By Chris KramerFebruary 23, 2011
Because of the stigma bankruptcy still holds in the minds of some people, debtors often hold off on filing for it until they've depleted savings and retirement accounts. According to the Los Angeles Times, this may be a mistake.
Those who have a steady, reliable income may be able to work with credit counselors to craft a plan to repay debt, but the many who are unemployed and can no longer even make the minimum payments on credit accounts may be better off filing for bankruptcy sooner than later, according to the source. Depleting retirement accounts before making this decision may be detrimental for the long-term financial well-being of an individual or a family.
Retirement savings may be exempt in bankruptcy, the news provider reports, and it may therefore be possible for consumers to discharge their debts without dramatically increasing their financial uncertainty in old age.
The same holds for home equity, according to the Times. A fraction of it, depending on state law, is exempt from liquidation during bankruptcy to allow debtors the opportunity to keep their homes through the proceeding.