Protecting Your Retirement In Bankruptcy
The recession has delayed the retirement of many Americans over 55; but it's often their attempts to stave off bill collectors that can actually damage their retirement savings during bankruptcy.
Below are three steps every debtor should take in order to save their retirement during bankruptcy:
- Save for retirement even when the bills are due. Saving for retirement may seem counterintuitive when you are facing delinquent debts and bill collectors. But saving for retirement is a smart move, not just for protecting your income today; but for protecting your future income. If you eventually decide to file bankruptcy, the money that is in your retirement account will be protected from creditor seizures.
- Save for emergencies even when the bills are due. Once again, it may seem counterintuitive to have money in a savings account when you're behind on other bills. But an emergency savings account is critical in helping you avoid additional debt or even to avoid complete financial disaster. If you eventually decide to file for bankruptcy, having an emergency savings account will allow you to pay for the filing fee and the bankruptcy attorney costs. Remember, you cannot use your credit cards to pay for bankruptcy.
- Do not withdraw money from your retirement account to pay bills. While it may seem like a smart move to withdraw money from your retirement account when you're facing hard times, doing so will only hurt you financially. Remember, early withdrawal from your retirement account will incur taxes, penalties and give creditors access to your cash. Any money that is taken out of the retirement account may become "fair game" even if you file bankruptcy.