out for yourself. At this stage in life it is unlikely that a huge promotion or other financial windfall will come and end the problem. If it is not paid by now it is likely never going to be paid. That is just the reality. I can help.

The following link is to a website which can help you run various scenarios for your specific situation. I urge you to figure out what type of payment would be necessary to pay off credit card or other unsecured debt, and to compare instead what happens when you save that money. Then please do call for a confidential meeting where we can look at your options. (303) 501-4028- Direct Cell. Robert Gauss, Esq.