It is no imminent secret that bankruptcy is both a good thing and a bad thing. It can impact a credit history record for up to a decade or more. It can potentially ruin an individual’s chances at establishing credit for the foreseeable future. Bankruptcy can also act as a hard reset and a chance to get out of a hole with a ladder and start from zero.
There is one common error that is anything but small, as discussed by a local Bankruptcy Lawyer In Tacoma Wa. It is something that many individuals do in the months preceding their bankruptcy filing. This error is the usage and spending of retirement savings.
The Big Mistake
Traditionally, retirement funds are protected from bankruptcy. Though it is true that it depends on the source of the funds, money saved through retirement means, including 401(k) and other resources, and shielded from bankruptcy.
An unfortunate mistake people make is that they use retirement funds to pay debts. These are the same debts that can be eradicated from a bankruptcy filing. It is a dreadful mistake in many instances because the debt is minimized but the protective buffer of retirement care is gone.
Use Retirement to Prevent Bankruptcy, Not Forestall it
Any scenario where an individual has to dip into their retirement is not necessarily a good one. But, it can often be a necessary point to avoid bankruptcy, and it can be used as such. Remove finances from retirement and begin to organize that aspect of finances to avoid a bankruptcy filing. But, it should not be done to stall it or push it off, especially if it seems fundamentally inevitable at some point.
Now fairly, many people do work their retirement savings to avoid bankruptcy, but it doesn’t work out that way. This is where a financial advisor or a Bankruptcy Lawyer In Tacoma Wa can help. They can review the situation and offer practical advice on the likeliness of avoiding bankruptcy. If the result is that bankruptcy would be helpful and its inevitable, individuals can hold onto their retirement and utilize it post-bankruptcy. Helpful advice can help navigate issues leading up to a bankruptcy and how to get into it sensibly.