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Can bankruptcy be a step towards solvency?

Financial and debt management advice may sometimes seem counterintuitive. For example, many workers would not question the advice that they should save for retirement. Yet a recent article did just that.

Specifically, the article described priorities that might trump saving for retirement, such as reducing consumer debt or building up liquid savings outside of retirement funds that can be used to cover short-term emergencies.

True, funds can sometimes be withdrawn from retirement accounts for certain emergency situations. However, those early withdrawals often come with high penalties. In addition, paperwork is needed to qualify for those special situations. That processing may take several weeks. In the interim, an individual facing an emergency financial situation might accrue huge credit card debts, medical bills, and/or penalties for delinquent mortgage payments that may be too high to ever pay off.

Our bankruptcy law firm’s website has several resources, including an article on how a bankruptcy filing might actually be a faster step to solvency than struggling with unmanageable debts. The article cautions that an individual should not wait to file for bankruptcy until his or her resources are completely depleted. 

The article is an important reminder that an attorney can help not only with the decision of whether to file for bankruptcy, but also the timing. Individuals with skyrocketing debts but some equity might benefit from a Chapter 13 filing. This type of bankruptcy allows the debtor to maintain his or her equity, while providing a more reasonable repayment plan. At the same time, even a Chapter 7 filing provides that certain property is exempt from liquidation. If you have questions about whether a bankruptcy filing might suit your financial situation, our website might offer some answers.

Source: Money, “When Not to Save for Retirement,” Mark Miller, Jan. 28, 2016

Related Article: “Bankruptcy As a Step to Solvency,” copyright 2016, Goldman & Beslow, LLC

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Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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