23 Mar Save Your 401(k) before Bankruptcy
The title just about says it all. It’s a really sad thing to get a call from someone asking for bankruptcy who has already spent all their retirement funds trying to avoid bankruptcy. You can’t get it back. And if you still need bankruptcy, you still need bankruptcy. However, as many know, 401(k) and most other retirement plans are exempt in bankruptcy. What that means is that if you have the foresight to file bankruptcy before draining your retirement funds, you can keep those retirement funds and get a debt discharge.
I understand why some people spend their retirement money on dischargeable debts before bankruptcy. Usually, they are just so used to paying their debts that they will employ any legal means to keep doing so. Bankruptcy may be something in their shadowy awareness, but it certainly sounds scary and to be avoided at all costs. People may even have the more misguided idea that “saving their credit” is vitally important. (Hint: saving your credit when in serious financial peril is like rearranging the deck chairs on the Titanic.)
So, what do you do? First of all, don’t be afraid to look. It’s cliche, but understand your options. Thankfully, the internet allows you to do a lot of preliminary research from the privacy of your own home. There are a few key questions to ask: Am I living with an unsustainable deficit? In other words, are my necessary and reasonable living expenses and debt payments more than my take home income on a regular basis? If so, is this going to change because of increased income or decreased expenses in the foreseeable future?
If you are operating with a permanent deficit and don’t expect it to change, do not draw down your retirement funds to feed that deficit awaiting the day when you have nothing. Have the courage to read the writing on the wall and learn your bankruptcy options. The bankruptcy system protects your retirement funds for a reason. No one wants you to be indigent in your old age. And as I said above, much of your preliminary research can be done online, but at some point, you’ll have to reach out to a bankruptcy lawyer to get some customized options, solutions, and information about fees and costs. I believe that there are some links to a few excellent bankruptcy lawyers on the right of this page.
Nicholas Ortiz, Boston Bankruptcy Attorney
Latest posts by Nicholas Ortiz, Boston Bankruptcy Attorney (see all)
- Bankruptcy and Arrest Warrants - August 23, 2013
- Massachusetts Mortgage 150-Day Right to Cure and Bankruptcy - July 23, 2013
- Unauthorized Practice of Law Gains Attention of U.S. Trustee - June 23, 2013
- What is a Prepackaged Chapter 11 Bankruptcy? - May 23, 2013
- Marital Adjustment Allowed to Set Commitment Period - April 25, 2013