I outlined in an earlier article the general advice to keep in mind if you need to make ends meet during a financial crunch. However, there are some additional considerations in play during this current epidemic that I wanted to make everyone aware of.
The previously mentioned “Bunker Strategy” stands – use your credit and unsecured personal loans before you use your secured loans before you even think of touching retirement funds. However, because there is some additional uncertainty in the financial world and in the employment world, here is some advice I’d give to someone already in a tight situation and considering bankruptcy right now.
- Do not liquidate your IRA. Firstly, it is likely already down due to the market conditions. Secondly, it creates potentially large tax liabilities that could just end up hurting you financially down the road. Lastly, it is creditor-protected. So, you don’t want to remove any money from that “bunker.”
- Do not take a 401(k) Loan either! Taking out a loan against your retirement account is a potentially risky move in the current economic climate. If you are terminated or laid off from your job (which is more and more possible the longer this goes on), you have to pay it back immediately. If you are unable to pay it back, there are severe tax and penalty implications.
- Use credit cards before you use cash. Save your cash right now. Most credit card companies are offering deferred payments for a month and are waiving various costs. You can always pay the cards off if you have the cash on hand once the crisis is over. You want to save cash for important payments to certain vendors that do not or cannot accept credit.
- Use Bankruptcy as a Bazooka! Once we are on the other side of this pandemic, use the bankruptcy code like a bazooka and blow up your debt while preserving your assets. Being able to barely make your minimum debt payments does not mean you are financially healthy. After struggling through this crisis, you deserve to get a clean slate. Let us help get that for you!
Timing is everything right now. Contact Ross, Quinn & Ploppert for a free consultation now in order to plan for the future. Call us at 610-323-5300.
DISCLAIMER: The information contained in this post is general information that should not be construed as individual, legal advice. This generalized advice does not create an attorney client relationship between Ross, Quinn & Ploppert and the readers. Anyone looking for individualized advice should schedule a consultation.