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Should you use your 401k for your debts?

| Dec 10, 2016 | Chapter 13 Bankruptcy |

When it comes to reasons for filing for bankruptcy protection in Wisconsin, one of the leading causes is medical debts. Because most people do not ever expect to be struck by some catastrophic medical problem, no one budgets for it (if that were possible) and many people presume that their healthcare insurance through their work would “cover it.”

Unfortunately, depending on the illness or medical condition you fall victim to, your healthcare insurance may not be sufficient. With some conditions, such as cancer, the staggering cost of some treatments could exhaust your policy limits. While you are sick or during your recovery, you may be unable to work and earn income. Another issue is if your medical condition makes it impossible for you to work, you could lose your job.

When you were working, you may have been making good progress with your retirement savings. When some people are hit with the devastating financial blows of job loss and medical debt, they may think about turning to their retirement savings in a 401k or IRA to make ends meet and pay some of the debt.

In such a case, many individuals will turn to a bankruptcy attorney for advice. Bankruptcy may offer a better solution than liquidating your life savings. If you are able to eventually return to work, it will likely be at a lower salary and recovering those retirement savings may prove impossible.

Many medical debts can be discharged through a bankruptcy filing and the discharge from a bankruptcy is far more certain and secure than the sometimes questionable claims promised by debt consolidation services. An attorney can help you determine which type of bankruptcy is most appropriate and can answer your questions on how to protect your retirement savings and eliminate overwhelming debt.

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