Daniel Gershburg » 401k

Filing Bankruptcy in New York City and keeping cash

admin — Thu, 03 Mar 2011 15:23:20 +0000

About 6 moths ago, if you had walked into my New York Bankruptcy office and told me that you had $8,000 in your bank account and you wanted to file for Bankruptcy, I would have said be prepared to give up a lot of your money to the Trustee. Not anymore. With the New New York Bankruptcy Exemptions that were passed a few short weeks back, things have changed….for the better. Now, you can protect up to $12,000 in ANY type of asset if you’re not using a Homestead exemption (an exemption where you protect the equity in your home). Have a car in New York and want to file for Bankruptcy? Whats that? Its paid off? And worth $10,000? No problem. You can likely keep it under the new rules. Receiving a large tax refund this month? Keep it.

The new exemptions allow you to either opt in to the New York Bankruptcy Exemptions or the Federal ones. Really, its all boring lawyer stuff, but the bottom line to you is that you can now get rid of thousands upon thousands of dollars in credit card debt, stop wage garnishments, lawsuits, and STILL STILL have enough to start your financial life over again.

With the new law I figured there would be a ton of questions from people out there, and we were right. We’re going to be instituting something called “Free Hour Fridays” in the coming weeks. You get to talk to yours truly, via Skype, either through phone or video, free for one hour. Ask me any questions about filing Bankruptcy in Brooklyn, Queens, Staten Island, Long Island, the Bronx. You get it. I’m absolutely thrilled that we’ll be able to help our clients keep so much more of whats their while getting rid of their debt.

Stop wasting money on debt settlement and solutions that dont work, before speaking to a New York City Bankruptcy attorney about this new law!

Using a 401k Loan to Make Credit Card payments is a waste of money

admin — Mon, 23 Aug 2010 15:59:51 +0000

As I was reading this past weekend, I happened upon this article www.huffingtonpost.com/2010/08/20/401k-hardship-withdrawals_n_688753.html

The article, in no uncertain terms, finds that people are literally raiding their 401k plans like there is no tomorrow. Whats the reason for this? Well, it varies on a case by case basis but typically the average worker does not have enough income to cover expenses. And so the result is that in their peak earning years (35-55), people are taking money out of their 401k’s just to survive. Now, my opinion here deals solely with using 401k money to pay your credit card bills when you have a large sum of debt that you likely will not be able to pay back. Here is why I think it’s a horrible horrible idea:

1. I’ve said it before and I’ll say it again: Filing for Bankruptcy is an emotional decision. If you have a 40k income and you’re 40k in debt, mathematically speaking, due to interest, etc., chances are you’re never coming close to paying that debt back. Which means that, mentally, you’re likely thinking whatever money you have in your 401k will save you from having to file Bankruptcy for some time. That you can make this work. That if only you received a small raise, you’d be fine. You are inevitably wasting money here. Even if you raid your 401k to pay off portions of your credit card debt, you’re still likely to have CC debt leftover, and that debt will accumulate with the absurd interest thats likely being charged. Again, you’re not dealing with the whole issue.

2. Penalties! If you’re taking a loan out on your 401k, not only are you going to have to pay TAXES on it, but you’re also going to forfeit a 10% penalty! Thats a ton of cash to pay off bills that are growing at around a 30% clip in some cases. Plus, now the debt is not unsecured (as it is with credit cards), now its priority debt. You owe Uncle Sam. Uncle Sam comes after your money much more aggressively than most credit cards do. And, unless you have some special circumstances, filing for Bankruptcy WILL NOT discharge tax debts the way it would discharge debts from credit cards.

3. Your 401k is EXEMPT in Bankruptcy. Just in practical terms lets do the math. You owe $40,000 to various credit cards. You have $20,000 in your 401k. You take it out and use it to pay credit cards. You’re still 20k in the hole, now owe taxes and penalties and have 0 retirement savings. Plus chances are your credit isn’t great at this point either. The converse. You file for Bankruptcy in Manhattan, Brooklyn, Queens, etc., you get rid of the $40,000 in debt, you KEEP the $20,000 in your 401k. So now, as opposed to being negative in the thousands, you actually have gotten rid of your debt AND you have money leftover. Really doesn’t make sense any other way.

Again, BEFORE you raid an account thats protected in Bankruptcy, please please speak with a Chapter 7 Bankruptcy attorney in New York. It could and likely will save you thousands upon thousands.

Updated New York Bankruptcy Limits Means Thousands more will be able to keep their homes and cars and still file

admin — Thu, 15 Jul 2010 17:26:30 +0000

You may now be able to file a Chapter 7 Bankruptcy in New York City and keep your home if you have under $300,000 in equity in it under proposed new limits in New York. Under the new law, waiting to be signed by the Governor, the exemption limits for a house would be increased from $50,000 for a single filer to $150,000 and from $100,000 for a joint filer to $300,000 for joint filers. That, my friends, is huge. What that effectively means is that if you own a condo, or home in New York City, and your mortgage is, for example, $300,000, your home could be worth up to $600,000 and if you file the Trustee is not allowed to take your home! I can’t tell you how many more clients will be able to get a fresh start in Bankruptcy when this bill goes into effect. Additionally, the exemption for equity in a vehicle will rise from its current exemption of $2400, to $4000! Again, while that may not seem like a ton, most vehicles do not have over $4000 in equity in them, unless you put down a huge downpayment. Lastly, and perhaps most importantly, when you file Bankruptcy in New York, you’ll now be able to chose between the New York laws surrounding Bankruptcy OR the Federal exemption limits. New York previously did not allow you to make this choice. Practically speaking, this helps those without a home more than anything else, because there is a wildcard exemption under Federal Rules. In English, that means that if you have some cash, but no home, chances are you’ll get to keep the cash under the Federal exemption laws (of course each case is different). Very very excited and happy about this as you all should be. Once we hear more news, we’ll absolutely pass it along to you.

Personal Bankruptcy and your 401K.

admin — Tue, 14 Apr 2009 00:32:31 +0000

Ive blogged about this before but I want to re-iterate that if you’re in deep credit card debt and don’t see a way out…DO NOT take out your 401k to pay that credit card debt. It doesn’t make any sense whatsoever. You’ve been saving that money for retirement, and there are incredibly serious tax consequences to taking that money out of the account. Furthermore, on a practical level, it may not even make a dent in your debt. Lets say your a typical client and your credit card debt is somewhere around $50,000.00 and you have about $25,000 in your 401k. If you take out that money to pay your credit card bills (most of those payments going towards interest and fees), you won’t pay off your credit card debt, you’ll have decreased or even eliminated all of your retirement savings, AND you’ll have to pay Uncle Sam for the privilege. Bankruptcy can help you eliminate all of your credit card debt and your 401k is exempt in almost all cases. That means you get to keep the money you worked so hard for and still be able to eliminate your credit card debt. Don’t take out that money until you speak to a Bankruptcy attorney.