Bankruptcy

Moments of Clarity in Insolvency and Bankruptcy or Chapter 7 Bankruptcy as a Retirement Planning Tool

By Joseph McDaniel, Esq.

So it is with credit card addicts, and second mortgage addicts, and similar folks. It feels so good to buy things for some people that they just keep going until they have what other addicts call "a moment of clarity". Or what American Express calls a "Priceless" moment.

After such a moment of clarity, folks who previously saw credit cards as a pathway to pleasure now view them the way many of us view pit vipers and other dangerous objects, like hair dryers teetering on the edge of the bathtub.

Sometimes external events improve the chances that such a credit card addict will have such a liberating moment.

For instance, if the credit card company increases the interest rate from 2% to 38%, and the debtor figures out that they will be negatively amortizing for the next sixty years until they die, that sometimes gets their attention, and they may get past the terror of creditors so they can think.

In fact, a mini-sized version of a moment of clarity is what generally drives people in to see me.

Now, there are some folks who just can't make decisions in their lives, because they vacillate or are afraid to let go of a credit card addiction. For those folks, I try to gently suggest that they leave my office and go directly to a free, online retirement calculator of their choice, and plug in savings of HALF the amount that they are currently spending on credit card debt, and see what the results will be in fifteen years.

I also ask them to calculate how long it will take them to pay off their cards, so they can start saving, at their present rates. The answer is generally "never".

The combination of calculating that they will "never" be able to retire if they keep doing what they're doing, along with noticing that if they deposit $1,000 in a tax-sheltered retirement account for fifteen years at a decent interest rate, they will get to retire into Jimmy Buffet Land, sometimes induces a moment of economic clarity. Or at least that's what some of 'em tell me.

It would probably be easier to set up a electro-convulsive shock setup in my office, but I don't think my building is zoned for that much electricity.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on April 10, 2010 (boomark / email).