Ask Mary Beth: Money Q & A |
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Creditors can't force liquidation of retirement assets
If I were to have a catastrophic medical problem, could I be
forced to sell my IRA to pay my medical bill? Similarly, if I had
large credit card bills, could I be forced to sell my IRA to pay
them off?
Mary Beth answers:
No, retirement assets such as IRAs, as well as life
insurance, Social Security and other public benefits, clothing,
household furnishings, jewelry, professional tools, and cars up to
a certain value are all part of the exempt property you are
allowed to keep in a personal bankruptcy filing.
Even if you do not go so far as to file bankruptcy, you cannot be
forced to liquidate your retirement accounts to pay your debts,
according to Samuel J. Gerdano, executive director of the
American Bankruptcy Institute.
Since both medical bills and credit card bills are unsecured debt--that is, not backed by collateral such as a car or home--many of these creditors will get little or nothing if you declare
bankruptcy. Consequently, they may be willing to work out a more
liberal repayment schedule or forgive part of your debt if you
discuss your financial situation with them.
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