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Home > Reader Questions > I’m Retired Military. What’s the Best Way Out of My Debt Mess? – Brian

I’m Retired Military. What’s the Best Way Out of My Debt Mess? – Brian

I retired from the Military after 26 years. Got a job, but at about 40 percent of what I was making. After draining the savings because It took me 5 months to find work. I have 2 major problems:

1) 65,000 credit card debit costing me 2200 month in minimum payments. We are coming up about 500 month short on living expenses after the bills, mortage, cars are paid.

2) the retirement check I am getting from my military pension was not getting enough taxes deducted, so I estimate I will owe the IRS around 2000 dollars in April.

What to do ?

I looked into debt settlement, but I am worried about getting sued and the tax liability. I am worried about claiming bankrupcy because I have a security sensitive job. It feels preety hopeless for our family at this point. Thanks in advance for any suggestions you can offer.

Brian in Texas

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  • Damon Day

    Sure, I hope it helped

  • Brian43

    Thanks for the information

  • Brian43

    Thanks for the advice.

  • Lewis Roberts

    While your mileage may vary, I have filed many bankruptcies for people in the military, people at NASA here in Florida, and others with sensitive security clearances. It has not been a problem.

    A chapter 13 bankruptcy might be your best option. It appears you have disposable income (about $1700/month left over; that is $2200 in payments less $500 shortfall = if no credit cards anymore, $1700/month left over).

    You also are now behind in IRS. A chapter 13 will allow you to clear that up as well. So you would have a rough chapter 13 plan payment of $1250/month to pay all of your credit card bills, the IRS bill, the chapter 13 trustee fee IN FULL.

    Therefore it would satisfy your desire to pay your creditors, keep them from suing and garnishing you, and get them off your back.

    Again as to security clearance, which is a bigger risk? Someone who has large amounts of debts and tempted to steal or be bribed or someone who filed bankruptcy and relieved themselves of the financial burden?

    It’s an easy answer for me.

    There are other factors to figuring a chapter 13 repayment plan, but this was a rough figure to show you how it can set things right quickly.

    The other major advantage is that in most areas, your credit card interest is frozen while in bankruptcy, so the debt is not climbing further.

    Please see a blog post of mine regarding debt settlement v. chapter 13.

    http://www.lrlawoffice.com/ban

  • Lewis Roberts

    While your mileage may vary, I have filed many bankruptcies for people in the military, people at NASA here in Florida, and others with sensitive security clearances. It has not been a problem.

    A chapter 13 bankruptcy might be your best option. It appears you have disposable income (about $1700/month left over; that is $2200 in payments less $500 shortfall = if no credit cards anymore, $1700/month left over).

    You also are now behind in IRS. A chapter 13 will allow you to clear that up as well. So you would have a rough chapter 13 plan payment of $1250/month to pay all of your credit card bills, the IRS bill, the chapter 13 trustee fee IN FULL.

    Therefore it would satisfy your desire to pay your creditors, keep them from suing and garnishing you, and get them off your back.

    Again as to security clearance, which is a bigger risk? Someone who has large amounts of debts and tempted to steal or be bribed or someone who filed bankruptcy and relieved themselves of the financial burden?

    It’s an easy answer for me.

    There are other factors to figuring a chapter 13 repayment plan, but this was a rough figure to show you how it can set things right quickly.

    The other major advantage is that in most areas, your credit card interest is frozen while in bankruptcy, so the debt is not climbing further.

    Please see a blog post of mine regarding debt settlement v. chapter 13.

    http://www.lrlawoffice.com/bankruptcy-florida-debt-consolidation/

    • Brian43

      Thanks for the information

  • Damon Day

    Hello Brian,
    First let me say, thank you for your service.
    To know exactly what you need to do is difficult given the limited information provided, however there are a couple of things we can address.

    The first thing is that we have to address the 500 a month short fall. So as obvious as it seems, we have to increase income or cut expenses. If increasing income is not an option, then we have to look at the budget to see where we can cut 500 in spending. The 2200 in minimum payments seems like the most obvious place to start.

    When I work with clients, I start with the numbers. We first have to find what is financially possible given your cash flow. So we need to figure out how to get rid of 500 dollars a month. Well, on your debt loads, cutting the interest down significantly on your credit cards would save you some, but it is not likely to save the entire amount without cuts to other areas of spending.

