Bankruptcy and Retirement , How It Affects You
Bankruptcy and retirement has its affects.The thought of filing for bankruptcy is scary to most people regardless of whether they file Chapter 7 or Chapter 13 bankruptcy. Many put off filing because they’re afraid of losing everything, including their retirement money. However, that isn’t necessarily what will happen. If you’re facing the possibility of bankruptcy, here’s what you need to know.
The bankruptcy courts offer exemptions for many assets, meaning that bankruptcy probably won’t wipe you out completely. These exemptions allow people who file for bankruptcy to keep many of their assets. Talking to a bankruptcy attorney will help you determine which assets you can keep and which assets you’ll likely have to sell in order to pay your creditors.
Some assets, including some retirement accounts, are protected from creditors when you file for bankruptcy. That being said, some exceptions to this rule exist. Most people can keep just over $1.3 million dollars per person in their retirement accounts even if they file for bankruptcy.
Any number over the court-protected amount will be taken to pay off the debtor’s creditors. Most people don’t know what they’ve invested in their retirement accounts. Hopefully, you are not one of them. If you think that you are, find out how much you have in your accounts before you file. If you have more than the legally protected amount, you’ll have to give up any money you have over the protected $1.3 million.
Saving Before And After Bankruptcy For Retirement
In many ways, it’ll be easier for you to save money after you’ve filed for bankruptcy. All your debts and the late fees go away, leaving you with more money. If you’d like to extend the reach of the money you do have, think about implementing some money-saving strategies. If you receive any money unexpectedly, put it into savings. Stop going out to restaurants for lunch. Instead, pack lunches and cook from scratch for other meals. Get rid of subscriptions to magazines, book clubs, and other “extras.” By living more frugally and saving any unexpected money that you receive, eventually, you’ll build your savings accounts back up.
Nowadays, filing for bankruptcy doesn’t mean you’ll lose everything. The courts allow debtors many exemptions. These exemptions include many household items such as cars and other important assets, like retirement accounts. If bankruptcy-related worries have been keeping you from filing, you owe it to yourself to talk to an attorney. Debt relief could be just around the corner.