When considering bankruptcy, retirement should definitely be taken in account.
I meet with quite few potential bankruptcy clients in Dalton, Dallas, Cartersville and Rome, Georgia who reluctantly come to my office and resist the idea of bankruptcy even though economic reality demands it. The tide usually begins to shift when we start talking about retirement.
Sometimes, I ask the question, “How soon do you plan on retiring?”
The potential bankruptcy client usually responds, “To be honest, I haven’t really thought about it. I get at least 10 nasty creditor calls a day which stresses me out so bad that all I can think about is this debt problem.”
“Why not wipe out the debt problem and start focusing on a retirement plan?” I will respond.
Many clients become more open to the idea of bankruptcy when they start to contemplate retirement. When both a husband and wife are working full time, a married couple might be able to squeak by each month and make that minimum credit card payment. However, once one of them retires, reality hits. Half the income is gone but the bills are the same. Actually, with twenty-five percent interest on credit card debts, they can grow rapidly.
I’ve heard many clients say to me, “I wish I had filed this case years ago. I’m about to retire and I have no savings.”
A most disheartening situation is when a person empties out their 401k account to make payments on credit card debt. Under Georgia law, your retirement account is 100 percent protected from your creditors. Why would you ever want to take a protected asset and convert into cash so that you can pay a debt that could have been wiped out in a bankruptcy?
Everyone knows that you can’t retire on social security alone. You must have some savings to cover medicine and other medical expenses.
Busting your tail to pay twenty five percent interest on your credit card debt instead of funding your 401k retirement account just isn’t smart. Make funding your 401k a priority and if you there is nothing left for the credit card companies, you need to come see me soon.
1. Can I Keep Contributing to My 401k After I File Bankruptcy?
2. Don’t borrow against your 401k to pay off credit cards or medical debt!