    If we determine based on your cash flow and life circumstances that it would not be possible to pay off this debt, then we will have to look at more drastic options like debt settlement or BK. You mentioned you are not comfortable with the possibility of being sued with settlement, or the possibility of owing taxes on the money forgiven.

    Well the reality is the only way to insure you can’t be sued is to pay the debt off or file bk, and the tax issue is simply something that needs to be included in the calculation but not something to be feared. For example, all else being equal, if I had a choice to pay 10,000 to a creditor or say 3,000 to the IRS, I would argue paying 3,000 to the IRS will always cost less than paying 10,000 to a creditor.

    You also mentioned a BK could cause a problem with your security clearance. Whether it will or not is certainly something that would need to be explored before you go down that road, however, if a BK would cause a problem, than it is likely that other negatives on your credit report could cause a problem as well. So my question is, do you know for a fact that a BK would cause you to lose your clearance, or are you assuming that to be the case?

    Here is what the Air Force says about Bankruptcy and security clearance:

    “The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk.”

    So depending on the type of clearance you have, we will want to make sure one way or the other whether or not your situation can have an impact on your clearance.

    We have to gather all of the facts and explore each possible option for balancing your monthly budget, then based on the answers to your concerns, we can run the numbers and see what the most logical approach is to getting you out of the situation that you are in.

    You mentioned that your situation feels hopeless, but I can tell you from experience, that you are in a much better financial position to deal with this situation than most of my clients. It is true that I do not have an understanding of your overall financial situation yet, but given that you are paying 2200 a month and your shortfall is only 500, the good news is I think that is going to be something that can be pretty easily rectified.

    http://GetOutOfDebt.org/Damon-

  • http://DamonDay.com Damon Day

    Hello Brian,
    First let me say, thank you for your service.
    To know exactly what you need to do is difficult given the limited information provided, however there are a couple of things we can address.

    The first thing is that we have to address the 500 a month short fall. So as obvious as it seems, we have to increase income or cut expenses. If increasing income is not an option, then we have to look at the budget to see where we can cut 500 in spending. The 2200 in minimum payments seems like the most obvious place to start.

    When I work with clients, I start with the numbers. We first have to find what is financially possible given your cash flow. So we need to figure out how to get rid of 500 dollars a month. Well, on your debt loads, cutting the interest down significantly on your credit cards would save you some, but it is not likely to save the entire amount without cuts to other areas of spending.

    If we determine based on your cash flow and life circumstances that it would not be possible to pay off this debt, then we will have to look at more drastic options like debt settlement or BK. You mentioned you are not comfortable with the possibility of being sued with settlement, or the possibility of owing taxes on the money forgiven.

    Well the reality is the only way to insure you can’t be sued is to pay the debt off or file bk, and the tax issue is simply something that needs to be included in the calculation but not something to be feared. For example, all else being equal, if I had a choice to pay 10,000 to a creditor or say 3,000 to the IRS, I would argue paying 3,000 to the IRS will always cost less than paying 10,000 to a creditor.

    You also mentioned a BK could cause a problem with your security clearance. Whether it will or not is certainly something that would need to be explored before you go down that road, however, if a BK would cause a problem, than it is likely that other negatives on your credit report could cause a problem as well. So my question is, do you know for a fact that a BK would cause you to lose your clearance, or are you assuming that to be the case?

    Here is what the Air Force says about Bankruptcy and security clearance:

    “The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk.”

    So depending on the type of clearance you have, we will want to make sure one way or the other whether or not your situation can have an impact on your clearance.

    We have to gather all of the facts and explore each possible option for balancing your monthly budget, then based on the answers to your concerns, we can run the numbers and see what the most logical approach is to getting you out of the situation that you are in.

    You mentioned that your situation feels hopeless, but I can tell you from experience, that you are in a much better financial position to deal with this situation than most of my clients. It is true that I do not have an understanding of your overall financial situation yet, but given that you are paying 2200 a month and your shortfall is only 500, the good news is I think that is going to be something that can be pretty easily rectified.

    http://GetOutOfDebt.org/Damon-Day

    • Brian43

      Thanks for the advice.

      • http://DamonDay.com Damon Day

        Sure, I hope it helped

  • Briandlee43

    I do pay my bills. I have not missed one payment. Im asking for advice not smart a@@ comments from you.

  • Briandlee43

    I do pay my bills. I have not missed one payment. Im asking for advice not smart a@@ comments from you.

  • Joed

    Your a disgrace to the military. Pay your bills deadbeat.

  • Joed

    Your a disgrace to the military. Pay your bills deadbeat.

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