The potential for negative concerns associated with bankruptcy may deter people from filing. Even people facing aggressive collection activities may try to work out other solutions because they worry about the consequences of personal bankruptcy.
Some people worry about losing their credit cards or the obligation to liquidate assets during bankruptcy proceedings. Others worry about the record of the bankruptcy turning up whenever they apply for credit or a new job in the future.
Particularly when the person dealing with financial challenges is in their 50s or beyond, they may worry that filing for bankruptcy could affect their eligibility for retirement. People may worry that they have to liquidate their retirement savings before they receive a discharge. Despite what some people fear, a successful bankruptcy filing might actually increase their chances of retiring comfortably.
Retirement assets have protection
Most people filing for personal bankruptcy choose between Chapter 7 bankruptcy and Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, the filer does not need to worry at all about asset liquidation. They can preserve all of their assets.
During Chapter 7 bankruptcy, the liquidation of some assets may be necessary. However, filers can typically preserve tax-deferred retirement savings accounts and pensions from creditor claims. Bankruptcy exemptions help people protect the resources that have a direct impact on their financial stability after bankruptcy.
A discharge may improve the household budget
Not only can people preserve their retirement savings during bankruptcy, but they can also eliminate sources of financial pressure that could cause hardship during retirement. Living on a fixed income isn’t easy.
Those with high levels of debt may be at risk of creditor lawsuits, repossession or even foreclosure after they retire. Bankruptcy prior to retirement or during retirement can eliminate financial obligations and make it easier for people to live within their means.
Learning the truth about personal bankruptcy can help people feel confident if they choose to file. Life after bankruptcy is often more comfortable than life before bankruptcy, as people no longer have to worry about aggressive collection efforts.
