Sometimes you’re dealt bad cards . . .
Here’s a quick story about Rick and Bill – they don’t know each other but they share a common problem. Rick was making $85,000 per year but was injured seriously and is now unable to work. His income is gone, but he has a mortgage, car payment and $60,000 of credit card debt. Bill has a similar problem – though not injured, he lost his job making $85,000 per year and, given his age and skill set, has not been able to find replacement work. Bill also has a mortgage, car payment and $60,000 of credit card debt. It just so happens that both Rick and Bill have approximately $25,000 in savings, as well as IRAs of $100,000.
The question is – what should Rick and Bill do? Well for starters, Rick needs to consult a Disability lawyer to find out if he can collect Social Security Disability or maybe see if there is a worker’s compensation claim (if the injury was work related). At that point – Rick and Bill are in the identical position – they need to speak to a financial crisis management attorney to find out what they should do about the credit card debt. Sounds obvious – doesn’t it? Let me tell you – it is NOT. In virtually every case we see – Rick and Bill make an awful mistake before they consult with the financial crisis attorney –– they use the $25,000 to continue to pay the credit card bills – and worse yet, when that money is gone – they start taping the IRA to continue to pay the credit card bills. Once they are virtually broke – then they seek help. Doing that – using up your savings and IRA to pay credit card debt when you’ve taken an income hit – is an awful mistake.
The smart move for Rick and Bill – in this case – is to immediately stop paying the credit card bills. They need to hang on to their money for the important obligations – food, shelter and transportation. When the savings is lower – we will eliminate the debt using bankruptcy or debt resolution. I know what you’re thinking. Let me guess, you’re saying, “Oh yeah, but what about my credit score?” Here’s my answer – first, credit scores can fall, but they recover. Second, you can’t pay for food for your children, housing or a car, by tendering your credit score – you need money to do so. The right plan is to preserve your cash first – your credit score is far down the priority list. What I’m saying is the last thing the banks and credit bureaus want you to know. Are you surprised? After all – they prefer you to keep paying them the 29% interest until the day you die!
Want to know what to do? Attend our upcoming FREE Seminar, Wednesday, June 28, 2017, “Solving Debt Issues – Caused by Disability or Life’s Difficult Road.” Attorney Jeff Kirschner, Law and Reality’s Disability and Workers Compensation is joining Brian Small and me for a terrific seminar that explores elimination of debt and how to address disability issues – information we’ve learned you want and need to know.
Happy Father’s Day to all the Dads and to all – a great weekend.
Ken