As the United States moves further from the recession, statistics seem to indicate that people are recovering on a personal financial level, as well. According to the Administrative Office of the U.S. Courts, the total number of Chapters 7, 11 and 13 bankruptcy filings in 2014 was 12 percent less than those filed in 2013. Although this information may seem positive, for some, attempting to pay down overwhelming credit card debt can have serious long-term consequences.
The Huffington Post reports that credit card debt has the potential to affect retirement. Studies have shown that a well-timed and carefully planned bankruptcy may put a person in a better position to prepare for the future. While it may seem counterintuitive to liquidate assets in a bankruptcy, there are some instances where retirement accounts may not be affected. On the other hand, using that money to pay off debts could leave a person without any resources when he or she reaches retirement age.
Experts recommend that people who are planning to file avoid paying more than the minimum payments because a large payment to a single creditor could be considered a preferential transfer. This is a payment that benefits one creditor over others, or that was made after the bankruptcy was filed, and it could cause issues for both the debtor and the creditor. It is also unwise to acquire any new debt before filing, as it could appear that the debtor does not plan to pay the balance.
Anyone who is feeling overwhelmed by consumer debt may benefit from filing for Chapter 7 or Chapter 13 bankruptcy, and the fresh start may be the impetus many need to begin preparing for retirement.