These two terms seem inconsistent. But in these times of changed economic reality, sometimes the two terms can complement each other. In Oregon, here are some situations where you should immediately seek bankruptcy council.
You Lost Your Job. Unfortunately, this is an all too common occurrence here in Oregon. You work hard for 5 years, 15 years, or even 30 years, and one day the boss says your services are no longer needed. Employment opportunities are bleak, but you are confident you can bounce back. You have a retirement account that you could dip into to pay debts and living expenses.
You are about to retire. It’s time to retire, but your debts far outweigh your future income from SSI, your retirement account (401(k), IRA, PERS), and part-time work. You will struggle to make minimum payments on your debt and there will be very little buffer for emergencies.
You are just getting back to work. You have been unemployed for a period of time, but you are excited to get back to work with a new job, albeit for less than the money you were making before. You have substantial debts, but you can chip away at them over the next 5–15 years.
You are about to cash out a retirement account to pay debt.
You have a 401(k), IRA, or other retirement account that if you cash it out, you can consolidate your unsecured debts and pay back your debts at a lower interest rate over a period of time.
If any of these scenarios sound familiar to your situation, you should call my offices for a free consultation. Bankruptcy is decidedly not for everyone. I often joke with my clients that as a bankruptcy attorney, visits to my office are loathed more than visits to the dentist. But I write this page because over the years I have had too many clients come into my office after they have made decisions (such as cashing out a retirement account to pay debt) that catastrophically affect their future and their family’s future. Too many times I have heard “if I knew that 2 years ago, I would never had made the choice I made.”
What are the types of things I am talking about?
In Oregon, your PERS, IRA, and 401(k), 403(b), and other qualified retirement accounts are 100% protected against creditors in bankruptcy. This means that if you owe $50,000 in credit card debt that is dischargeable in bankruptcy, and you have $300,000 in your retirement account, the $50,000 can be discharged in bankruptcy while you keep your $300,000 retirement account. Thus:
Do not cash out your retirement account to pay debts until you talk to a bankruptcy attorney.