Often when we are facing unexpected or unmanageable debt, we look for other areas in our finances to get money. We think that we can get out from under the debt that we are struggling to pay each month by using credit cards, or loans from banks or family. Sometimes we are tempted to liquidate our 401K or retirement account to pay our debt. But then what will happen when it is time to retire? You could be financially worse off then you are now since you won’t have more time to build up income and pay into your retirement plan.
Protected by Law
Congress passes a significant revision to the Bankruptcy Code in 2005 protecting Individual Retirement Accounts assets from creditors, levy’s or garnishments. Retirement accounts such as IRAs, pension plans, 401(k)s are protected under the law and cannot be seized to repay creditors in a bankruptcy case.
Older Bankruptcy Filers
Research has shown that the number of filers over 65 is increasing. American retirees living on a fixed income are susceptible to life-changing events that will cause them to turn to bankruptcy.
We are all vulnerable to unexpected medical expenses, death and divorce but when you are on a fixed income, these situations can become a catastrophe causing you to forgo food or medications to pay your bills.
Some older Americans think that filing for bankruptcy is a moral failing and will wait several years struggling to pay the debt before finally filing for bankruptcy. Often seniors will ask family members to help them catch up, and this generally is a band-aid fix. Seniors would be better served asking for family members help after filing bankruptcy if they still find that they are not able to keep up with basic living expenses.
If you are facing unmanageable debt, don’t make the mistake of cashing in your retirement fund to pay credit cards and loans. When you file for bankruptcy, you can eliminate all or most of your debt, and since most retirement assets are exempt, you can keep the funds during and after bankruptcy. Talk to a Houston bankruptcy attorney to find out how to rebuild your financial situation.