How Bankruptcy Delay Impact Retirement
It’s an unfortunate reality of our current economy, but many workers over 40 are finding that their debt load is seriously interfering with their ability to either save for retirement or to maintain the savings they have already accumulated. Many over-40 workers (and those who are unemployed) are stuck in a debt trap and doing everything they can to delay a necessary bankruptcy despite the fact that it could be the one thing that actually saves their retirement.
Here’s the truth how bankruptcy delays impact retirement:
Liquidating Retirement Is Not A Smart Move
Many debtors facing credit card lawsuits and/or foreclosure mistakenly believe that liquidating their 401k is a smart move. But the reality is that liquidating retirement savings to pay debt can create an even bigger problem – tax debt. Tax debt is difficult to discharge in bankruptcy and if it is recent tax debt , it’s impossible. That’s why if a debtor needs to liquidate their retirement to pay their debt then they may be better off filing bankruptcy and protecting their retirement savings. In bankruptcy, common creditors such as mortgage lenders and credit card companies cannot touch a debtor’s retirement savings. But if you withdraw the money and put it in your bank account, those savings become fair game.
Medical Debts Are Not More Important Than Retirement
Another issue many over-40 debtors face is medical debt . Even a fully insured person who falls ill can face hospital bills in the tens of thousands of dollars. It is natural that most people would want to pay off their medical debt; but if doing so prevents you from saving or requires you to gut you retirement savings filing bankruptcy may be a better option. Medical debt is easily discharged in bankruptcy and doing so can free up cash better used to pay off taxes or to keep a house out of foreclosure .