Many people in their 50s and 60s are heading toward retirement still carrying high-interest debt which is, unfortunately, a perfect storm as rates stay high and recession concerns loom. That’s the warning from Lynn Toomey, the founder of Her Retirement.
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Toomey and Ashley Morgan, a debt and bankruptcy lawyer with the law offices of Ashley F. Morgan, shared with GOBankingRates some ways consumers can avoid the coming unpaid debt crisis.
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Identify High-Risk Debt
According to Toomey, high-interest, unsecured debt like credit cards and personal loans should be tackled first.
“These often carry 20% or more interest,” Toomey said. “Debt that drains monthly cash flow and grows faster than your savings rate equals high risk.”
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Restructure Obligations
Toomey advised consumers to restructure obligations using tools like 0% balance transfers or payoff strategies. Additionally, tools such as debt consolidation loans and home equity lines, when used with caution, can help consumers lower rates and regain control.
Make Lasting Changes
“Use behavioral nudges to make lasting changes,” Toomey said. “Identity-based goals work better than shame-based tactics. Try things like automation, mindset shifts, visual tracking tools and a financial coach or advisor.”
Toomey said that women are more vulnerable due to caregiving roles and lower lifetime earnings. But with planning, Toomey said, they can stay ahead of this crisis.
Consider Bankruptcy
As a debt and bankruptcy lawyer, Morgan has helped thousands of people deal with their debt issues. The first piece of advice is to figure out where your money is going, where you can cut and other options you may have now.
“We are in a situation right now, where if you can cut back and save right now, things will be a lot easier to deal with as a recession hits and consumers face financial struggles,” Morgan said. “If you can’t cut anymore, you may be able to increase your income.”
Finally, Morgan said, you may need to look into Chapter 7 or Chapter 13 bankruptcy.
“People think bankruptcy can be a dirty word, but it really is a tool to manage debt,” Morgan said. “Bankruptcy is better than being sued or having a garnishment.”
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Sources
Her Retirement, “Her Retirement.”
Ashley F. Morgan Law, “Ashley F. Morgan Law | Bankruptcy Attorney | Tax Resolution.”
This article originally appeared on GOBankingRates.com: 4 Ways To Avoid the Coming Unpaid Debt Crisis
