Many people assume that bankruptcy protection is only for those who have exhausted all other options, including cleaning out all of their retirement accounts. Unfortunately, this puts many borrowers in a precarious situation, causing them to essentially rob their future selves to pay off their short-term obligations. The Gil Law Firm, one of Dothan's most respected bankruptcy and debt consolidation law offices, recommends contacting a lawyer who will help determine the best time to file.
Debt Consolidation Attorneys Answer FAQs About Paying Bills With Retirement Funds
Shouldn't I Use All My Available Resources Before Filing For Bankruptcy?
In short, no, you should not drain your accounts and resources before seeking bankruptcy protection. Bankruptcy is intended to give you a fresh start at life, which becomes increasingly difficult without retirement funds. In fact, because of the power of compound interest, you could be spending much, much more than it appears. In 20 years, just $10,000 could have doubled or tripled, which means you're taking that much more from your future self.
Won't I Lose My Retirement Funds Anyway?
While a Chapter 7 bankruptcy typically does allow the trustee to seize a variety of assets, retirement funds contained in a 401(k) or IRA account are typically exempt. On the other hand, a Chapter 13 bankruptcy doesn't require you to give up any of your assets at all. In almost every case, you'll be able to walk away from your bankruptcy with your retirement funds intact.
Will My Retirement Savings Prevent Me From Filing For Bankruptcy?
Before a Chapter 7 petition can be approved, you'll have to pass a means test, providing that you're unable to pay off your outstanding debts. However, most retirement savings accounts are exempt from consideration, and a Chapter 13 bankruptcy doesn't include a means test at all.
Before filing for bankruptcy, you need the help of a skilled debt consolidation attorney who will help you get the full benefit of your petition. Learn more about The Gil Law Firm’s services online, or call (334) 673-0100 for a consultation.