Life and Money With Helaine by Helaine Olen

Starting Over After Bankruptcy

Dear Helaine: Help me decide what I should do. I'm a 53-year-old who had it all but lost everything in the recession beginning 10 years ago. I sold off real estate at a loss, closed my business and tried to pay everything I owed. In the end, I had to declare bankruptcy after running through my retirement funds.

Now I have a new career, and I am trying to plan for the future. I purchased an apartment, which I am planning to sell at a profit next year. I have $25,000 in an IRA, but no other savings to speak of. Plus, I still have $40,000 in credit card debt.

When I sell the apartment, I'll get about $100,000 after paying the mortgage. What should I do with that money? I am afraid of rising rents, so I feel like I should buy a place to live. However, I also feel I should pay off my debt because I am paying high interest rates. I also feel like I should put money aside for retirement, but there just isn't enough to do all of those things. -- Back From the Financial Abyss

Dear Back From the Abyss: I wish you had written me a decade ago! Retirement funds are, for the most part, safe from creditors in bankruptcy court. Unfortunately, all too many people -- including yourself -- use that money in an unsuccessful attempt to stave off bankruptcy. I understand the desire to pay back money owed, but bankruptcy laws are written this way for a reason.

As for what you should do now, you need to think through your options before making any financial moves. Do you plan to stay where you are long-term? If not, selling and renting might make sense. If you plan to retire where you are, you might be better off staying put. If you sell and use some of the money to pay down credit card debt, can you commit to living within your means going forward, or will you simply end up with the same amount of debt in a few years again? I can't answer these questions -- only you can.

One other thing: You need to meet with a bankruptcy attorney again. I don't know your salary, nor do I know how far in the past you declared bankruptcy and whether you filed Chapter 7 or 13, but $40,000 in high-interest credit card debt is a lot of money to owe, and it might be your best option again. You need to talk to an expert who can make a determination based on all the financial facts.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)