Unfortunately, most people who file bankruptcy these days are not financially irresponsible — they are just unlucky. Medial debt is the number one reason people file bankruptcy. These are people who may have saved their whole lives and get slammed by medical bills they can’t cover.
If you find yourself considering bankruptcy, it helps to know what to expect so you can avoid costly mistakes. This article from the Motley Fool outlines the essentials you need to know, such as:
The pros and cons of Chapters 7 and 13 – Chapter 7 is the more frequently used kind of bankruptcy filing, and it involves having your assets turned over to the courts. With Chapter 13 a repayment plan is created that allows you to pay off your creditors over time.
Bank Accounts – it’s not likely that you will be able to keep all the money in your various bank accounts if you file for Chapter 7 bankruptcy. They won’t necessarily be completely wiped out, though, and you’ll likely still keep the accounts. A Chapter 13 bankruptcy will likely leave many or all of your accounts intact, as its purpose is not liquidation but repayment.
Retirement Accounts – Most 401(k) accounts stay safe and intact. Traditional and Roth IRAs are vulnerable in a bankruptcy — though they have somewhat generous exemptions.
Social Security – If there’s any chance of a bankruptcy in your near future, be sure to keep your Social Security benefits in a separate account to protect them from bankruptcy.
Annuity Income – It will depend on your state’s rules whether you can keep your annuity payments.
The best advice is to avoid bankruptcy all together. Bankruptcy may not always be the best choice for solving debt problems. Bankruptcy may be avoided if an individual or business can successfully negotiate modifications of existing financial obligations with lenders.
As you decide whether or not to file for Chapter 7 or Chapter 13, it is critically important to enlist the effective counsel of a dual-board-certified attorney during creditor negotiations and the workout process. Retaining Cossitt Law to help you make sense out of the process and to represent you in the workout process enhances the credibility of your proposal and increases the chances of avoiding a bankruptcy proceeding.
The further in advance you consult with a certified Montana bankruptcy attorney and get expert legal guidance, the more options you have and the better outcome you will achieve. Contact Cossitt Law at (406) 752-5616 to set up a consultation.
Read the Motley Fool article here.