I tell all my clients and prospective clients that my office is the last stop on the train. In other words, people should try every other option first before filing bankruptcy. Many have gone to (reputable) debt counselors to work out payment plans.
Others take out home equity loans to consolidate their debt at a much lower interest rate. However, there is also such a thing as false hope, and that can sometimes put you in a worse situation in the long term.
What I am referring to here is the plundering of pensions and IRAs to stay afloat financially. Many clients come to me with pension loans or outright empty investment accounts because they were trying to forestall an inevitable bankruptcy.
Tread Carefully When Reaching For Your Pension
This is an option that should only be taken with the advice of a financial professional, as it can sacrifice your future in order to save your present. This is for several reasons:
- Pension loans, even if you pay them back in full, can rob you of significant financial growth needed for retirement. If the money is not in the fund, it can't grow.
- The tax consequences of an outright disbursal from a pension or IRA can not only create a new debt that might make the solution less attractive, but that debt may well be non-dischargeable in an eventual bankruptcy filing.
- In taking a disbursal of funds from a retirement account you are, in effect, sacrificing your future financial well-being in order to try and save your current predicament.
- You are most often paying creditors with money ordinarily beyond their reach in bankruptcy.
People hold off on filing bankruptcy because they are afraid of what it will do to their credit. However, the irony of the whole situation is that most people who are contemplating bankruptcy usually have bad credit anyway. Do not run the risk of making a bad situation worse!
So What Do I Do Instead?
If you live in southern New Jersey and are thinking about filing bankruptcy, call my office at 856-432-4113 or contact me through this site to schedule a free consultation before you do something drastic like sacrifice your financial future.
If you are looking for further information about bankruptcy, download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.