Credit Cards or Retirement?

One of the best reasons to file bankruptcy may be to plan for your retirement. If you're paying the minimum amount each month on credit card debt, you can't be saving for retirment. If you want to retire in any form, you have to start saving now.

Suppose you have $20,000 in credit card debt and all you're paying is the minimum amount each month. Under most credit card agreements, the minimum varies, based on the outstanding balance, and is often something like 1.5% of the balance. Paid at $300/month that $20,000 will take nearly 37.5 years to be paid in full at an 18% interest rate, which is pretty cheap for a credit card.

Now suppose that instead of paying the debt, you file bankruptcy and get a discharge. Then you pay $300/month into an IRA that earns 6% a year. At the end of 37.5 years, you will have over $500,000 in a retirement account.

Lots of people feel they are being irresponsible if they don't pay their debts. Being responsible also means that you have made adequate provision for retirement so you are not a burden to your family or society. Bankruptcy may be the responsible choice.