If you are retired (or approaching retirement age), you do not want to have ask yourself this question: “Should I dip into my retirement account to help pay off my credit card or other debts?” When faced with this question, many Americans are too quick to withdraw money from an IRA or other retirement account without reviewing all their options. Retirement assets should be protected for their intended purpose, retirement.
As mentioned in a recent New York Times article regarding retirement, when seniors get into financial trouble, they often avoid asking for help or seeking out advice. Instead of being ashamed, seniors should avoid spending their retirement assets to pay off their existing debts. Retirement assets should not be squandered, for example, in order to make monthly credit card payments. This is because most retirement assets like pensions, IRA, 401(k)s and other qualified accounts are exempt from the reach of creditors under both New York State law and the Federal Bankruptcy Code. Similarly, the money invested in whole life insurance policies, is fully protected under New York State law and exempt up to certain limits under the Federal Bankruptcy Code.
A bankruptcy filing can discharge debts, protect assets from the reach of creditors and provide the debtor with a fresh start. If the debtor qualifies, a chapter 7 bankruptcy can eliminate most debts and protect the assets that they have saved for retirement. If a chapter 7 bankruptcy is not an option, a chapter 13 bankruptcy can offer the debtor a 5 year payment plan to repay outstanding debt. Additionally, one should not be overly concerned about preserving their credit score if they cannot afford to pay their bills. Too often we have clients come to our office that are not properly budgeting money for food or medical expenses. Seniors should not have to skip meals or stretch medication in order to make payments on their debts. Debtors will have the opportunity to rebuild their credit when the bankruptcy case is closed.
If you are struggling to pay your bills and want to know your legal options, please contact the Law Offices of David I. Pankin, P.C. at 888-529-9600. We offer a free consultation and convenient payment plans.
Further reading: http://www.nytimes.com/2015/05/14/business/retirementspecial/bankruptcy-can-help-seniors-protect-assets.html