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Retirement Funds

Retirement Funds: It is unwise to use retirement accounts to pay debts

People who are dependable and diligent might abruptly find themselves in crippling debt. A sudden medical cost or job loss might flip their lives upside down. Not one to shirk obligations, they may be tempted to remove funds from their retirement accounts in order to pay off their creditors.

If you find yourself in this situation, it is unwise to use your retirement income to pay off or reduce your obligations. A few of the perks of filing for bankruptcy include erasing or restructuring your debt while preserving your retirement savings.

Pension Funds Are Safeguarded

One bankruptcy misconception is that all available assets must be used to pay off as much existing debt as feasible. Many retirement savings are protected by bankruptcy rules, preventing you from becoming reliant on public assistance in your later years.

Included among the protected forms of money are the following:

  • 401(k)
  • IRA
  • 403(b)
  • Profit-Sharing Strategies
  • Defined-Benefit Plans

Over $1,000,000 is safe from creditors. The sum fluctuates every three years with inflation adjustments. The next revision will occur in 2022.

Empty retirement savings accounts rob your future

If you’ve been saving for your future retirement, congrats! You have a limited number of working years to save for your retirement, and it is critical that you do so. If you deplete your savings now to pay off a debt, you will be more likely to depend on Social Security to cover your continuing needs. Social Security alone is insufficient.

Other considerations when withdrawing from your retirement accounts:

  • Early withdrawal fees (usually 10 percent )
  • Tax penalties (varies depending on your age)
  • Income tax responsibilities
  • Loss of business matches
  • Lack of future value

As an attorney who has specialized in bankruptcy and debt for more than a decade, I can provide you with seasoned legal counsel based on your particular circumstances.

Insolvency provides a new beginning.

The majority of personal bankruptcies (69 percent) are filed under Chapter 7 nationwide. It does not seem to be the case in North Carolina. 53% of North Carolina’s personal bankruptcies, according to the American Bankruptcy Institute, are filed under Chapter 13. In addition to North Carolina, Alabama, Georgia, Louisiana, South Carolina, and Tennessee all have a higher rate of Chapter 13 filings.

In North Carolina, an expected 6,400 personal bankruptcies were filed in 2021. Nationally, there have been around 400,000 bankruptcies.

The following is an outline of the two personal bankruptcy chapters:

Chapter 7 is known as liquidation bankruptcy since it eliminates the majority of unsecured debts. In Chapter 7 bankruptcy, you will not necessarily have to liquidate all of your assets to pay off your debt. You may safeguard up to $60,000 in home equity if you are 65 or older, and up to $35,000 if you are younger than 65. If you acquired your property during your marriage, you may be able to safeguard even more of its equity. In addition, you may exclude clothes, furniture, gadgets, and other personal items. Up to $3,500 in car equity is also protected. Additional exclusions may apply. In the majority of Chapter 7 cases, the bankruptcy trustee has nothing to sell. This implies that the majority of Chapter 7 bankruptcy filers are allowed to retain all of their assets. Credit card debt, utility bills, medical expenses, unpaid rent, legal fees, and unsecured personal loans are examples of eligible debt. Typically, debt is cleared within three months. Chapter 7 bankruptcy provides relief to tens of thousands of individuals each year, but you must have a skilled attorney to guide you through the process.

Chapter 13: This chapter is reorganized. Chapter 13 bankruptcy allows many individuals who do not qualify for Chapter 7 to bring their mortgage payments current, keep their automobiles, repay child support or alimony, and pay their taxes. Chapter 13 provides another option for regaining financial stability. Instead of eliminating debt, Chapter 13 restructures it into a three- to five-year repayment plan. In Chapter 13, some debtors pay pennies on the dollar to their creditors. That’s correct! Even though it is a repayment plan, the majority of individuals do not pay their creditors in full. As your attorney, I may devise a repayment plan that allows creditors to take less than what is owing. Certain debts, including child support, alimony, and most tax liabilities, must be paid in full. A court of bankruptcy must approve the scheme. If you can afford to retain all of your property, you may do so. If you have completed all due payments and are current on child support and alimony responsibilities, the outstanding debt will be discharged at the conclusion of the payback term.

Creditor phone calls, invoices, and litigation will cease throughout any bankruptcy processes. The automatic stay will also halt a foreclosure action, allowing many homeowners to remain in their homes.

Examine All Options for Regaining Financial Stability

At Hoard Law, P. C., I practice only bankruptcy law. I consider myself a one-trick pony. I think bankruptcy does not define an individual. Each year, bankruptcy assists tens of thousands of individuals in regaining their financial footing so they may get the new start they deserve and concentrate on their future. Regardless of your socioeconomic status, I will treat you with honesty and courtesy. I will use all of my knowledge to advise you through your bankruptcy case and other debt relief choices.

If debt is dictating your life, it’s time to regain control. I can devise a practical strategy that handles your financial worries, allowing you to concentrate on the important aspects of your life, such as your family, your friends, your school, or that new career you’ve always wanted to pursue but couldn’t because you were too concerned about your costs. After filing for bankruptcy, many of my clients report feeling much less stress and are glad to no longer have to worry every time they answer the phone or visit the mailbox. Contact Hoard Law, P. C. immediately to begin a fresh financial future.