Life-changing crisis demands drastic action

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Dear Debt Adviser,
My husband was in assisted living facilities for nine years, and recently passed away at age 73. I’ve spent all of our IRA funds, cashed in all of our stocks, took out a line of credit on our house that we owned free and clear, and maxed out my credit cards to pay for his care.

I am in a financial crisis, and can no longer pay my credit card debt. I talked with a credit counselor and was told that my best option was to file for bankruptcy. The creditors require at least 3 percent of the total amount owed as a monthly payment. I only have Social Security and three pensions as my monthly income. I am 69 years old. Please give me your best advice as to how to proceed. Thank you.
— Mary

Dear Mary,
I’m sorry to hear about your husband. I would like to think that I’d do the same for my wife. Your letter may serve as an example to others who are on the fence about the merits of long-term care insurance. Many financial planners now recommend that their clients consider including adequate insurance coverage as an important element for financial well-being. Permanent life insurance or long-term care insurance may have prevented you from ending up in this financial dilemma and provided you with peace of mind during your husband’s illness. I can only imagine that you were likely doubly stressed dealing with your husband’s care and worrying how you would pay for it.

I hope you don’t mind me going off on a tangent from your question to assist others who may be facing a similar situation down the road. Now, on to determining what your best options may be to deal with your credit card debt. You mention that you visited with a credit counselor. Assuming that your counselor did a thorough review of your financial situation and that neither of you could come up with a workable repayment scenario acceptable to your lenders, it seems that you are a candidate for bankruptcy.

Because you chose to write seeking advice from me, I am assuming that bankruptcy is something you would prefer to avoid. However, bankruptcy is a legitimate and sometimes even a preferable option for folks who do not have the income to pay their debts. Bankruptcy protection is allowed by law and for good reason. In this country, everyone deserves a fresh start if they become hopelessly overwhelmed by debts. To fully understand the pluses and minuses of filing bankruptcy, you will need to speak to an attorney. This is a legal process and only an attorney can give you competent legal advice.

If your sole income is from pensions and Social Security, you may also have the option of doing nothing. Your types of income usually cannot be levied by a creditor to pay for debts. Here again, I suggest you consult with an attorney to be sure and discuss having the attorney draft a letter to the creditors explaining your situation, your chosen course of action and that all future contacts go through your lawyer.

From what you have told me, the most important thing now is to resolve this situation so it doesn’t continue to interfere with you as you get on with your life. The best advice I can give you is to fully understand your options, make a choice and don’t look back. At 69, you have a long life to look forward to and the sooner you begin to move in a positive direction, the better.

Good luck!

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