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Hi, there, Michael Bovee with Consumer Recovery Network, and
welcome to our YouTube DebtBytes channel.
Today's reader question that I'm going to address is one that,
actually it's happening more frequently,
in the last, I don't know, ever since the recession, maybe 2007,
2008, job market decline.
People are going into retirement, thinking about
retirement or are in retirement, well into retirement, and unable
to keep current with unsecured debts like credit cards.
I have a reader question here today that is related to that,
that states, or asks, what is the best thing for
me to get myself free from all of this debt and stress?
Should I file bankruptcy?
Going into retirement this June.
So it's 2016, it's January, 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 for Marcy, she has limited income starting
in June between social security and a limited pension of $2000.
And, her home is underwater by tens and
tens of thousands of dollars, and credit card debt of $25,000.
Meeting those minimums is going to be impossible
starting in June.
So, why wait?
In this situation and in many people's situation, for six
more months, and I don't care if you're watching this video and
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 preserve as much of your
finances as possible
in that situation because your earning potential is limited.
So, regardless of whether you're Marcy and
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're doing a Chapter 7 bankruptcy,
anyway, national average cost of that, $1800.
If you're in some of the coastal cities,
it might run a little bit higher.
Then, as you get inland, like where I'm at, you can start to
look at total cost for a Chapter 7 being more like $1500.
That means that settling debt for let's say,
half of the 25,000 is 12,5 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, right?
There is no repayment anymore, that's unaffordable.
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.
We talk about that on other videos, but
let's assume half and then the cost basis.
Now, let's look at the mortgage.
It's never gonna be, given what she shared,
it's $80,000 in the red, so she is completely underwater on that
and probably won't bounce back in her lifetime really,
just being honest.
You might be in a situation where you have limited equity in
your place, maybe $5,000, $10,000 of equity.
Maybe that's worth hanging on to but
if you can shed an unaffordable mortgage and
a second mortgage in the process of a bankruptcy, and
find amore affordable living situation, why absolutely.
Okay, because again, 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, really.
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.
And it's time to move on to greener or warmer pastures.
Since she's in the upper northeast and I'm thinking,
I want some warmth around this time of year, too.
So, should you file bankruptcy as you head into retirement?
My answer, absolutely, unequivocally, yes, and
actually Marcy, I wish you would have filed it years earlier and
preserved some of your earnings and
savings as you move into this new phase of your life.
And I think you're gonna enjoy it,
I think you're going to have fun.
I think 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.
If for whatever reason, you learn that Chapter 7 is not
an option for you, post about that in the comments below,.
After that, consult with the bankruptcy attorney and
we can talk about it further.
Anybody watching this video faced with the same kind
of questions for yourself,
you are welcome to post in the comments for feedback.
See you on the next video.
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