A Bankruptcy Lawyer’s Blog

Can You Really Avoid Bankruptcy? Find Out the Possibilities

A sad fact of life is that increasing numbers of people are finding themselves in a position, either though unfortunately circumstances or financial mismanagement, in a position where they are simply unable to pay back outstanding debts. Under these circumstances they may consider bankruptcy, yet the stigma attached to this viable means of resolving financial issues, coupled with its long term consequences, mean that many people will do anything they can to avoid bankruptcy.

This occasionally comes at the expense of people selling assets that would actually be protected under chapter 7 bankruptcy. One such method people use to avoid bankruptcy is using their pension or retirement plan to pay off unsecured debts, thus avoid bankruptcy. Often, the desire to avoid bankruptcy comes from peer, social or family pressure, as well as potentially bad advice from financial counsellors.

Of course, bankruptcy is not a good thing! And nobody in their right mind would ever consider reckless spending, overspending or living beyond one’s means. But the fact of the matter is that a number of people find themselves in this situation and there is little way out of it. You cannot unspend money after all.

But using your pension plan to pay off unsecured debts is highly unnecessary. If you were to declare chapter 7 bankruptcy and have outstanding debts wiped out, your pension plan, along with your home and primary vehicle, would be protected and the creditors would not be able to get their hands on them. So is it really better to avoid bankruptcy and forfeit your retirement fund? Or could the better long term option be to consider chapter 7, remove outstanding debts but still remain safe in the knowledge that your pension fund and long term financial security remains in place. Unsecured debts are, by their very nature, insecure, ie there is no collateral backing them up. So do not forfeit anything you do not have to, particularly something as important as your pension fund.

Find out what is involved in Declaring Yourself Bankrupt before you make the decision. To get facts on bankruptcy, Click Here