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When choosing between debt relief options, it's crucial to consider how your decision will impact your financial future. One factor to keep in mind is how your debt repayment plan can affect your retirement savings. Let's say you're eligible to file for bankruptcy based on the means test.
If you opt for debt settlement or debt management, you'll have to make payments until the end of the term, regardless of whether Chapter 7 bankruptcy is a better option for you. However, with Chapter 7, you can often eliminate your debt within 90 days and start investing in your retirement with a fresh start. For retirement planning advice, check out "How Much Do I Need to Retire" on Savology. To see if you qualify for Chapter 7, use the Chapter 7 Means Test Calculator.
Wondering how much you can save? Check out Steve Rhode's "What Repaying Your Debt Will Cost You in Retirement - Calculator" on GetOutOfDebt.org. It's an eye-opening tool that I found extremely helpful.
How The Calculator Works:
Steve's calculator is user-friendly and requires only six pieces of information. Each input is explained in a helpful manner. Here are the details:
- Current Age: Enter your current age.
- Monthly Payment: Input your monthly debt payment.
- Monthly Payment After Payment Plan: Enter the amount you plan to save monthly for retirement after paying off your debt. If you don't plan to save, leave it as 0 to see the future cost of lost retirement from a repayment plan.
- Length of Payment Plan: Input the number of years you expect to take to pay off your debt.
- Interest Rate: Input the expected rate of return for your retirement plan.
- Estimated Retirement Age: Input the age you plan to retire. You can use Savology's free retirement calculator to gain a better understanding of your projected outcome.
With these inputs, you can easily calculate your retirement plan and future costs.
What is the Result of the Calculator?
It's incredible how Chapter 7 bankruptcy can be a game-changer for those who can't afford their debt and need debt relief. Let me show you an example of how it works. Imagine you have a future retirement loss of $460,845.01 for just a 5-year program. This loss is based on a 10% return, a 5-year program, and a monthly payment of $300. That's a significant amount of money to lose.
But don't worry, there's a solution. Chapter 7 bankruptcy can help you eliminate your debt and avoid losing your retirement savings. Take a look at the chart below to see how debt payment affects retirement calculations.
Should you do a Chapter 7 if you qualify and have a large, unaffordable debt burden?
If you're struggling with debt, you may be considering Chapter 7 bankruptcy as a way to get relief. According to an article by Steve Rhode titled "The Incredible Healing Power of Bankruptcy," bankruptcy can be a helpful solution for many people.
When I asked a friend who owns a bankruptcy firm about Chapter 7, he said that it can be a great option for many people, but it really depends on their individual circumstances. For instance, if you own a valuable asset like a boat and you owe less than the asset's value but are already behind on payments, debt settlement might be a better choice. It's important to consider all your options and seek expert advice before making a decision.
