In my 22 years as a consumer and business bankruptcy attorney, I have represented over 5,000 clients. I can honestly say that not many of these clients have had a good financial plan. If they did, they wouldn’t be in my office speaking to a bankruptcy attorney. One common mistake is taking money out of 401k plans or IRA in order to pay off credit card debt. Retirement funds like 401ks and IRAs are 100% protected from both creditors and bankruptcy trustees. The only way that creditors can touch that money is if you voluntarily remove it from your account and give it to them. Many of my clients, prior to speaking with me, have taken money out of retirement and used it to make minimum payments. Now, they still owe more money than they can pay to creditors, and now they owe taxes, too.
Everyone should have a financial plan if they want to retire at some point. Even if your plan is as simple as saving a percentage of your salary, it is something. Anyone can open an IRA; it doesn’t need to be a company plan. Placing the bulk of your retirement funds into one of these accounts will be a good start to a protected future. There is no better time to start planning than now. Or, if you already have a plan, now is a good time to revamp your financial plan for the future.
I truly believe that bankruptcy is not financial failure. Instead, it is, very simply, financial planning for the future. Any client who has come see me was worried about their debts. I don’t want them to be worried about what they owe. I want them to protect what they have. The debts will always eventually get sorted out. Protecting assets is what they should really be focusing on. So, am I saying what you think I’m saying? Yes, I am. Protect your 401k and/or IRA and worry less about your debts. Why? Because if you know these assets are protected and your plan is to protect these assets at all costs, you will realize much sooner that it is in your best interest to file for bankruptcy protection. If something goes wrong, isn’t it better to know your options ahead of the game? That’s what I call financial planning!
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