Because of the financial strain Covid 19 has put on so many people, the Law Firm of William H. Lively, Jr. is lowering the up front costs for filing Chapter 13 bankruptcy cases for new clients. If you need to file a Chapter 13 bankruptcy and cannot come up with a large down payment to hire an attorney, contact our office–we can help get you protected for less.

A bankruptcy filing may preserve a retirement plan

Increases in older Americans struggling to pay debts may cause some of them to empty a retirement account when they may not need to. Baby boomers and seniors facing financial issues may protect their retirement plans when filing for bankruptcy.

Chapter 7 bankruptcy generally requires liquidating an individual’s assets and repaying creditors. Federal law, however, exempts 401(k)s and Individual Retirement Accounts from liquidation, as reported by Money magazine.

Reasons to keep funds in an account intended for retirement

Leaving retirement account funds intact may provide an individual with much-needed income in the future when he or she retires. An individual struggling with debt may need to think carefully about the future before withdrawing funds from a retirement plan.

The Employment Retirement Income Security Act of 1974 authorizes a plan’s administrator to release funds only to the account’s owner. Withdrawing money before reaching retirement age to pay debts may come at a great cost; an individual may face an unplanned tax liability and early withdrawal penalties.

A retirement fund withdrawal to pay creditors may worsen current financial circumstances rather than create an improvement. Taxes incurred by early withdrawals do not qualify for discharge through bankruptcy and the result may not bring about the hoped-for outcome.

Growing debt and the need to cover retirement living expenses

Between 1999 and 2019, the debts of Americans age 70 or older increased by more than 500%, as reported by CNBC. Liabilities affecting seniors included mortgages, personal loans and credit card bills worth $1.1 trillion, according to the Federal Reserve Bank of New York.

Filing for bankruptcy may discharge burdensome consumer debts and provide a new financial outlook. It may also allow filers to keep their IRA or 401(k) account funds so they may use them to cover their retirement living expenses.