Ask Terry Questions Paying off credit cards or bankruptcy?

Paying off credit cards or bankruptcy?

By Terry Savage on November 10, 2019 | Chicken Money

Hi Terry. I am currently on disability, making a small amount per month. I fell behind on my credit cards and now I am 4 months late. I came into some money, 75k and was wondering if I should pay off the cards or file bankruptcy? I owe $20k total. I also want to invest 40-50k. Where is a good place to start investing? I no longer have a 401k. Thank you so much.

Terry Says

You don’t want to go through bankruptcy at this stage. I’m glad you have the sudden money. Pay off the credit cards in full. And take them out of your wallet. You might even consider calling one of the card issuers and closing the account, so you aren’t tempted and don’t pay the annual fees. Be sure to keep the card you’ve had for the longest time as it demonstrates you credit-worthiness.
THEN, you are not “investing” the rest of the money. Put it in a bank money market deposit account where you will earn very little interest — about 1 percent. Keep it as a reserve for an emergency, which will surely come. Don’t let anyone at the bank talk you into anything else!!! You want a money market deposit account. Period. If you can’t find one that pays at least 1 percent, write back to me.
PS I don’t know how you “came into” that money. If it was an inheritance or gift, then no taxes are due. But if it was from the sale of an investment, you might owe taxes!

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