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Many people believe that bankruptcy is a sign of hitting rock bottom but they would be wrong. Bankruptcy is a tool in the law that can be used to actually protect assets and wealth from creditors. Many famous and wealthy people have filed and survived bankruptcy with many emerging from bankruptcy and building an even greater net worth than they had prior to filing. While you may not be a celebrity or even extremely wealthy, bankruptcy bankruptcy can be a useful financial tool to help you get back on track. Yes, being financially depleted and bankruptcy often go hand in hand but It doesn’t have to be that way. In other words, you don’t have to wait till you’re broke in order to file bankruptcy. In fact, it would probably be a better financial decision to file before you hit rock bottom.
Don’t wipe out your savings to stave off bankruptcy
Nearly 60 percent of Americans have saved less than one thousand dollars for an emergency. It is a side effect of the rising cost of living and the stagnation of wages in this country. If you’re one of the lucky people who actually do have a savingings, it would be highly advisable to file for bankruptcy before you wipe that savings out. In many cases a good bankruptcy lawyer will be able to find a way to protect most or all of your savings, especially savings you have in retirement accounts. Any payments you make to creditors that would otherwise be discharged in a Chapter 7 are effectively just a donation to that creditor. Beyond that, even if you wanted to pay your creditor, any payments made to a specific creditor within a certain period of time of a bankruptcy filing can also be “clawed back” by a bankruptcy trustee which negates what you were doing to begin with.
DO NOT use your retirement funds
Your retirement account is a nest egg that you and/or your spouse has been building for decades. There are extremely few circumstances where it would be advisable for you to use your retirement account to pay down short term debts. Virtually every retirement account in use today can be exempted from the bankruptcy which means you get to retain the value of that account for its intended purpose, your retirement. Generally speaking, it makes much more financial sense to file bankruptcy to liquidate your retirement savings.
Don’t sell off your assets
The majority of Harmon and Gorove’s clients are able to keep most or all of their assets. Harmon and Gorove’s attorneys work hard to protect your assets from the trustee and creditors. Selling your assets to pay off creditors isn’t something that you have to do in most cases. The attorneys at Harmon and Gorove work hard to make sure that your assets stay your assets. Protecting your assets in bankruptcy does require a good deal of expertise and planning, especially if you have a good deal of assets. If you have a significant number of liquid assets or rarer assets like a cash value life insurance policy or a pending lawsuit in which you could recover money, talk to a lawyer as soon as possible. Timelines are important in bankruptcy and anything you do to delay could cause you to lose irreplaceable assets. You should always be upfront with your lawyer about what assets you have, knowing beforehand is imperative to your ability to retain your assets.
Don’t ever give up
Bankruptcy provides many people with a clean slate. Scrambling to sell off your assets or using up your savings isn’t using your money wisely, it’s panicking and making decisions that can change your life for the worse. Most people can see the need for a bankruptcy on the horizon. The warning signs are usually there long before people hit rock bottom. If you’re facing debts that seem insurmountable you should consider speaking with an experienced bankruptcy attorney before you get to the end of your rope. The staff of Harmon and Gorove are highly trained in exemption planning and asset protection.
When your Bankruptcy is concluded, you will want to have as many tools to restart your financial life as possible. Keeping your retirement account, cash savings, homes and automobiles will provide you a new and fresh means of getting ahead after a bankruptcy. If you wipe out your assets before you file bankruptcy, the fresh start that bankruptcy provides won’t be as effective and won’t give you the advantages you need to get ahead. Contact the attorneys at Harmon and Gorove today to see how we can help you get rid of your debts and get you started down a new path to financial success.
Harmon and Gorove often works with clients who are looking to retire but are facing the prospect of retiring with overwhelming debt. It often make sense for people who have significant debts to file bankruptcy before or during retirement but before you file there are many factors you need to take into consideration.
If you are a senior citizen who is looking to retire and who doesn’t have any assets you might consider stopping payments to your creditors. If you don’t own anything and your income is derived from social security, disability or other government program then creditors can’t garnish this money. While this will work for many people who do not have any recoverable assets keep in mind that doing nothing and just stopping your payments to creditors doesn’t actually eliminate your debt. The people you owe may still choose to send you letters, call you, and ultimately sue you. While it is possible for your creditors to obtain a judgement from you if your sole source of income is from social security or some other government disability the creditor can’t enforce the judgement against your income.
If you want to try to end the collection calls you can always reach out to your creditors and let them know you’d like to settle your debts for an amount less than you actually owe. In certain circumstances letting your creditors know you are on a fixed income and have little to no ability to repay them will cause them to negotiate with you to accept less than you owe just so they can actually get something out of you. There are certain tax implications to debt forgiveness that can pop up so this isn’t the best option for everyone and every debt.
If negotiations fail or your creditor threatens you with a 1099-C your next step may be to file a Chapter 7 Bankruptcy. In filing a Chapter 7 bankruptcy you will discharge most, if not all, of your unsecured debt. You should always review your finances with an experienced bankruptcy attorney in your area to ensure that there are no other issues that could have an impact on your bankruptcy. Much like social security and disability payments, most retirement accounts are protected from recovery by the trustee in your bankruptcy. This means that you can rid yourself of all your unsecured debt and still keep the money you may have stashed away in your IRAs, Roth IRAs, 401(k)s, 403(b)s, and Keogh plans.
If you are a senior citizen that has assets it is imperative that you meet with a competent bankruptcy attorney that can determine if a Chapter 7 will work for you or if you need to file a Chapter 13 case. Debtors with assets must proceed with extreme caution when filing for Chapter 7 protection since certain assets can be liquidated and sold to repay your creditors by the Chapter 7 Trustee. Additionally, once you file a Chapter 7 you are not allowed to simply dismiss the case in the event you discover that you have assets that can’t be protected and that you may lose. A competent bankruptcy attorney can go over what you have that is unprotected and review exemptions with you. Using this information you and your attorney can decide which path is best for you.
If you are like the nearly 80% of middle income seniors that are looking to retire and still maintain a significant debt load, DO NOT under any circumstances start pulling money out of your retirement accounts to satisfy your debts until meeting with a bankruptcy attorney. We see people making this mistake all the time and once that money is gone, you’re not going to get it back. We often find that many senior citizens deplete their retirement savings trying to pay back debts that could have otherwise been taken care of completely in a Chapter 7 Bankruptcy or reduced significantly in a Chapter 13. Don’t make a $500,000 mistake and put off your ability to retire any longer by depleting your savings to pay unscrupulous creditors. Contact the friendly attorneys at Harmon and Gorove for a free consultation to see what we can do to help make your retirement dreams come true.