Bankruptcy Or IRA Withdrawal: Which Option Is Better?

If you are struggling financially and you have an IRA with a decent balance you may be tempted to withdraw funds from this account to pay down your debts. This is usually a big mistake though, and it can have a big financial impact on your life and your retirement resources. You should never access retirement savings to pay on credit cards, medical bills, or other unsecured consumer debt except in very narrow circumstances.

If you are like most people you have always paid your debts on time, but circumstances beyond your control like a job loss or catastrophic medical emergency affected your ability to meet your monthly expenses and debt payments. You may feel that bankruptcy is not an option out of a misguided sense of shame, and prefer to pay your debts if at all possible. Withdrawing from your IRA is not usually a sound financial move though, and in most cases consulting an experienced bankruptcy attorney who specializes in debt relief  is a better option instead.

Will The Withdrawal Completely Eliminate Your Debt?

In a small percentage of cases it may be possible to pay off all of your debts using your IRA balance, and this may be a good idea if all the debts will be eliminated completely. If you have money invested at 2% but the interest you are paying is 17%-22% then using the funds to pay off the debt completely can be a wide move. If you plan on only paying off some of your debt then your IRA should be left alone, because you may soon find yourself falling behind on payments again and this time you will also have a much lower IRA balance as well. The taxes and penalties on early withdrawals can be severe. An experienced bankruptcy attorney can help you determine the best move in your specific case.

Will Bankruptcy Put Your IRA Balance At Risk?

When you file for bankruptcy protection you will need to list all of your assets and accounts, and this includes 401k accounts and IRAs. Under the bankruptcy code even if you have large balances in retirement account and these must be listed your creditors are not allowed to touch any retirement funds that you have. Bankruptcy will not place these funds in jeopardy but you could if you withdraw funds from the retirement account. The bankruptcy trustee will not touch any retirement accounts that you have, but any money that you withdraw from these accounts will become fair game. An experienced bankruptcy attorney can help advise you on the best way to handle your financial problems and get the debt relief that you need. This can be done without placing your retirement savings at risk.

The bankruptcy attorneys at West & Hurley can help with a free debt consolidation consultation so that you find the right answer for your unique debt problems and circumstances. Visit http://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.

Americans And Mortgage Servicers: An Unhappy Relationship Right Now

Reports show that private sector jobs are on the rise, which is a welcome change from the last few years. The mortgage industry can not say the same, because of the recent investigations and revelations about abuse and fraud by mortgage servicers on a wide scale basis. A recent article by the New York Times detailed all of the shocking abuses that homeowners have faced in the last few years and the nightmare experiences that these homeowners have gone through.

The article in the New York Times described mortgage practices that were highly dubious if not outright criminal yet were commonly used by many major mortgage lenders. These practices include forging signatures on important mortgage documents and foreclosure paperwork, fraud concerning the execution of documents on a widespread basis across the industry, being deceptive in statements made concerning paperwork correction and problem resolutions, and misrepresenting the fees charged to consumers. According to the article these practices had become normal operating procedure for even reputable lenders at times instead of the exception, and this was true all across the USA.

According to the Times publication the federal government has come up very short as far as investigating and regulating mortgage lenders and servicers. The article goes on to state “It’s nice to know some attorneys general are taking matters into their own hands. One is Martha Coakley of Massachusetts, whose lawsuits against big banks have unearthed important details about dubious mortgage practices.”

Martha Coakley is not the only Attorney General who has taken steps against the unsavory mortgage lenders. The Times article states “Another is Catherine Cortez Masto of Nevada. She filed a case against Morgan Stanley that was settled last year, generating as much as $40 million in monetary relief for borrowers. She also participated in a suit against Wells Fargo that resulted in $45 million in principal forgiveness for Nevadans. And she has a case pending against Bank of America. Last month, Nevada Attorney General Catherine Cortez Masto sued Lender Processing Services, the huge default and foreclosure processor that works behind the scenes for most large banks. With this case, she demonstrated how enlightening an in-depth study can be.”

Lender Processing Services is one of the biggest perpetrators against homeowners according to Nevada Attorney General Catherine Cortez Masto. The article in the New York Times went on to say “The complaint, which came after a 14-month inquiry, contends that L.P.S. deceived consumers by committing widespread document execution fraud, misrepresenting its fees and making deceptive statements about its efforts to correct paperwork. Investigators interviewed former L.P.S. employees and customers and examined foreclosures the company had worked on. ‘L.P.S. played a critical role in the deceptive foreclosure practices that have harmed Nevada homeowners and burdened Nevada courts,’ the complaint said.”

The result of the actions taken by these Attorney Generals may not help many homeowners already faced with foreclosure or eviction. Bankruptcy may be the only way to save your home if you have been the victim of foreclosure or eviction based on mortgage documents that are false, inaccurate, forged, or fraudulent. Many of these same lenders are dragging their feet on mortgage modifications, even in cases where they are supposed to work with homeowners. Military families have been foreclosed on while the military member was deployed even though this is illegal.

If you are having financial difficulties and find that you have problems making your mortgage payment each month, or you are worried because you may be facing a foreclosure in the near future, then bankruptcy may be the best option in many cases. This step may help you save your home, and this may be true whether you file under chapter 7 or chapter 13. The automatic stay which goes into effect when you file bankruptcy also applies to your mortgage, and this stay will prevent any foreclosure until your case is resolved.

