What could bankruptcy possibly do for someone who was solvent?
His problem was liquidity and an income that was certain to decline in the next few years.
His generous disability income would end at 65, leaving him with only Social Security and the income from the illiquid annuities to live on.
Minimum payments on $50,000 of credit card debt took 40% of his current income. It would take 42 years to pay it off at contract terms.
Like so many clients, he wanted desperately to pay off the debt, yet the credit card interest rates made it impossible without selling off the assets on which he relied for a stable future.
Care to guess what saved the day? The Federal Reserve!
The interest rate on federal funds was at .18%. Less than one percent.
In a Chapter 13 plan, he could keep his house, preserve the annuities he’d need for his support at 65, and pay the face amount of the debt plus minuscule interest. [Read more…]