Bankruptcy, social safety nets and planning ahead

The credit industry lobby did a terrific job of portraying bankruptcy as the refuge of the irresponsible.  Hence the 2005 “Bankruptcy Abuse Prevention and Consumer Protection Act” (sometimes jokingly referred to as the “Bankruptcy Protection Prevention and Consumer Abuse Act,” which for the record would be BPPCAA).

As those of us who work in the bankruptcy world know, and as the Wall Street Journal’s Brett Arends does a good job of pointing out (“Rethinking Bankruptcy” – July 24, 2009), the reality is that most people filing for bankruptcy are just regular people who have acted responsibly, and our bankruptcy system should more rightly be viewed as an important social safety net.

Brett also makes the important point that, however you feel about the laws, they’re there for your benefit.  So make sure to take full advantage of them if you need them.   With good bankruptcy planning you can keep your home, keep your assets and even be able to use credit cards again before long.

Some key points he correctly lists include:

• Money in pension plans, 401(k) plans, IRA accounts up to $1 million is protected from creditors.
• 529 tax-sheltered college savings plans are safe 2 years after deposit, and you can contribute $65,000 ($130,000 per couple) in a year without negative tax consequences.
• Life insurance products and retirement annuities may be protected.
• Your home is protected up to $50,000 (or $100,000 for a married couple)

The point being, if you’re facing financial struggles and considering filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy in New York, it can make a big difference to talk with a bankruptcy lawyer in New York in advance to help you start planning.

Please feel free to get in touch for a free initial consultation where you can get all of your questions answered and come up with a rational and feasible strategy for continuing your financial life in New York.