What are the best options?

Struggling Under Medical and Credit Card Debt

by Steve Rhode


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Question:

Dear Steve,
I stayed home with kids for nine years and just went back to work. We have had medical issues and just not made enough money. We have racked up some credit card bills, $50k and $40k in student loans. Our house mortgage is 250K, and we have two cars. We have tried paying down the cards for years, but it feels like we are not getting anywhere.

I am trying to decide if we should file for bankruptcy. I have my kids' college to think about, and we have no money saved for our retirement.
Lisa

Answer:

Dear Lisa,
I'm all about letting the math tell you what the answer is. In this case, it would appear you have been living a bit beyond your means with overflow expenses landing on the credit cards.

Therefore, unless you are able to increase your income, reduce your expenses, or a bit of both, it is unreasonable to expect you are going to be able to make payments and get out from under this.

On top of this, the most frightening thing you said was you have no money saved for retirement. You should look at What Repaying Your Debt Will Cost You in Retirement - Calculator.

Life is full of second chances and the opportunity to do better the next time around. However, the single component you never get a second chance at is time. Once it is gone, it is gone forever.

Therefore, bankruptcy is absolutely an appropriate solution to consider. It is often the fastest way out of debt for the lowest cost. More importantly, it will give you the opportunity to get back to saving as fast as possible, so you can take advantage of the multiplying power of time.

Now, all that being said, following your bankruptcy, you will absolutely need to find a way to get your life to fit within your income. In my experience, filing bankruptcy is a fantastic teachable moment and the vast majority of bankruptcy filers never file bankruptcy again.

Am I a good candidate for bankruptcy?

If the medical debt is the result of having no health insurance, please get covered. Having medical insurance not only covers some costs, but you also get reduced costs for a large number of medical expenses if your doctor or hospital accepts your insurance.
Steve Rhode
Get Out of Debt Guy - Twitter, G+, Facebook

If you have a credit or debt question you'd like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.


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