Los Angeles Bankruptcy Lawyers Blog

Before considering a Chapter 7 Bankruptcy, one of the last assets a person feels forced to liquidate are their Retirement Accounts. Often times, clients will tell me that they figured it was an asset that would be taken anyway, so they might as well use it to either buy more time, or spend a little money as one last splash in the pool of wealth. You would not believe the sadness that overcomes them when they find out virtually all retirement accounts are exempt from Bankruptcy.

These exemptions only really apply to a Chapter 7 Bankruptcy, which is the far more common liquidation scenario whereby a person does not make enough money compared to other Los Angeles residents and wants to wipe their slate clean. If a Chapter 13 Bankruptcy applies, which is often used when one's income is either too high or they have an asset such as a home that would otherwise be liquidated and needs to be protected, the result is that no assets are taken at all as long as you keep up with the mandated payments.

Don't ever liquidate your retirement account to stave off a Bankruptcy. You just might discover after the fact when it is too late that you basically transferred your retirement money to a credit card company, when you could have kept the whole thing and wiped out all of your unsecured debt. There are just too many mistakes the unwary can make and the stakes are high. What is the number one reason for Los Angeles Residents to get a Divorce? - - Money Problems! Talk to a reputable Los Angeles Bankruptcy Lawyer and don't get burned.

Kirk Laron
Los Angeles Bankruptcy Lawyer

Getting divorced in California, or anywhere else for that matter, typically brings the inevitable dividing of assets, which can be a never-ending fight. However, it also brings the division of debts. Many couples run into Divorce Court and get approval to divide their debts according to their agreed upon division without realizing that a Creditor must agree or it is not binding as to that particular Creditor.

Everything is fine, of course, as long as the divorced individuals keep making their payments. But, what happens when one person declares Bankruptcy or otherwise defaults on their debt payments? The creditor will look to see who is on the agreement, the ex-husband, ex-wife, or both. If both parties are on the agreement, then the creditor can go after either individual for the full amount owed! The fact that the Divorce Court has authorized the division of debt means absolutely nothing to the creditor unless that creditor has agreed otherwise. The obvious question becomes why the creditor would agree to let one of the parties off the hook, when they have no obligation to do so.

As a result, when a couple has more debts than assets, it can be wiser to file the divorce and bankruptcy at the same time. In this way, the joint debts can be discharged without worrying about whether your Ex is going to keep making their payments or not when you have not control over them. Ideally, this situation is best handled by an Attorney who performs both Family Law and Bankruptcy Law. Remember, Joint Debts survive Divorce until fully paid!

Kirk Laron
Family Law and Bankruptcy Attorney