A qualified bankruptcy attorney can help you get your finances under control again, retain your home if possible, and get a fresh start when you need it most. The bankruptcy attorneys at West & Hurley offer a free bankruptcy consultation to help you find the right answer for your unique debt problems and circumstances. Visit http://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.

2011 Gave Jobless Americans Very Little To Be Grateful For

Christmas is a time for food and fun, family and friends. During this holiday season all of the blessings through the year are counted and appreciated, but for many Americans 2011 gave very few reasons to be grateful because of chronic unemployment, a struggling economy, home foreclosures, and financial difficulties.

An analysis conducted by the National Law Employment Project shows that almost 2 million Americans who are out of work and facing financial hardships will be affected if federal unemployment benefits are not extended soon. By the end of the year 2012 the number could jump from 1.8 million to roughly 6 million if Congress does not take action to prevent this.

Jobless Americans are suffering, and in addition many are underemployed even though they desire full time employment. Unemployment benefits may not seem like much but this financial assistance can often mean the difference between meeting your bills or falling even further behind. While unemployed Americans are hunting for jobs record numbers are also cutting expenses as much as possible and eliminating small luxuries. Basic cable, holiday menus, Christmas gifts, and many other items taken for granted in the past have now become a struggle to afford.

The middle class of America seems to be in a downward spiral and many Americans are unsure where to turn. Without unemployment benefits many of those who barely scrape by will soon be without any financial means. This may lead to a large rise in homeless individuals, and as more people cut back on things and withdraw from society millions of Americans are affected.

Household budgets this holiday season are glum and strapped for financial resources. At a time when you should be enjoying friends and counting blessings you may find yourself counting change and praying for a miracle in the form of a job. There is a lack of investment in the American worker today that is distressing for many. Many long term unemployed are forced to use resources intended for retirement, drain savings accounts, and even file for bankruptcy. These are Americans that want to work but can not find full time steady employment in the current economy.

The number of personal bankruptcies has been on the rise since the economic downturn started. The supposed economic recovery did not stop this trend because the recovery never reached the middle and lower classes in the country. In 2011 it is expected that around one and a half million people filed for bankruptcy protection and it is expected that 2012 will be the same unless something drastic occurs. Many of those who filed for bankruptcy in 2011 did so because of long term unemployment, chronic underemployment, or the sudden stop of unemployment benefits.

Personal bankruptcy can be the solution needed. This solution will provide a long term answer to the financial struggles you are facing. Chapter 7 bankruptcy can help erase your debts and give you a fresh financial start while chapter 13 bankruptcy can help you keep your vehicle and home in most cases while allowing you to resolve your financial problems at the same time. This can make all the difference in the world to a family who is struggling just to get by and make ends meet. There is a solution to your debt and financial issues and help is available.

If you are one of the long term unemployed women, you are underemployed and facing economic hardship because of this, or you feel like you are swimming in debt with no way out there is help and debt solutions available. A qualified bankruptcy attorney can help you turn your finances around and give you a fresh start when you need it most. The bankruptcy attorneys at West & Hurley can help provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances. Visit http://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.  Or call 1-800-956-5152 for their 24 hour free information hotline.

Tax refunds and bankruptcy

I regularly receive this question: Will the trustee take my tax refund every year?  The answer is, as usual, it depends. So lets take a look at some of the factors that go into answering this question.

First, in a Chapter 7, you want to look at what time of the year you filed your bankruptcy. The trustee, or more accurately, your bankruptcy estate, only owns that part of the refund that is due to you as of the date that you file. So, if you file on July 1, then one half of the calendar year has passed and one half of the tax refund that you might receive in the following year could be considered part of your bankruptcy estate and could be taken by the trustee.

However, as usual, there is more to this. Part of your tax refund might be due to the child tax credit or due to earned income credit. The trustee is not entitled to any of this money. Also, there are exemptions which can be applied to save or protect part of your tax refund. In Ohio, there is a wild card exemption of slightly over $1000 which can be applied to any property, including your tax refund.

In Chapter 13, you’re in a bankruptcy for up to five years. Therefore, every tax refund that you receive while you are in a Chapter 13 bankruptcy may be considered by the trustee. The same rules apply. The trustee is not entitled to take any earned income credit or child tax credit. Also, you generally are entitled to apply your exemption to the tax refund.

So, you can see, the answer is not as black and white as it may seem and the application of these rules means that in one case a family might be able to keep a rather large tax refund and in another case a family may lose a large portion of the tax refund. It all depends on the circumstances of the case, and what the tax refund is based upon.

Am I judgment proof?

Dear West Hurley & Malkiewicz,

I am considering making an appointment for bankruptcy protection but a friend told me about a program that makes you “judgement proof” if your only income is social security. I’m not sure if I can qualify for that because my husband is still working. (The credit cards I have are all in my name).

If I would qualify for this could your company handle this for me?

Sincerely, (name removed by Rick West)

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Great Question.

There is no such program. But, often folks who have only social security income are judgement-proof, and I frequently tell them they need not file, since creditors cannot garnish social security income.

But, this does not mean that one has nothing to fear from creditors if their income is only social security. I frequently see retired people who have savings in the bank that could be taken by creditors, or houses paid off that could be lost to creditors, or vehicles that are paid for.

Yes, creditors, even credit card creditors, can take your house and car if you don’t pay them.

So, you see, just having social security income and not looking at other aspects of your situation could be a recipe for disaster.

Always best to call us up and discuss these things. The call is free. You don’t even need to come to the office. We are happy to help you understand if you are judgement proof, – really – or not.