Imagine this scenario: You and your spouse are on a fixed income. Unfortunately, the monthly expenses continue to grow as the salary remains the same. By virtue of cutting corners your family has been able to survive “paycheck to paycheck”. You are able to meet all of your living expenses and continue to make the minimum monthly payments on your credit cards. Everything is fine so long as nothing changes AT ALL.
But then life throws a curve ball.
An unexpected medical expense throws the monthly living into a tornado. Health insurance is not enough and you have to pay for the hospital bills out of pocket. You have been living “month to month” so you do not have money in the savings account. Now the monthly bills are due and you are left with the choice of: A. Do not pay the mortgage, but make sure you pay the credit card bills; B. Do not pay the credit card bills, but make sure to pay the mortgage; or C. Invade the 401k and pay all of the bills.
So what is the answer to the question?
There is no question. Unless you have an absolute emergency you should never invade your retirement account. That account, which is almost always exempt in bankruptcy (exceptions apply, which NYBankruptcy.com will discuss with you at your free consultation) is for your retirement, not for your creditors. Never steal from your future.
Next, why would you ever consider putting your home in jeopardy to pay a credit card, or unsecured creditor? If, as the fact pattern states, you are only making minimum monthly payments you are not reducing the principal. This is a vicious cycle that will have you paying the creditors a tremendous amount of money without decreasing the debt.
If you find yourself in a position where you are dedicating a significant amount of your monthly income to minimum monthly payments then bankruptcy may be an option. Filing for bankruptcy may allow you to eliminate debt that is costing you a majority of your income. When you eliminate that debt you will now be able to save money for the unknown. Essentially, you will break the “month to month” cycle and build your future.
Contact NYBankruptcy.com today for your free consultation from a local Long Island Bankruptcy Lawyers.