Bankruptcy as a Pre-Retirement Tool
Are you approaching retirement? Are you still burdened with massive minimum monthly payment obligations on your credit cards? Are you concerned that you will not be able to continue to maintain these payments once you stop working?
Over the past 20 years, I have encountered countless individuals in mid-life who have agonized over the prospect of filing bankruptcy. I call it the "moral dilemma". We have been ingrained with the concept that you work hard and pay your bills on time. I have also observed that most individuals reach a personal "breaking point" in which they come to realize that they have to consider filing for bankruptcy.
If you have answered "Yes" to the questions above, I suggest that you consider a different approach. Although it is never too late to actually file for bankruptcy, you could end up in a more advantageous financial position in retirement if you consider bankruptcy in the last 5 to 10 years before you retire.
Many people exhaust everything they have – including retirement funds - to avoid filing for bankruptcy, but yet end up in a situation where it is still necessary to file bankruptcy.
In New York where I practice, all ERISA qualified retirement accounts (IRA, KEOUGH, 401k, 457, etc.) are fully protected from the claims of creditors, even in bankruptcy. Technically, it is considered exempt property, or an exemption.
The worst thing that you could do is to tap your retirement savings to pay credit card debt. If you are considering bankruptcy, do not look to your retirement savings to bail you out. I ask you to look only at your present cash flow. If you cannot meet your obligations based upon your present cash flow, I suggest that you seek the counsel of a qualified bankruptcy attorney.
If you act before you spend down your retirement savings, you may still be able to eliminate your credit card and other debts and still retain your nest egg as you approach retirement.
Unfortunately, if you have already tapped some or all of your retirement savings, attorneys cannot go back and get the money that was already paid out. What we can do is to assist you to protect your remaining and future retirement savings. Filing for bankruptcy will help to stop the harassing phone calls and letters, and leave you debt free so that you can move forward as you approach retirement. While it is never too late to file, the smart move is to seek counsel when the first sign of trouble is apparent – not after you have exhausted your retirement savings.
Questions and Answers
Paying off debt, believe it or not, may either be a good or bad option...
Cashing in your 401k to pay off debt sounds like a great plan, but is it really a good idea or not? Definitely not. There are a number of reasons out there for this, but it mainly just comes down to numbers.
A number of options are available to help you get rid of multiple debts. There are the self repayment strategies, by following which, you can easily clear your outstanding debt amount. If required, you can also take professional help to pay off debt.
In order to save enough for your goals you'll want to learn more about your retirement savings options like 401k to IRA contributions, account balance goals, what happens when you cash out a 401k account, and more.
Bankruptcy is very often a time-sensitive process and pre-bankruptcy planning can be critical in protecting assets. Chapter 7, in particular, the trustee's responsibility is to "look back" at the actions the debtor has taken to insure that there hasn't been a fraudulent conveyance of assets, a non-allowed preference payment to creditors or other actions that might leave assets exposed. It's critical, if you are considering bankruptcy, to consider taking the following steps to insure a successful
Chapter 7 bankruptcy is a common procedure for individuals seeking debt relief. It is a legal process that allows individuals relief from overwhelming debt based on a meeting a set criteria.
Students from both private and public universities all over the country may also provide low cost or free advice. The sessions will only achieve directing clients to the right legal path in filing the right papers. Note that with the new bankruptcy laws taking into effect making the bankruptcy filing process more difficult than usual, an experienced bankruptcy attorney will be worth your money.
Many people who enter the bankruptcy process worry about the fate of their credit. This is actually unnecessary as the bulk of credit damage happens before the bankruptcy process is even initiated. While no one wants the added hassle of rebuilding their credit after resolving debt troubles, doing so can put you leaps ahead of others in the credit game.
Americans are now filing Chapter 7 or 13 Bankruptcy to get their debts under control. Bankruptcy in itself is designed for debt elimination. Chapter 7 bankruptcy functions to cancel out unsecured debt such as utility or medical bills, credit card, etc. Chapter 13 Bankruptcy on the other hand is designed to give individuals more time in repaying all their debts.
Filing for bankruptcy is good news whenever you are struggling with your credit card debt, mortgage or medical bills. Bankruptcy laws help families and individuals in their debt struggles. You have two options on how to deal with your debt problems, Chapter 7 (debt elimination) and Chapter 13 (reorganization). Always remember that you can regain credit again after successfully filing your bankruptcy.
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