Since Bankruptcy Laws were enacted in America, Bankruptcy has always been about, in words of our founding fathers, providing unfortunate but honest debtors a fresh start. As many commentators write, Bankruptcy greases the wheels of capitalism. It encourages risk taking, and the invention of new products and services without the fear of debtors prisons. In no time like the present is Bankruptcy probably more necessary to the victims of the housing collapse than the present. If you are seriously upside down on your mortgage, its time to have a reality check with the future. In doing so, seek a competent attorney in Bankruptcy Law to explore this option, as opposed to foreclosure, short sale, or struggling through the payments. You might just find that by setting aside the ego and getting your fresh start, you will be doing yourself, your family, your friends, and the rest of America a favor. Do you want to be debt free and own a home free and clear in 6 years, or end up the same place you are now? Tough choices require tough decisions, but make sure they are well thought out and not entered into solely by emotion.
One of the most common fears that people considering bankruptcy have is whether or not they will lose their retirement if they file for bankruptcy. Like all legal questions, the answer to the question of whether or not a debtor will lose their retirement benefits if they file for bankruptcy is that they will probably not lose their retirement benefits. 401(k) plans, 401(b) plans, IRAs, and most other retirement plans are exempt from seizure by creditors either under federal law, state law or both. For a retirement plan to be exempt it must be a qualified plan, and as a practical matter most plan are qualified plans. One exception to a retirement plan is if you have made large additional payments to your retirement plan before filing, those payments may not be exempt.
If you're filing bankruptcy and on Social Security you may still want to file a Chapter 7 or Chapter 13 bankruptcy, even if you are judgment proof. If you have secured debt, such as a mortgage or car payment, and you are behind on your payments, chapter 13 may give you the ability to bring these secured debts current, while still getting rid of your credit card or medical debt. If you have some real or personal property that is not considered exempt in your district, you can protect that property from creditors by filing a Chapter 13 and paying at least a portion of your unsecured debt. There are some social security recipients, who are judgment proof and have no non-exempt assets, but still want to file chapter 7 bankruptcy. The primary reason is that they want to stop the phone calls, bills and demand letters.